Venture funds and startups blame each other in Kerala

R Sreekumar

In Kerala, both the venture capitalists and the young IT, biotech entrepreneurs are at the receiving end. The charge against venture funds is that they are unable to disburse money, while the charge against entrepreneurs is that they are submitting viable or innovative projects for funding.

Kerala Venture Capital Fund Pvt Ltd (KVCF), the asset management company of Kerala Venture Capital Fund has a corpus of Rs 20 crore to be disbursed over a period of 10 years. However, during the past two years it has been able to disburse only Rs 73 lakh out of the Rs 1.3 crore sanctioned by the company. The Fund has contributions from Small Industrial Development Bank of India (SIDBI) to the extent of Rs 10 crore while Kerala Financial Corporation (KFC) and Kerala Industrial Development Corporation (KSIDC) have agreed to put in Rs 5 crore each.

"The problem with public sector venture funds such as KVCF is that they cannot invest in projects put forward by fresh entrepreneurs. As per their bye-laws they go by the track record of its promoters or the company itself," said MR Hari, MD, Invis Multimedia Pvt Ltd, one of the beneficiaries of KVCF. Industry sources said that many fresh engineering graduates in the state with innovative ideas had to either abandon their projects or seek funds outside Kerala. However, the venture fund companies provide lot of inputs by pointing out the weaknesses and lacunae in their operational strategies, he added.

Those who have got venture funds sanctioned are also quite shy of availing it. Ushus Technologies Pvt. Ltd, a Technopark based company was sanctioned Rs 50 lakh, but is yet to avail the amount from KVCF. "We have a six month period to avail the funds, but we have to be cautious in finalizing the terms for availing the fund or risk the prospect of losing management control," KR Sreekumar, Director and VP (Marketing), Ushus Technologies said.

The largest beneficiary of venture funding so far in Kerala has been Kochi based Soft Systems Pvt. Ltd that has been funded by SIDBI to the extent of Rs 5 crore. Soft Systems specializes in plantation management software. "Both SIDBI and KVCF get a number of applications for investing in new projects, but many fail to qualify for the benchmarks set by us," according to P Rudran, GM, SIDBI-Ernakulam. KVCF has a panel of national experts for evaluating each project in biotechnology and IT.

The base of the IT and biotechnology industry in Kerala is too small for deploying funds, according to KA Joseph, MD, KVCF. Moreover, being the first fund tailor-made for Kerala, the awareness about KVCF among potential entrepreneurs is also not sufficient, he added. KVCF was primarily floated to fund ventures in Kerala but with viable projects not coming up it has plans to tap the neighboring markets of Coimbatore, Chennai and even
Bangalore.

Many organizations have now started conducting Young Entrepreneur competitions to spot budding talent and innovative ideas. Although the ideas or projects submitted are good, they may not be commercially viable, according to venture funds said.

Low deployment of credit is a problem Kerala has been facing all these years. The CD ratio of commercial banks is between 40 and 45 which is quite low by national standards. There again the industry and the government blame the banks for not disbursing sufficient credit but banks complain that there are too few viable industrial projects being submitted.

(CNS)