Electronic Development Fund (EDF)
Electronic Development Fund (EDF) is a “Fund of Funds” investing in “Daughter Funds” that invest in the equity of companies developing new technologies in the area of electronics, nano-electronics and Information Technology (IT).
Fund of Fund (FoF) is defined by the securities market regulator - SEBI - as a mutual fund scheme that invests primarily in other schemes of the same mutual fund or other mutual funds. An FoF scheme enables the participating investors to achieve greater diversification and spreads risks across a greater universe. The funds they invest in are commonly known as “daughter funds”. The EDF does minority investments in Seed Funds (which provide the initial capital to start the company), Angel Funds (those which invest in early stage companies) and Venture Funds (those which invest in new ventures or companies which are particularly risky) dedicated to the electronics and IT sectors.
Thus, EDF is a kind of refinance facility. EDF only decides which funds to invest in and does not directly choose the companies for investment.
The EDF invites requests from professionally managed private/public funds for its participation. EDF participation in a fund may vary depending on the nature of the fund and risk involved. EDF will support both Indian and foreign funds which are registered in India and comply with SEBI regulations and other norms in this regard.
CANBANK Venture Capital Funds Ltd. (CVCFL) is the Fund Manager for EDF. CVCFL was appointed as the fund manager in September 2015. The entire responsibility of raising the fund, investing and monitoring the fund lies with the fund manager. The corpus of the fund depends on the market demand and the ability of the fund manager to raise funds. The Fund Manager considers requests from applicant Venture Funds, Angel Funds and Seed Funds and makes recommendations to the Department of Electronics and Information Technology (DeitY), Government of India. Thereafter CVCFL will be participating in the individual beneficiary Daughter Funds based on the approval of the DeitY.
Formation of EDF was conceived in the National Policy on Electronics -2012 (page 15 of the policy note). Later, on 6 January 2015, EDF was set up along with the “Digital India” agenda of the Government, which is envisaged to develop the Electronics System Design and Manufacturing (ESDM) sector to achieve “Net Zero Imports” by 2020. The Electronics Development Fund Policy was launched by Hon’ble Prime Minister of India, Shri Narendra Modi, during the inauguration of Digital India Week on 1 July 2015. Government formally launched EDF on 15 February 2016 with handing over of the letter of commitment to the first group of Daughter Funds under EDF.
EDF is set up with industry involvement. Setting up of EDF is expected to create a vibrant ecosystem of innovation and research and development (R&D) in the sector. Some state Governments have similar initiatives. For instance, the state of Kerala’s Start-Up Village, inter-alia, also houses an angel fund.
For more details, see here.