The Centre has given a nod for the establishment of the Startup India Fund of Funds 2.0 with a total corpus of Rs. 10,000 crore. The fund will mobilize venture capital for the country’s startup ecosystem. The Ministry of Commerce and Industry has notified the scheme through the Department for Promotion of Industry and Internal Trade. The scheme commits to alternative investment funds to be spread over the 16th and 17th Finance Commission cycles.
The notification highlights that a renewed push to widen access to venture capital across stages and sectors, with a focus on innovation-led manufacturing, long-gestation technologies, and smaller venture funds supporting early growth-stage startups. It follows the structure adopted for the 2016 Fund of Funds for Startups, under which investments are routed through SEBI-registered Alternative Investment Funds (AIFs) that deploy capital into equity and equity-linked instruments of government-recognized startups.
It also clarifies the investment flow. AIFs will mobilize capital from multiple investors to build their corpus, identify and evaluate startups, and deploy funds in tranches over time. Beyond funding, these AIFs are expected to actively mentor and nurture portfolio companies before eventually exiting their investments.
The new scheme is structured across four distinct segments, deep tech funds supporting startups working on complex, cutting-edge solutions, smaller funds focused on early growth-stage startups, funds backing technology-driven manufacturing aligned with “Make in India” priorities, and sector-agnostic and stage-agnostic funds.
To address the varied needs of these segments, the framework introduces greater operational flexibility. This includes enabling larger fund sizes for capital-intensive sectors like deep tech and manufacturing, supporting longer investment horizons for R&D-heavy ventures, allowing higher government participation where private capital is limited, and adjusting the investment multiplier to encourage broader fund participation. The scheme also functions as an umbrella platform, enabling co-investments and additional corpus support from ministries, departments, and institutional investors.
The Department for Promotion of Industry and Internal Trade (DPIIT) will issue detailed operational guidelines covering eligibility criteria, fund selection, monitoring processes, reporting norms, and disbursal mechanisms. SIDBI will continue as a key implementing agency, alongside additional domestic institutions to be appointed.
A DPIIT-constituted Venture Capital Investment Committee will evaluate proposals from AIFs following due diligence by implementing agencies. The committee will include industry representatives, subject-matter experts, and agency officials, with a focus on backing funds managed by experienced professionals with strong track records.
Oversight will rest with an Empowered Committee chaired by the DPIIT Secretary, comprising representatives from relevant ministries, the National Startup Advisory Council, and other ecosystem stakeholders. This body will have the authority to refine the scheme and its guidelines within the Cabinet-approved framework.
