Founders collaborate on deeptech innovation, spurred by India's Startup India Fund of Funds 2.0.
India’s Ministry of Commerce and Industry has launched the second iteration of its Startup India Fund of Funds (FoF 2.0), a significant initiative aimed at accelerating capital allocation within the country’s burgeoning startup ecosystem. With a substantial corpus of ₹10,000 Cr, the new fund is specifically designed to bolster investments in deeptech and manufacturing ventures.
The FoF 2.0 scheme will channel funds into SEBI-registered category I and II Alternative Investment Funds (AIFs). These AIFs will, in turn, deploy the capital into equity, equity-linked instruments, and debt offerings of startups registered with the Department for Promotion of Industry and Internal Trade (DPIIT). This multi-tiered approach is intended to ensure disciplined capital deployment, attract private investment, and broaden access to funding across diverse sectors, stages, and geographies within India.
The operational guidelines for FoF 2.0 have been notified, detailing the mechanisms for fund disbursement, the segmentation and selection process for AIFs, and the constitution of oversight bodies. The Small Industries Development Bank of India (SIDBI) has been appointed as the implementation agency, reprising its role from the first FoF launched in 2016. DPIIT also plans to onboard an additional domestic implementation agency to expand the fund’s reach and enhance sectoral expertise.
Key oversight responsibilities will fall to the implementation agency, which will monitor compliance with operational guidelines, including private placement memorandums. The agency will also hold representation on the advisory boards of selected AIFs to ensure alignment with the fund’s objectives. A Venture Capital Investment Committee (VCIC), comprising prominent figures from the investment and academic sectors, will screen and recommend proposals. An ’empowered committee,’ chaired by the DPIIT secretary, will oversee the scheme’s overall implementation and performance.
The selection process for AIFs involves two stages: initial due diligence by the implementation agency and subsequent screening and recommendation by the VCIC. The fund will prioritize AIFs with experienced management teams and a proven track record, particularly those supporting startups in non-metro regions to foster wider geographical investment.
FoF 2.0 is structured to act as a catalyst for private capital, with potential co-investment from various government ministries and departments. However, the total allocation to any single AIF will not exceed 50% of its corpus. A portion of the fund, approximately 5%, will be allocated to capacity-building initiatives within the startup ecosystem, including mentorship and regulatory support, with the remainder returned to the Consolidated Fund of India.
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