Key Points
- SIDBI appointed to oversee deployment of ₹10,000 crore into SEBI-registered AIFs
- Government stake in any single fund capped at 25 to 40 per cent
- Framework targets deep tech, early-stage startups and technology-driven manufacturing
The Department for Promotion of Industry and Internal Trade has issued operational guidelines detailing how ₹10,000 crore will flow to startups through a revamped fund-of-funds structure. The guidelines, released weeks after the scheme was notified on 13 April 2026, set out investment pathways, fund selection criteria and oversight mechanisms for the Startup India Fund of Funds 2.0.
Under the framework, the government will not invest directly in startups. Instead, capital will move through Securities and Exchange Board of India-registered Alternative Investment Funds, which are privately managed pooled investment vehicles. These AIFs will then back startups recognised by DPIIT. The structure aims to combine public capital with private sector investment expertise.
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The Small Industries Development Bank of India (SIDBI) will serve as the initial implementation agency, according to the guidelines. SIDBI will select and monitor participating AIFs. A second domestic agency is expected to join the programme to expand institutional reach.
Investment segments and private capital requirements
The guidelines create distinct investment segments targeting gaps in the startup ecosystem. These include deep technology ventures, early-stage companies backed by smaller funds, technology-driven manufacturing and sector-agnostic investments. Each segment carries specific allocation criteria.
To maintain market discipline, participating AIFs must raise private capital alongside government commitments. The guidelines specify minimum investment multipliers for each segment. Government participation in any single fund will be capped between 25 and 40 per cent, depending on the category, to limit concentration risk and draw in other investors.
A two-stage selection process will govern AIF participation. SIDBI will first conduct due diligence on proposals. A Venture Capital Investment Committee comprising industry and ecosystem experts will then evaluate shortlisted funds. Final approval rests with a sub-committee of SIDBI’s board.
Oversight will operate at multiple levels. An empowered committee chaired by the DPIIT secretary will review performance periodically. Third-party evaluations will assess outcomes at regular intervals. A portion of returns generated will fund ecosystem development activities including mentorship and infrastructure support. The remainder will flow back to the Consolidated Fund of India.
The framework includes provisions to expand funding beyond established startup hubs, with emphasis on ventures in emerging cities. Co-investment arrangements allow other ministries and institutional investors to participate in priority sectors.
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Your Questions, Answered
How will Startup India Fund of Funds 2.0 invest in startups?
The fund will not invest directly. It will channel capital into SEBI-registered Category I and II Alternative Investment Funds, which will then invest in DPIIT-recognised startups.
Who is implementing the Startup India Fund of Funds 2.0?
The Small Industries Development Bank of India has been appointed as the initial implementation agency. A second domestic agency is expected to be onboarded.
What is the government’s maximum stake in participating AIFs?
Government participation in any single fund is capped between 25 and 40 per cent, depending on the investment segment.
Which sectors does the fund target?
The framework targets deep technology ventures, early-stage startups, technology-driven manufacturing and sector-agnostic investments across emerging cities.
