The Department for Promotion of Industry and Internal Trade (DPIIT) has notified Startup India Fund of Funds (FoF) 2.0 with a ₹10,000 crore corpus to support startups through SEBI-registered Alternative Investment Funds (AIFs), prioritising deeptech, early growth-stage companies and technology-driven manufacturing ventures.
The Cabinet approved scheme, managed primarily by Small Industries Development Bank of India (SIDBI), builds on the original 2016 FoF and introduces co-investment provisions alongside enhanced governance through a Venture Capital Investment Committee comprising industry experts.
Targeted Support for High-Risk Sectors
FoF 2.0 focuses on deeptech sectors including quantum computing, biotechnology and advanced materials, alongside capital-intensive manufacturing and growth-stage startups facing Series B and C funding challenges. AIFs must commit minimum ₹200 crore corpus with 75% deployment into priority areas and management fees capped at 4%.
The Venture Capital Investment Committee, including CXOs, former RBI officials and DPIIT representatives, will oversee AIF selection and performance monitoring through public dashboards tracking internal rate of return, job creation and intellectual property generation.
Response to Funding Contraction
India’s startup ecosystem exceeds 125,000 companies, but early and growth-stage funding fell 35% in FY25 amid global venture capital slowdowns. The original FoF deployed ₹10,000 crore through 99 AIFs and attracted ₹75,000 crore in private leverage.
FoF 2.0 introduces co-investments up to ₹50 crore per deal alongside AIFs to crowd in institutional capital. A second domestic agency will join SIDBI in implementation, with greenfield AIFs receiving priority for breakthrough technologies.
Strategic Sector Alignment
The manufacturing focus supports Atmanirbhar Bharat goals targeting electric vehicle batteries, precision engineering and Industry 4.0 applications. Deeptech allocation exceeds 30% for space technology, semiconductors and climate technologies requiring long development cycles.
Domestic limited partners including LIC and National Investment and Infrastructure Fund have committed ₹4,000 crore as anchor investments. The scheme facilitates bridge financing for growth-stage companies with ₹100-500 crore revenue approaching IPOs or institutional rounds through NSE Emerge and BSE SME platforms.
