The Government of India has launched the Startup India Fund of Funds 2.0 (FoF 2.0) with a corpus of Rs 10,000 crore ($1.2 billion) to mobilise venture and growth capital for startups, especially in deep tech and manufacturing.
The scheme builds on the original Fund of Funds for Startups (FFS 1.0), introduced under the Startup India initiative, and was announced by the Ministry of Commerce & Industry on April 13, 2026.
How will FoF 2.0 channel funds and drive startup investments? The government’s FoF 2.0 will continue to invest indirectly by allocating capital to Alternative Investment Funds (AIFs) instead of investing directly in startups. These AIFs will invest in DPIIT-recognised ventures, with commitments distributed over the 16th and 17th Finance Commission cycles. This structure aims to attract private capital while ensuring public funds play a catalytic role.
A Venture Capital Investment Committee (VCIC) will evaluate and select AIFs, while an Empowered Committee (EC) will monitor implementation and performance. The scheme also permits co-investment by government and institutional investors under defined safeguards. The Department for Promotion of Industry and Internal Trade (DPIIT) will issue detailed operational guidelines.
The Small Industries Development Bank of India (SIDBI) will serve as the primary implementing agency and is expected to operationalise the scheme immediately. The government may also appoint an additional domestic agency to support execution. The initiative is also aimed at reinforcing India’s ambitions to emerge as a global innovation hub, aligning closely with the broader vision of “Viksit Bharat @ 2047.”
The scheme introduces provisions for fund recycling and deployment: Distributions from Startup India FoF 2.0, after allocating up to 5% of returns for startup ecosystem capacity building, will be deposited into the Consolidated Fund of India (CFI).
FoF 2.0 uses a segmented investment approach to more effectively target innovation across different stages and sectors:
- Segment 1: AIFs that support deep tech startups developing novel solutions that address complex problems, require longer R&D cycles, and involve higher costs.
- Segment 2: Smaller AIFs (Micro VCs) that support early growth-stage startups in the initial phases of developing technology, products, or services.
- Segment 3: AIFs that support tech-driven, innovative manufacturing startups, especially in champion sectors aligned with the Make in India initiative.
- Segment 4: AIFs that support startups regardless of sector or stage.
How the FFS 1.0 worked—and where it fell short: Launched in 2016, the FFS 1.0 aimed to address a structural gap in domestic risk capital. Managed by the SIDBI, this approach mobilised larger pools of private capital and contributed to the growth of India’s venture ecosystem.
However, regulatory issues, such as the “angel tax” on startup investments, created barriers for early-stage funding and required government action to reduce compliance burdens. Transparency and outcome measurement also remained limited, since the DPIIT did not maintain comprehensive data on startups’ contribution to GDP. Recent initiatives, such as the BHASKAR portal, aim to address these gaps by improving coordination among startups, investors, and institutions.
Why FoF 2.0 Matters: The revised framework targets early-stage and deep-tech funding gaps and encourages capital flows into strategic and manufacturing sectors. It also aims to strengthen domestic capital formation, supporting greater financial self-reliance.
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