India sets up $119 mn fund for space start-ups, 5 ways it helps space ambitions

The Government of India has approved a $119 million (Rs 1,000 crore) venture capital (VC) fund to support space start-ups in the country.

The Union Cabinet on Thursday (October 24) cleared the proposal for the VC fund initially in July.

The Cabinet in a press release said that the VC fund will be managed by space regulator and promotor Indian National Space Promotion and Authorization Centre (IN-SPACe).

India is one of the top five spacefaring nations in the world, but has a share of just 2 per cent share in the space economy. The Narendra Modi government wants to change that and the VC fund is a step in that direction. Since 2019-20, the Indian space industry’s growth has picked up pace as the government has gone about opening the sector for more private activities, liberalising investments norms, and coming up with a space policy and rules and guidelines.

In a post on X (formerly Twitter), Prime Minister Narendra Modi said that the fund will “have a phenomenal impact on the youth”.

“It will give opportunities to several innovative minds and add momentum to our space programme,” said Modi further.

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Here is how the VC fund is expected to help India’s space ambitions take flight.

1. 40 start-ups to be supported over next five years

The Rs 1,000 crore fund will be utilised over the next five years to support around 40 space start-ups, said the Cabinet in a statement.

The average deployment amount could be Rs 150-250 crore per year depending on the investment opportunities and fund requirements, said the statement.

As for the break-up of funds disbursed in a year, Rs 10-60 crore are expected to be invested in a start-up.

“The indicative range of investment is proposed to be Rs 10-60 crore, contingent upon the stage of the company, its growth trajectory, and its potential impact on national space capabilities. Indicative Equity Investment Range could be: Rs 10-30 crore for growth Stage and Rs 30-60 crore for late growth stage,” said the Cabinet statement following the approval.

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2. The multiplier effect

Capital infusion into start-ups is expected to drive a multiplier effect in the Indian space industry as a whole.

The investment in selected start-ups is expected to lead to additional funding for later-stage development. This is expected to instil confidence in private investors.

As selected start-ups will work on scaling up manufacturing and services, several indirect jobs as well as investment opportunities are expected to be created across the entire supply chain.

3. Boost to India’s ‘aatmanirbhar’ ambitions

The fund is also set to boost India’s ambition to be ‘aatmanirbhar’ (self-reliant) in critical sectors like space.

The creation of the fund will lead to the retention of space companies domiciled within India and countering the trend of Indian companies domiciling abroad, said the Cabinet in the statement.

4. Help reach target of 5x growth of space sector

India’s space economy is currently pegged at around $8.4 billion and the Modi government seeks to grow it five times to $44 billion over the next decade. The VC fund is expected to be a key step in the direction of the space growth.

As the space sector itself is quite new in India, so many of the companies are also start-ups instead of traditional companies. This means that much of the growth of India’s space sector will also be led by start-ups. Therefore, support to start-ups will go a long way in the growth of India’s space economy.

India currently has around 250 space start-ups, according to Reuters.

Across the world, Indian space start-ups are known for cost-effective services and manufacturing solutions. The space start-ups also provide services to communications, agriculture, and commodities, where high-quality data is a precious resource, as per the news agency.

The agency further reported that private equity (PE) investment in the Indian space industry has risen by 7 per cent from $118 million in 2022 to $126 million raised in 2023 and by 235 per cent from $37.6 million raised in 2021.

5. Create jobs and boost R&D

The VC fund us expected to fund the entire supply chain of the Indian space-sector.

The fund will help businesses scale, invest in research and development (R&D), and expand their workforce, said the Cabinet in a statement.

“Each investment could generate hundreds of direct jobs in fields like engineering, software development, data analysis, and manufacturing, along with thousands of indirect jobs in supply chains, logistics, and professional services. By fostering a strong startup ecosystem, the fund will not only create jobs but also develop a skilled workforce, driving innovation and enhancing India’s global competitiveness in the space market,” said the Cabinet in a statement.