Subscription, Ad-Backed Gaming Startups To Get Karnataka VC Funding

State government will scrutinise business model of a startup before deciding on providing funds

The decision comes post the introduction of the Karnataka Police (Amendment) Bill, 2021

Through the AVGC fund, the government infuses a maximum of INR 2 Cr investment into a startup

As the Karnatanka government plans to ban online betting or wagering games, the state government’s AVGC venture fund will only be used to fund gaming startups which run on subscription or advertising-based business model. AVGC stands for animation, visual effects, gaming and comics.

According to state’s Minister for Information Technology & Biotechnology, CN Ashwath Narayan, the government is committed to promoting startups including innovators in the gaming space.

“In course of promoting the industry, the department will adhere to the framework and be in accordance with the law,” an Economic Times report quoted him as saying.

There are about 91 gaming startups in the state. Under the AVGC Policy of Karnataka, an asset management company under the IT/BT department identifies promising startups in the sector and supports them using its INR 20 Cr corpus, raised from a few government-run institutions. The company has shortlisted target companies and the investment process is going on.

There will be no government support for gaming companies which lack transparency, or if their games fall in the grey area. The conditions would also be applicable for skill-based games.

The government will scrutinise the business model of a concerned startup before deciding on providing funds and the investment will be routed to only those gaming apps which improve gaming skills of the users, as per the report.

Through the AVGC fund,  the government infuses a maximum of INR 2 Cr investment into a startup.

The decision to not fund startups making gaming apps which include betting comes on the backdrop of the recently-introduced Karnataka Police (Amendment) Bill, 2021 which proposes to ban online gaming or betting, with a maximum imprisonment of three years and a penalty up to INR 1 Lakh.

The decision has also raised concerns over its likely impact on the sunrise sector of gaming startups.

The Confederation of All India Traders (CAIT) has sought the exemption of Indian online gaming platforms from the proposed law in Karnataka to ban online gaming and betting.

In a recent letter written to the Karnataka Chief Minister Basavaraj S Bommai, the National Secretary of CAIT, Praveen Khandelwal, said that the bill aimed at prohibiting online gambling and betting also makes all online games of skill illegal.

The online gaming market in India is expected to grow further in times to come, with several indigenous platforms coming up. According to a KPMG report, titled “Beyond the Tipping Point: A Primer on Online Casual Gaming in India”, the total Indian gaming market is expected to grow 113% from INR 136 Bn ($1.83 Bn) this fiscal year to INR 290 Bn ($3.91 Bn) in 2025.