Key Points
- Startup India FoF 2.0 has a corpus of ₹10,000 crore across two Finance Commission cycles
- SIDBI will begin implementing the scheme immediately as primary agency
- Priority areas include deep tech, early growth stage and manufacturing startups
The Union government has notified the Startup India Fund of Funds 2.0 with a corpus of ₹10,000 crore to channel venture and growth capital into Indian startups. The Department for Promotion of Industry and Internal Trade (DPIIT) published the notification on Monday, marking the second phase of the government’s flagship startup funding programme.
The scheme matters for founders struggling to raise early-stage capital from domestic investors. A Fund of Funds does not invest directly in startups. Instead, it commits capital to venture capital and private equity funds, which are registered with SEBI as Alternative Investment Funds (AIFs). These AIFs then deploy the money into startups, effectively multiplying the reach of government capital across the funding chain.
Startup India FoF 2.0 builds on the Fund of Funds for Startups (FFS 1.0), which DPIIT launched in 2016 under the original Startup India Action Plan. That programme was designed to address funding gaps for early-stage companies and reduce dependence on foreign venture capital. The new scheme extends this approach across the 16th and 17th Finance Commission cycles.
According to the notification, the ₹10,000 crore corpus will support AIFs that invest in four priority categories. The first is deep tech startups, meaning companies building products based on advanced scientific or engineering breakthroughs. These typically require longer development timelines and larger capital outlays than consumer internet businesses.
The second category covers early growth stage startups backed by smaller AIFs. This addresses a persistent gap in the Indian funding landscape, where small fund managers often struggle to raise capital despite identifying promising companies. The scheme will also prioritise technology-driven manufacturing startups, aligning with the Centre’s push to expand domestic production capacity.
The fourth category is sector-agnostic and stage-agnostic startups, allowing flexibility for AIFs that do not fit neatly into the other three buckets.
DPIIT will constitute a Venture Capital Investment Committee (VCIC) comprising veterans from the startup funding community to screen applications from AIFs seeking commitments. The notification states that operational guidelines and VCIC composition will be issued separately by the department.
An Empowered Committee will monitor implementation and track scheme performance. The notification also includes provisions for co-investment, where the government and institutional investors such as pension funds or development finance institutions can invest alongside the selected AIFs under a common framework with governance safeguards.
Startup India FoF implementation and rollout
The Small Industries Development Bank of India (SIDBI) will serve as the primary implementation agency and will begin operationalising the scheme immediately. DPIIT has indicated it will select a second domestic agency to share implementation responsibilities, though it has not named the institution or specified a timeline.
Only SEBI-registered AIFs will be eligible to receive commitments from the Fund of Funds. These AIFs must then invest exclusively in entities that the Centre has recognised as startups under the DPIIT recognition framework. This ensures the capital reaches companies that meet the government’s definition of a startup rather than established firms.
Your Questions, Answered
What is Startup India Fund of Funds 2.0?
It is a government scheme with a ₹10,000 crore corpus that invests in SEBI-registered venture capital and private equity funds. These funds then deploy the capital into startups recognised by DPIIT.
Which startups will benefit from the scheme?
The scheme prioritises deep tech startups, early growth stage companies backed by smaller funds, technology-driven manufacturing startups and sector-agnostic startups.
Who will implement Startup India FoF 2.0?
SIDBI will serve as the primary implementation agency. DPIIT plans to appoint a second domestic agency, though it has not named the institution yet.
How will AIFs be selected for the scheme?
A Venture Capital Investment Committee comprising startup ecosystem veterans will screen applications. DPIIT will issue operational guidelines and VCIC composition separately.
