In a significant move to strengthen India’s startup ecosystem, the Government of India has notified the ₹10,000 crore Startup India Fund of Funds (FoF 2.0) a major initiative aimed at mobilising venture and growth capital for deep-tech startups, early growth-stage companies, and technology-driven manufacturing ventures.
The initiative builds on the success of the earlier Fund of Funds for Startups (FFS 1.0) launched under the Startup India programme, marking the next phase of India’s long-term strategy to support innovation-led growth.
Building on the Success of Fund of Funds 1.0
The first iteration of the fund, operational since 2016, has played a pivotal role in shaping India’s startup ecosystem. Managed by the Small Industries Development Bank of India under the Department for Promotion of Industry and Internal Trade, FFS 1.0 operates as an “investor for investors”.
Instead of directly funding startups, it invests in SEBI-registered Alternative Investment Funds (AIFs), which in turn deploy capital into startups.
Through this model, the government has already supported over 1,370 startups, catalysing private capital participation and expanding access to early-stage funding.
What’s New in FoF 2.0
The newly announced FoF 2.0 retains the same underlying structure but sharpens its focus on future-facing sectors and growth-stage capital needs.
Like its predecessor, the fund will invest through SEBI-registered AIFs, which will deploy capital into government-recognised startups via equity and equity-linked instruments.
However, FoF 2.0 introduces a more targeted approach, prioritising areas that are critical to India’s long-term economic and technological ambitions.
Four Strategic Investment Segments
The ₹10,000 crore corpus has been structured across four key segments:
- Deep-tech startups: Supporting innovation in areas such as AI, space-tech, semiconductors, and advanced computing
- Micro VCs: Backing early growth-stage startups through smaller, specialised venture funds
- Tech-driven manufacturing: Encouraging domestic production powered by advanced technologies
- Sector-agnostic funds: Providing flexibility to invest across emerging opportunities
This segmentation reflects a deliberate effort to balance early-stage innovation with scalable industrial growth.
Strengthening Governance and Execution
To ensure effective deployment and oversight, the government will introduce detailed operational guidelines covering:
- Eligibility criteria for participating funds
- Fund selection and evaluation mechanisms
- Monitoring and reporting frameworks
- Disbursal processes
- Investment committee structures
The Department for Promotion of Industry and Internal Trade will issue these guidelines, while a high-level committee chaired by its Secretary will oversee implementation and performance.
This structured governance approach aims to ensure transparency, accountability, and efficient capital allocation.
Catalysing the Next Phase of Startup Growth
FoF 2.0 comes at a time when India’s startup ecosystem is evolving beyond consumer internet businesses into deep-tech, manufacturing, and globally competitive innovation sectors.
While early-stage funding has improved significantly over the years, startups in capital-intensive domains often face challenges in accessing long-term growth capital.
By channeling funds into AIFs, the government aims to:
- Crowd in private capital
- Strengthen India’s venture capital ecosystem
- Enable startups to scale sustainably
- Support innovation in strategic sectors
The Road Ahead
With a ₹10,000 crore commitment, FoF 2.0 signals the government’s continued focus on building a resilient, innovation-driven economy.
As India positions itself as a global hub for technology and manufacturing, initiatives like this will play a crucial role in bridging funding gaps and enabling startups to compete at a global scale.
By combining policy support, institutional capital, and private sector participation, the Fund of Funds 2.0 is set to drive the next wave of entrepreneurial growth fueling not just startups, but the future of India’s economic transformation.
By : Vanshika Tayal
