SIDBI proposes perpetual capital for startups through fund of funds: CMD Sivasubramanian Ramann

Small Industries Development Bank of India’s (SIDBI) initial investment through its Rs 10,000-crore fund of funds will be deployed back into the startup sector to create "perpetual capital" for them, said Sivasubramanian Ramann, Chairman and Managing Director, SIDBI.

SIDBI is a limited partner in 105 alternative investment funds (AIFs) through its fund of funds, of which 45 are deployed in AIFs floated by first-time fund managers.

"We have seen some of the funds who deployed capital in 2017 have already exited a few companies and have tucked in about three-and-half time returns," said the SIDBI chairman and MD at TechSparks 2023, during a fireside chat with Shradha Sharma, Founder and CEO of YourStory.

He said the fund of funds was likely to make returns of Rs 20,000 crore from the capital deployed, if they draw down six years from now. “That Rs 20,000 crore will once again go back to startups. So, it is really a perpetual capital,” he added.

Ramann told YourStory that longer lifecycle and patient capital should not be a hurdle for startup investments.

SIDBI's Fund of Funds for Startups was launched in 2016 and has a corpus of Rs 10,000 crore to back SEBI-registered AIFs.

“We have committed Rs 9,000 crore to these funds, which in turn have put money into 1,000 startups. These startups have brought in Rs 65,000 crore domestic and foreign capital," Ramann said.

SIDBI has also proposed setting up a new fund of funds to back early-stage startups, giving exits to angel investors.