Private Equity and Venture Capital for the SME Industry

One of the biggest challenges for any enterprise is raising funds to startup or grow further. Normal options for any entrepreneur while starting up is raising funds from own sources, family & friends & sometimes through banks via Government schemes. For an entrepreneur who has passed the 3 year grind, a few more options come in the form of Business loans from private banks & NBFCs. This again is subject to lot of eligibility norms as well as terms & conditions. What other options do entrepreneurs have? Private Equity & Venture Capital Funds! Yes we are talking about the right thing. PE/VCs are not into the exclusive domains of IT/e-commerce start-ups. There is lot of action happening in the SME space in India.

The action started in the 1990’s and is gradually picking up pace. Some of the key players in the Indian SME sector are ICICI Ventures, Crys Capital, Kotak PE, Aureos, BTS India, Lighthouse, SEAF, Access PE, Helion Venture Partners, SeedFund, SIDBI Ventures etc. The Small Industries Development Bank of India (SIDBI) operates through its wholly owned subsidiary, SIDBI Venture Capital Limited (SVCL). It co-finances state-level funds, and sometimes co-invests with private sector VCs on a case-by-case basis.

The central Government initiated & controlled VC funds are mainly

  1. SIDBI Venture Capital Limited (SVCL)
  2. IFCI Venture Capital Funds Limited (IVCF)

Some of the state Government initiated & controlled VC funds are mainly

  1. Gujarat Venture Finance Limited (GVFL)
  2. Kerala Venture Capital Fund Pvt Ltd.
  3. Punjab Infotech Venture Fund
  4. Hyderabad Information Technology Venture Enterprises Limited (HITVEL)

There are few Public sector Banks initiated & run VC’s like

  1. Canbank Venture Capital Fund
  2. SBI Capital Markets Limited

With the booming of the economy and consistent reforms in the country, SME/Entrepreneurs can take help of lot of tools/service providers like Networks, portals, online marketplaces, Mentors, Incubators & accelerators who are doing a commendable job in enabling one get access & receive PE/VC Funding.

Incubators- There are many Government as well as private run incubators in the country.
The central government has taken lot of steps not only to promote entrepreneurship but also foster incubators. This is being done largely on PPP mode with the help of lot of leading institutes in the country like IIT’s/NIT’s/ Research Institutes etc

Some of the Government run incubators

National Small Industries Corporation (NSIC) – Training cum Incubation Centers
National Science & Technology Entrepreneurship Development Board (NSTEDB), Department of Science & Technology
SIDBI Innovation and Incubation Centre (SIIC)

Some of the private incubators

The Indian Angel Network incubator

  1. CIIE Ahmadabad
  2. MICA
  3. TBI
  4. The Hatch
  5. T Labs
  6. 5ideas
  7. The startup village
  8. Technopark
  9. Kyron
  10. GSF

There are many more.

PE/VCs not only bring in the much required capital/funds but also brings in lot of experience & expertise that will help the SME’s to improve operational efficiency, innovate & launch new products, explore new markets, improve sales etc
Of late, few of established Indian SMEs are also exploring the IPO route through the SME exchange platform. There are over 100 SMEs actively listed on this platform as on date and many more in the pipeline.

 

 

Avinash

Avinash is the co founder of CFRM, a company specializing in SME lending solutions. Indiansme.in is owned and operated by CFRM

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