"WE ARE OFFERING OUR STARTUP ECOSYSTEM ON A PLATTER TO FOREIGN INVESTORS"

Of the 100+ unicorns in India, none are funded by Indian VCs, says the Founder of Venture Gurukool & Ankurit Capital, Mahendra Swarup, as he cites the lack of institutional support and experienced talent as the reasons why domestic capital has hit a barrier in India in this conversation with BW Businessworld's Noor Fathima Warsia

- Noor Fathima Warsia

One would argue that the lack of domestic capital in Indian startups has a large adverse impact. Why was it that Indian VCs, PEs and the like did not catch up as startups in India picked up despite the availability of wealth?

The domestic venture capital (VC) space in India is relatively new. Private equity funds (PE) came in first and domestic PEs started taking off in the early 2000s, which was when the internet bubble burst. That kept domestic money out of the digital space. In the last decade, India became a hot investment destination for foreign players and sectors such as telecom, mobile and data boomed. India's IT talent also came into the limelight. This attracted VC funding to Indian shores. That was how the story began but the regulatory framework around alternate investment funds (AIF) and related issues was not clear. Hence, the domestic industry did not take over.

It was only when large amounts of overseas monies began coming into startups and tech and digital assets that the regulators woke up and the AIF regulations came into play. This was done also to increase the domestic pool of funds. Most of the high net-worth individuals (HNIS) and family offices at the time could only invest their surplus in gold, real estate or stock. When regulations and bodies such as the Indian Private Equity & Venture Capital Association lobbied, some HNIs diversified investments into IAFs. But it was not nearly enough.