Venture Capital Fund

Source: This post on Venture Capital Fund has been created based on the article “Union Cabinet approves establishment of Rs.1,000 crore Venture Capital Fund for Space Sector under aegis of IN-SPACe” published in PIB on 24th October 2024.

Why in news?

The Union Cabinet has approved the establishment of a Rs. 1,000 crore Venture Capital Fund specifically for the space sector. This initiative will be managed under the aegis of the Indian National Space Promotion and Authorization Center (IN-SPACe).

About the Venture Capital Fund

1. IN-SPACe was established as part of India’s 2020 space sector reforms to promote private sector participation in space activities.

2.  The proposed Rs. 1,000 crore Venture Capital Fund aims to support the growth of India’s space economy, currently valued at $8.4 billion, with a target to reach $44 billion by 2033.

3. This fund addresses the need for risk capital in a high-tech sector, as traditional lenders often hesitate to finance startups. The fund is expected to support approximately 40 startups.

4. The government-backed fund will boost investor confidence and signal a commitment to advancing space reforms, operating as an Alternative Investment Fund under SEBI regulations to provide early-stage equity to startups.

5. The fund will be deployed over five years from the commencement of operations. The average annual investment is expected to range from Rs. 150 to 250 crore, depending on available opportunities.

6. Expected Benefits

i) Multiplier Effect: Attracting additional funding from private investors for later-stage development.

ii) Company Retention: Reducing the trend of Indian companies moving abroad.

iii) Space Economy Expansion: Aiming for a five-fold increase in the Indian space economy over the next decade.

iv) Advancements in Technology: Strengthening India’s leadership through private sector engagement.

v) Enhanced Global Competitiveness: Positioning India favorably in the global space market.

vi) Support for Atmanirbhar Bharat: Contributing to national self-reliance goals.

7. Employment Generation Potential

i) The fund is expected to create jobs across the entire space supply chain—upstream, midstream, and downstream.

ii)  Investments may lead to hundreds of direct jobs in fields like engineering, software development, data analysis, and manufacturing.

iii)  Indirect job creation could extend to thousands in supply chains, logistics, and professional services.

iv)  A strong startup ecosystem will not only create jobs but also develop a skilled workforce, driving innovation in the space sector.

UPSC Syllabus: Indian Economy