The government has introduced operational guidelines for the Rs 10,000 crore Startup India Fund of Funds 2.0 (FoF 2.0) to enhance capital deployment and funding accessibility for startups. The Department for Promotion of Industry and Internal Trade (DPIIT) has launched a detailed framework for the second edition of the Fund of Funds scheme, focusing on improving capital flows efficiency into India’s startup ecosystem. This initiative aims to facilitate private investment rather than direct funding.
Investments under this scheme will flow through SEBI-registered Category I and II Alternative Investment Funds (AIFs), which will then invest in DPIIT-recognized startups. This approach is anticipated to ensure disciplined capital allocation, boost private investor participation, and broaden funding access across various sectors and regions. The Small Industries Development Bank of India (SIDBI) will serve as the initial implementation agency, overseeing the selection and monitoring of AIFs.
To bridge funding gaps, the guidelines introduce a segmented approach to AIFs, including deep-tech focused funds, micro venture capital funds for early-stage startups, and funds targeting innovation-driven manufacturing sectors. Each category is defined by parameters like corpus size, government contribution limits, tenure, and minimum private capital mobilization requirements. The scheme employs a two-stage selection process for AIFs, emphasizing private capital participation and market-led investment discipline.
The scheme is structured to create multiplier effects by ensuring private capital involvement and market-driven investment discipline. It also allocates a portion of returns towards ecosystem development initiatives like mentorship programs and capacity-building efforts.
