Tamil Nadu Startup Funds of Funds
Dharmendra Pratap Yadav, IAS, Secretary to Government, MSME Department, Government of Tamil Nadu

The government of Tamil Nadu will set up a fund of funds (FoF) for startups with a corpus of ₹250 crores. The fund will invest in startup ventures in the Tamil Nadu state of India, according to the new Tamil Nadu Startup and Innovation Policy 2018-2023 which was unveiled yesterday by the Chief Minister of the state.

The first tranche of the Tamil Nadu Startup Fund of Funds will be of ₹25 crores which will be allocated in the financial year 2019-2020 and will be managed by Small Industries Development Bank of India (SIDBI). The policy is aimed to provide an innovative and supportive ecosystem to the startups in the state. With the policy, Edappadi K. Palaniswami, CM of Tamil Nadu hopes to help 5,000 tech startups to emerge in the state.

The latest policy reads, “It will be registered as an Alternative Investment Fund (AIF) under Securities and Exchange Board of India (SEBI) regulation, 2012. The fund will be invested in other SEBI registered AIFs for investment in Startups and MSMEs established in Tamil Nadu. The government of Tamil Nadu will invest Rs 75 crore in the fund.”

Additionally, the government has also set up a Tamil Nadu Startup Seed Grant Fund (TNSSGF) which is of ₹50 crores and ₹5 crores have been allocated for the first year. It is created in partnership with several financial institutions and universities to enable investment in early-stage startups in form of grants. The TNSSGF would also provide funding for Idea-to-PoC (Proof of Concept) stages which are pre-startup activities.

Several state and central public sector undertakings (PSUs) will adopt incubators and channelize their Corporate Social Responsibility funds to support startups. The incubators will also provide an innovation sandbox to solve the day to day problems faced by Indian citizens and help startups that are working to solve those problems by providing access to the platform, test bed, data, hand-holding and capital.

The following entities will not fall under the ‘STARTUP’ category and shall not be entitled to avail the benefits under the new policy:

  1. Entities formed by splitting up or reconstruction of a business already in existence,
  2. A subsidiary of a firm in the State, except subsidiary of a start-up itself which also qualifies as start-up and the combined entity also satisfies the start-up criteria,
  3. A franchisee of an existing business in the state, (d) entities promoted or sponsored by or related to an industrial group in the state whose group turnover exceeds Rs 300 crore.

With the launch of the policy, the government also hopes to provide extended support to around 10 global high growth startups to create a high social impact in sectors like sanitation, clean energy, healthcare, education and food. Earlier, Tamil Nadu tied up with Ministry of Electronics and Information Technology to set up a Centre of Excellence for Fintech Startups at Software Technology Parks of India in Chennai.

In December 2018, TNeGA, Tamil Nadu’s e-governance agency collaborated with IIT-Madras to develop means for e-governance and contribute to aspects including but not limited to agriculture, healthcare and education. The government will leverage the power of artificial intelligence, Internet of Things (IoT), drones and blockchain to solve various problems persisting in the state.


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