The high-end technology platform will enable investors to manage and monitor investments in small enterprises, while giving start-ups a one-stop shop for meeting their funding needs
Raising institutional finance - both equity and debt - is likely to become easier for early-stage start-ups. Small Industries Development Bank of India (Sidbi), which targets micro, small and medium enterprises (MSMEs), is setting up an electronic platform for institutional investors, angel and venture capital funds, start-up accelerators and incubators ventures to meet the financing needs of early-stage start-ups.
The collaborative electronic platform under the National Innovation Finance Programme (NIFP) is currently in the development phase in the Centre for Innovation and Incubation and Entrepreneurship (CIIE) of Indian Institute of Management (IIM), Ahmedabad. The high-end technology platform, backed with analytics tools, will enable investors to manage and monitor investments in small enterprises, while giving start-ups a one-stop shop for meeting their funding needs.
At the pilot stage, the electronic platform would offer assistance to 10-15 start-ups, before ramping it up to the need of 500-odd companies.
According to K I Mani, general manager, Sidbi, SME Development Centre, the development bank is playing the role of a "market maker" in this exercise, while collaborating with different stakeholders, including the IIM Centre and the German sustainable development agency, GIZ GmbH. "We want to bridge the gaps in the MSME system, rather than become the biggest lender to the sector," says Mani.
According to Kunal Upadhyay, chief executive, CIIE Ahmedabad, early-stage companies find it difficult to raise debt finance. The analytics-backed platform will help institutional and private investors access the record of start-ups, facilitating their evaluation for investment. "There will be tools for accelerators, incubators, banks, and angel and venture investors to evaluate start-ups. For start-ups, the platform will become something sort of a credit bureau while raising funds," says Upadhyay. The biggest boost will be that it will give them easier access to institutional finance, he adds.
With all the stakeholders on a common platform, it will give small enterprises a holistic view of the start-up system, says Sanjoy Sanyal, senior associate at German consultancy firm Adelphi, who works with SMEs using clean technology. "Start-ups can tailor themselves and approach different stakeholders in the value chain according to their need."
Those in the sector note that despite burgeoning growth in start-up system over two-three years, India lags in meeting domestic capital needs of early-stage companies, when compared to other countries such as the US, Israel, Singapore, South Korea and China.
Sidbi officials feel once the robustness of the platform is established, it will allow many government-backed funds and schemes targeting the MSME sector to come on board. The plan is to hive off the platform as an independent self-sustaining entity at a later date, and make the product available to other countries.