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Ficci turns venture capitalist

Arijit Barman & M Saraswathy  |  Mumbai 

You won’t bat an eyelid when you hear of Silicon Valley billionaires turning angels. They float seed funds to back and incubate young and exciting ideas and ventures, and make millions. But an industry association? That would probably be a first.

But that’s exactly what industry association, Federation of Indian Chambers of Commerce and Industry (Ficci), is doing by joining hands with the premier civilian foreign aid agency of the US federal government, USAID. Together, they have floated a $15 million VC fund (Rs 78 crore approx) to support, sustain and scale up grand local ideas and innovations that can also be commercialised for India and other emerging markets.

Joining this “Millennium Innovation Fund” are known angel investors like Vijay Mahajan of microfinance company Basix and Infinity Innovation Fund (IIF), managed by Saurabh Srivastava, one of the oldest early-stage venture capitalists in India. Even the Department of Science and Technology is coming on board as a key stakeholder.

“This fund will try to leverage great Indian ideas, innovators and entrepreneurs or commercialise some of the great work that comes out of the many government labs. It will also try to globalise these ideas in similar emerging markets across the world and even in developed economies,” Rajiv Kumar, director general, Ficci, told Business Standard.

How will this work? While Ficci and USAID will aim to create an “innovation eco system”, the fund managers Basix and IIF will work like traditional VC/PE managers with a profit motive in order to make the fund’s “business plan sustainable”.

The innovation fund is one part of a bigger tie-up between USAID and Indian partners like Ficci. Called the Millennium Alliance, this will be an omnibus platform to facilitate different kinds of financial contributions from private and public sector founders and stakeholders to selected innovators.

The contributions will be through a range of vehicles and financial assistance like grants, loans, technical collaborations and even equity investments in four key sectors: health, food security, climate change/energy and education. The alliance aims to raise $50 million (Rs 260 crore, approx) in the next 12 months from other corporate sponsors, foundations and government bodies.

“USAID in India is changing its profile and looking at partnerships where we it can support similar initiatives to facilitate game-changing development innovations for bottom-of-the-pyramid solutions. We can support them financially or through our global outreach. India is a global development innovations laboratory,” said William Hammink, Mission Director, USAID India.

Nurturing indigenous innovation is not new for Ficci. In fact, USAID officials are believed to have been inspired by two existing programmes running concurrently for the past five years.

Ficci in collaboration with Lockheed Martin Corporation and University of Texas, Austin, has been promoting a unique “India Innovation Growth Programme” since 2007. The objective of this initiative has been similar: To identify innovators and help them scale up through training and strategy development and marketing. So far, 170 innovators have been facilitated and 150 business engagement agreements signed to make them commercially viable.

The success can also be gauged from the fact that these selected participants in turn have generated more than Rs 350 crore in revenues. For 2011, that is likely to cross Rs 490 crore. There is a parallel programme that Ficci undertook with DRDO, the R&D wing of the Ministry of Defence. Under this Technology Assessment And Commercialisation (ATAC) initiative, DRDO-developed technologies have been getting adapted by private sector players for civilian use and products. In the past five years, 200 technologies from 26 DRDO labs have been assessed by private companies and 24 MoUs signed with leading players like Jyothy Laboratories, Tulip Group and Gujarat Fluorochemicals. Again, the motley ideas span sectors.

From green gas to robotics to life sciences or mosquito repellant paper handkerchiefs that Jyothy Labs has decided to manufacture commercially. So far, $4.5 million economic value has been generated post the licensing of these technologies.

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First Published: Wed, January 11 2012. 00:30 IST