Bangalore: Government is mulling to bring about a totally new paradigm in venture funding by it in Information Technology start-ups and taking minority stake in them without risk exposure, a key official in the Ministry of Communication and Information Technology indicated on October 30.

"We are finding ways to redirect funds and apply it in a manner which is not individual project appraisal and approval based," secretary in the Ministry, R R Shah, said on October 30.

Addressing a conference in Bangalore, he said government decision-making process is "risk-aversive", and it can never be "venturesome" and as such, there is a "contradiction" in government sponsored venture capital funding.

Shah noted that venture capital funding in itself needs path breaking investment decisions and risk-bearing ones.

"There is a need for a totally new paradigm. We are creating a situation where government venture funds could pick up a small percentage, say 20 per cent to 30 per cent, while private venture capital (VC) will continue to be dominant players."

"In such a scenario private VCs will be dominant players and take all the risk, while government hedges its risk by creating a preference capital and gets moderate returns in case returns accrue and government gets the first chance in case of liquidity," he explained. "Government can have preference shares."

On the other hand, Shah said, "In case of windfall profits, private (dominant) VCs get all after moderate returns are ploughed back into the government." He expressed confidence that it's a "workable model".

PTI