Budget 2026 has provided a fresh ₹10,000 crore allocation to the Fund of Funds for Startups (FoF), to be deployed through SEBI-registered Alternative Investment Funds.
The allocation is targeted at early- and growth-stage companies and is structured to operate with two-times leverage at the underlying fund level. As a result, the total deployable capital pool is expected to be in the range of ₹20,000–25,000 crore.
According to policy documents, the expanded FoF is expected to support around 500 startups over a five-year period, with an average ticket size of about ₹50 crore per company. The focus of deployment is on business modernisation, research and development, IPO readiness and acquisition financing, rather than seed or pre-seed investments.
The fresh allocation supplements the earlier FoF corpus created in previous budgets, which has already been fully committed. The additional funding is aimed at addressing the capital gap faced by Indian startups at Series B and later stages.
All investments under the FoF will be routed through funds registered with the Securities and Exchange Board of India.
Dedicated Deep-Tech Fund of Funds Announced
For the first time, Budget 2026 has also indicated the creation of a dedicated Deep Tech Fund of Funds.
The deep-tech pool will focus on sectors including quantum technologies, sixth-generation telecommunications, advanced materials, biotechnology and AI-driven hardware. The fund is intended to support startups operating in areas with extended product development and commercialisation cycles.
Deep-tech ventures typically require seven to ten years to reach market revenues, which has limited their access to conventional venture capital structures. The dedicated fund is positioned to provide longer-horizon capital for such companies.
Private-Sector-Led R&D Pool Linked to Startup and Industry Collaboration
The deep-tech funding initiative is aligned with a ₹20,000 crore private-sector-led Research, Development and Innovation (RDI) allocation announced in Budget 2026.
This RDI allocation sits within the ₹28,049 crore outlay for the Department of Science and Technology and is structured to support collaborative projects involving startups, industry and academic institutions.
The RDI pool is designed to shift a larger share of applied research activity away from exclusively government-run laboratories toward joint commercial and industrial research programmes.
Three-Layer Capital Structure for Startup Scale-Up
Budget 2026 establishes a multi-layered funding structure for the startup ecosystem.
The first layer consists of equity capital from the ₹10,000 crore Fund of Funds for early- and growth-stage companies. The second layer is the dedicated Deep Tech Fund of Funds, intended to support longer-cycle technology ventures. The third layer is non-dilutive research funding provided through the ₹20,000 crore private-sector RDI pool.
Together, these instruments are structured to support startups across scale-up and commercialisation phases, including sectors such as artificial intelligence infrastructure, cybersecurity, industrial automation, healthcare technology and climate technology.
Addressing the Series-B and Commercialisation Gap
The expanded FoF and the new deep-tech funding structure are intended to address the capital shortage that has historically affected Indian startups beyond early-stage funding.
Policy documents indicate that the revised funding framework is designed to improve access to domestic capital for later-stage growth and commercial deployment, reducing reliance on overseas investors and foreign listing pathways for scale-ready Indian technology companies.
