Karnataka VC funding only for subscription or ad-driven gaming companies

Bengaluru: The Karnataka government will invest the corpus of its AVGC venture fund only in such gaming startups that are driven either by a subscription-based or an advertisement-based business model, official sources said on the back of Karnataka moving ahead to ban all online betting games.

AVGC — an acronym for animation, visual effects, gaming and comics —is a sector the IT/BT department has been encouraging within the startup ecosystem in view of its growth potential.

Karnataka is the only state which has set up a dedicated venture fund to back AVGC startups.

An asset management company under the IT/BT department identifies promising startups in the sector and supports them using its Rs 20-crore corpus, raised from a few government-run institutions. The company has shortlisted target companies and the investment process is going on.

IT/BT minister CN Ashwath Narayan said the government is committed to promoting startups including innovators in the gaming industry.

“In course of promoting the industry, the department will adhere to the framework and be in accordance with the law,” he told ET. There are about 91 startups in Karnataka that are in the gaming space.

Official sources said the government would not back gaming companies—including those running skill-based games—if they lack transparency about their games or are found to be hiding something from players or if their games fall in the grey area.

“We will scrutinise their business model before taking the investment call,” an official said, not willing to be identified. “Only such gaming apps that help players improve their gaming skills will get our backing,” he added.

The government supports an AVGC startup with a maximum funding of Rs 2 crore.

Another important requirement is the startup should have its gaming app available on the android or iOS play store.

The Karnataka Assembly has passed a bill amending the Police Act, 1963, which seeks to ban online games that are “games of chance” in nature. Chief minister Basavaraj Bommai, however, has already clarified that the new law does not prohibit online games that are pure “games of skill” where the player does not risk losing his or her money.