Karnataka to channel PSU profits into start-up venture funds

Karnataka to use profits from 7 PSUs for KITVEN‑5 & Beyond Bengaluru VC funds, raising ₹175cr to back startups and create up to 1,500 jobs.

The Karnataka government is set to tap into the strong profits of its state‑owned enterprises to boost funding for early‑stage startups. Profitable public sector undertakings (PSUs) earning over ₹100 crore annually will now be allowed to invest in two government‑backed venture capital funds — the fifth Karnataka Information Technology Venture Capital Fund (KITVEN‑5) and the Beyond Bengaluru Cluster Seed Fund.

KITVEN‑5 is aiming for a ₹100 crore corpus, while the Beyond Bengaluru fund is targeting ₹75 crore. Together, they are expected to support 15–18 startups and generate between 1,000 and 1,500 direct and indirect jobs. The initiative reflects the state’s push to expand startup activity beyond Bengaluru and provide risk capital to emerging ventures.

Initial commitments to KITVEN‑5 include ₹25 crore from the Karnataka Innovation and Technology Society (KITS) and ₹5 crore each from Karnataka State Industrial & Infrastructure Development Corporation Ltd and Karnataka State Finance Corporation. KITS has also pledged ₹20 crore to the Beyond Bengaluru fund. The remaining ₹120 crore is expected to come from profit‑rich PSUs.

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Traditionally, surplus PSU funds have been parked in deposits, bonds, or government‑backed mutual funds. The new policy expands their options, allowing investments in approved venture capital funds. Officials say this will diversify PSU returns while channeling capital into startups in a phased manner over three to four years, depending on opportunities.

Seven PSUs have been identified as eligible investors: Hatti Gold Mines Company, Karnataka Renewable Energy Development, Karnataka Soaps & Detergents, Karnataka State Beverages Corporation, Mysore Sales International, Karnataka Power Transmission Corporation, and Karnataka State Minerals Corporation.
KITVEN, launched in 2000, has already invested nearly ₹190 crore across 55 startups. Earlier funds have exited 34 ventures with healthy returns, while KITVEN‑3 and KITVEN‑4 together have deployed over ₹76 crore. Overall, KITVEN is credited with enabling around 5,500 jobs, underscoring its role in Karnataka’s innovation ecosystem.

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