The Indian government has announced a new Rs 10,000 crore ($1.2 billion) fund to strengthen access to capital for homegrown startups, with a particular focus on emerging and technology-driven sectors.
The government notified the Startup India Fund of Funds 2.0 (FoF 2.0), building on an earlier programme launched in 2016 to address funding gaps and encourage domestic investment in the startup ecosystem.
Under the new scheme, the corpus will be channelled through commitments to eligible Alternative Investment Funds (AIFs) over the 16th and 17th Finance Commission cycles. These AIFs will, in turn, invest in startups recognised by the government.
The government said that the initiative is intended to expand venture and growth capital availability, especially for high-potential segments such as deeptech, early growth-stage startups, and technology-led manufacturing ventures.
The previous programme, the Fund of Funds for Startups (FFS 1.0), operated under the Startup India initiative as a fund that invested in SEBI-registered Alternative Investment Funds (AIFs), rather than directly in startups.
Managed by the Small Industries Development Bank of India (SIDBI) under the Department for Promotion of Industry and Internal Trade (DPIIT), it invested in SEBI-registered AIFs and supported more than 1,370 startups.
Like its predecessor, FoF 2.0 will deploy capital through AIFs, investing in equity and equity-linked instruments. The fund is structured into four broad segments: deep technology, micro venture capital funds backing early-stage companies, technology-driven manufacturing, and sector-agnostic investments.
A structured selection process has been introduced to identify suitable AIFs. A Venture Capital Investment Committee (VCIC), comprising experienced members of the startup ecosystem, will oversee screening, while an Empowered Committee will monitor implementation and performance.
The framework also provides scope for co-investment or additional corpus contribution by government ministries and departments, as well as institutional investors, alongside oversight measures intended to support governance and accountability.
Detailed operational guidelines, including eligibility criteria, fund selection, monitoring and reporting requirements, are expected to be issued by the DPIIT. A committee chaired by its secretary will oversee the scheme's rollout.
SIDBI has been designated as the implementing agency for FoF 2.0, while the notification also provides for the selection of another domestic implementing agency to support execution of the scheme.
The government is also expected to appoint an additional domestic agency to support execution.