Tech3 | An RBI shocker for Startup Inc; Big Tech firms fear Telecom bill's overreach; and more

One quick thing: ShareChat to raise $55-65 million via convertible notes at $2.7 billion valuation

In today’s newsletter:?

• RBI curse falls on Startup Inc, again
• Big Tech firms fear Telecom bill's overreach
• Red tape chokes Goa tourism

RBI curse falls on Startup Inc, again

The central bank's tightening grip on the financial sector, which first squeezed fintechs, is now closing in on venture funds.

What’s the matter?: In a bid to crack down on banks and NBFCs potentially hiding their bad loans, the Reserve Bank of India (RBI) has unintentionally made life tougher for venture capital firms and startups.

So, what does it say?

?

• If a bank or NBFC gives a loan to a startup, they can't also invest in a VC fund that invests in the same startup

VCs argue that this could worsen the already precarious startup funding situation, which has already dropped by more than two-thirds this year.

Atmanirbhar capital: India has traditionally faced a shortage of domestic capital flowing into local venture capital firms.?

• Nonetheless, there has been gradual improvement in the last 4-5 years, thanks to banks and family offices

However, the recent decision by the RBI poses a threat to the continuous flow of funds from banks to VC firms.

• At present, domestic VCs contribute to less than a third of the funding for startups, according to industry estimates

• The majority of the corpus for domestic VCs comes from contributions by foreign limited partners

Future tense: Domestic funds might be forced to circumvent the new regulations through tax havens and jurisdictions like Mauritius, according to a venture capital investor who is also a fintech founder.

• Industry experts believe the biggest impact will be felt by SIDBI's fund of funds, which backs many venture funds across the country

Find out more

This is a short version of the MCTech3 newsletter. Sign up here to get the full edition in your inbox every evening on weekdays.?