Inviting Indian venture capitalists? Remove red tape to invest in local start-ups
Sri Lanka and India should cut down on red tape in cross border start-up investments in a bid to liberalise potential investors in both nations to put cash in these firms. This way local start-ups can expand regionally in no time, says Gopal Srinivasan, Chairman and Managing Director TVS Capital Funds (P) Ltd.
TVS Capital Funds M.D Gopal Srinivasan.
He told the Business Times on the sidelines of the opening day of the annual Asian Business Angel Forum (ABAF) on Wednesday that both states should explore this as it makes ‘tremendous’ sense’. He said that liberating Indian venture capital funds will grant start-ups in Sri Lanka access to the Indian market. “Each business here,” he said pointing at the 25 start-ups displayed at the ‘Startup Corner’ at ABAF, “will do great in India.”
Industry experts agreed saying that Sri Lanka’s start-up ecosystem, which was valued at US$32 million, is small when around $4 billion is annually being thrust into India’s start-up ecosystem. India is among the leading investors in Sri Lanka with cumulative investments of over $1 billion since 2003. “For Sri Lanka to reach its 2022 goal of $5 billion in IT exports, tech start-ups have to step up and drive industry growth to an even greater extent. Regional events like ABAF are essential in drawing a wider funnel of expertise and investment, while also shining a spotlight on the attractiveness of Sri Lanka, as an in-demand international destination of choice for start-ups moving out of the USA and Silicon Valley,” according to Mano Sekaram, Chairman of the Lankan Angel Network, the host for ABAF 2017.
Industry statistics show that India-Sri Lanka trade too has increased tremendously and India has become the most important trading partner for Sri Lanka in the region. Some 86 per cent of Sri Lanka’s exports to the region go to India and 35.5 per cent of India’s exports to the region go to Sri Lanka. This could be due to the Free Trade Agreements (FTA) between the two countries which became operational in 2000. According to Mr. Srinivasan both nations are in the same currency trade areas. “Since there aren’t any currency restrictions, there should be freedom for Indian funds to invest in Sri Lankan start-ups as part of the FTA,” he said stressing that Sri Lanka should take this up with India. He added that as a board member of the Alternative Investment Policy Advisory Committee (AIPAC) he too aims to discuss this at length with the Indian authorities. Last year the Indian capital markets regulator Securities and Exchange Board of India (Sebi) allowed angel funds to make overseas investments up to 25 per cent of their investible portfolio in line with other alternative investment funds.