The Department for Promotion of Industry and Internal Trade (DPIIT) under the Ministry of Commerce and Industry has released detailed operational guidelines for the Rs 10,000-crore Startup India Fund of Funds 2.0 (FoF 2.0), aimed at improving capital deployment efficiency and widening funding access for startups.
The scheme will operate through investments in SEBI-registered Alternative Investment Funds (AIFs), which will subsequently channel funds into DPIIT-recognised startups.
Officials stated that this indirect investment model is intended to promote disciplined capital allocation, attract private participation, and ensure broader sectoral and geographic coverage.
The Small Industries Development Bank of India (SIDBI) has been designated as the initial implementation agency. It will manage fund deployment through a structured mechanism involving the selection and monitoring of AIFs. DPIIT is also expected to onboard an additional implementation agency to expand outreach and strengthen institutional capacity.
Under the framework, FoF 2.0 is positioned as a catalytic fund rather than a direct investor, with a clear mandate to mobilise private capital and generate a multiplier effect within the startup ecosystem. The guidelines introduce segmentation of AIFs into specific categories, including deep-tech funds, micro venture capital funds targeting early-stage startups, funds focused on technology-led manufacturing, and sector-agnostic funds.
Each category will function under defined parameters such as corpus size, limits on government contribution, tenure, and minimum private capital requirements, aimed at ensuring targeted and efficient fund utilisation.
A two-stage selection process has been outlined for AIFs. The implementation agency will carry out initial screening and due diligence, followed by evaluation by a Venture Capital Investment Committee comprising experts from industry, academia, and the innovation ecosystem. The committee will assess proposals based on fund management expertise, past performance, and investment strategy.
The guidelines also provide for co-investment opportunities with ministries, government departments, and institutional investors in priority sectors. Additionally, provisions have been included to allocate a portion of returns towards ecosystem development initiatives such as mentorship programmes and shared infrastructure.
Officials indicated that the framework has been designed to remain adaptable to evolving market conditions while maintaining transparency and accountability in fund deployment.
The Startup India FoF 2.0 is expected to strengthen domestic venture capital, support innovation-driven enterprises, and enhance India’s position as a global startup hub by leveraging private investment and improving access to growth capital.
