Karnataka govt proposes to set up $2.5M angel fund

The Karnataka government has proposed to set up an angel fund worth Rs 15 crore ($2.5 million) to encourage new early-stage ventures operating across various verticals within the state.

Presenting the state budget for the financial year 2013-14, new chief minister K. Siddaramaiah said the government would also set up incubators for companies operating in the information and communications technology (ICT) space in collaboration with select engineering colleges, and would further launch a bio accelerator for firms in the medical technology segment. However, the government is yet to come up with a proper plan on all these proposals.

The state government is already managing three VC funds – Karnataka Information Technology Venture Capital Fund or KITVEN (started in 1999, it has now liquidated its entire investment), KITVEN Fund 2 and Karnataka Venture Capital Fund (KARVEN).

KITVEN was supported by a number of organisations including Karnataka State Industrial and Infrastructure Development Corporation Ltd (KSIIDC), Karnataka State Financial Corporation (KSFC), Small Industries Development Bank of India (SIDBI) and Karnataka Bio-technology & Information Technology Services (KBITS), among others. The fund, worth Rs 15 crore, had an average ticket size of Rs 50 lakh-Rs 1.5 crore. It invested in emerging companies with a long-term approach and focused on seed funding/rapid growth opportunities within the state. It also assisted a wide spectrum of companies specialising in IT, biotechnology and other high-end products/solutions across knowledge sectors.

KITVEN Fund 2, a Rs 26.25 crore VC fund launched in FY2008-09, invests in companies operating in sectors like IT, biotechnology, Nano technology, etc. With an average ticket size of Rs 1-2.5 crore, it has invested in companies such as Pawaa Software, Mitra Biotech and Sloka Telecom, among others.

Karnataka Venture Capital Fund (KARVEN) is worth Rs 6 crore and proposes to fund companies across agro processing, automobile components, aerospace engineering, clean energy, and other such sectors in the state. The preferred form of investment is equity. KARVEN will also focus on other forms of capital instruments such as preferential capital (convertible/redeemable), debentures or combination of above instruments.

(Edited by Sanghamitra Mandal)