Centre Unveils Rs 10,000 Crore Startup India Fund Of Funds 2.0 To Accelerate Deep Tech And Early-Stage Innovation

The Government of India has launched the Startup India Fund of Funds 2.0 (FoF 2.0), a Rs 10,000 crore initiative aimed at boosting access to capital for emerging businesses and energising the country’s innovation ecosystem.

What Is FoF 2.0?

Building on the Fund of Funds for Startups introduced in 2016, FoF 2.0 is designed to address persistent funding gaps in the startup landscape and channel more domestic venture capital into high-potential sectors. The corpus will be deployed through commitments to eligible Alternative Investment Funds (AIFs) during the 16th and 17th Finance Commission cycles.

Who Will Benefit

The programme targets a broad spectrum of startups and venture funds, with a special emphasis on:

• Deep technology ventures
• Early-stage startups, especially those backed by smaller funds
• Innovation-led manufacturing enterprises

The scheme adopts a flexible approach to support startups across sectors and growth stages, enabling capital to reach promising founders and technologies at the right time.

How It Works

• FoF 2.0 will invest in SEBI-registered AIFs, which in turn back government-recognised startups.
• Capital will be allocated through commitments rather than direct investments into startups, leveraging the expertise and networks of professional fund managers.
• The approach is intended to catalyse private investment, crowd-in domestic capital, and strengthen the venture funding pipeline.

Governance And Oversight

To ensure transparency, accountability, and rigour in fund allocation and monitoring, the scheme introduces multiple layers of oversight:

• Venture Capital Investment Committee (VCIC): Comprising experienced members from the startup ecosystem, the VCIC will evaluate and select AIFs for commitments under FoF 2.0.
• Empowered Committee: This body will oversee implementation, track performance, and ensure alignment with the scheme’s objectives.
• Co-Investment Safeguards: Built-in checks will govern co-investments by public and institutional stakeholders to maintain fairness and protect public capital.

Implementation

The Department for Promotion of Industry and Internal Trade (DPIIT) will issue operational guidelines for the scheme, including detailed eligibility criteria and processes for AIF selection. The Small Industries Development Bank of India (SIDBI) has been appointed as the primary implementation agency and will begin rolling out the scheme immediately. Plans are also underway to onboard an additional domestic agency to expand and expedite execution.

Expected Impact

• Boost to Innovation: Increased funding for deep tech and R&D-heavy ventures can accelerate breakthroughs with strategic and commercial value.
• Support for Early-Stage Startups: Smaller funds often back younger companies; channeling capital through them can broaden access and diversify the startup pipeline.
• Manufacturing Upshift: Backing innovation-led manufacturing aligns with national priorities on self-reliance and advanced industrial capabilities.
• Job Creation and Competitiveness: By catalysing private investment through SEBI-registered AIFs, the scheme aims to drive employment and strengthen India’s technological edge.

Key Takeaways

• Rs 10,000 crore Fund of Funds 2.0 to be deployed via eligible AIFs over the 16th and 17th Finance Commission cycles.
• Focus on deep tech, early-stage startups supported by smaller funds, and innovation-led manufacturing.
• VCIC and an Empowered Committee will ensure rigorous selection, monitoring, and transparency.
• Operational guidelines to be issued by DPIIT; SIDBI will lead implementation with another domestic agency to be onboarded.
• Objective: catalyse innovation, create jobs, and enhance India’s manufacturing and technology capabilities.