Startup India Fund of Funds 2.0 Scheme

Evolution of startup funding support

Startup India Fund of Funds 2.0 Scheme: The Startup India Fund of Funds 2.0 (FoF 2.0) scheme was notified on 14 April 2026 to strengthen India’s startup financing ecosystem. It builds upon the earlier Fund of Funds for Startups (FFS 1.0) launched in 2016 under the Startup India Action Plan.

The new scheme focuses on improving access to venture capital (VC) funding for startups across multiple stages. It aims to bridge funding gaps, especially for early-stage and deep technology ventures.

Static GK fact: The Startup India initiative was launched on 16 January 2016 to promote innovation and entrepreneurship in India.

Key financial and administrative structure

FoF 2.0 has a total corpus of ₹10,000 crore, making it a major government-backed funding initiative. It operates under the Ministry of Commerce and Industry and is implemented primarily by the Small Industries Development Bank of India (SIDBI).

The scheme invests indirectly by contributing to SEBI-registered Alternative Investment Funds (AIFs). These AIFs, in turn, invest in startups through equity and equity-linked instruments.

Static GK Tip: SIDBI was established in 1990 as the principal financial institution for the promotion and development of MSMEs in India.

Understanding AIF and venture capital

Alternative Investment Funds (AIFs) are privately pooled investment vehicles that collect funds from sophisticated investors, both domestic and foreign. They invest according to a defined investment strategy, often focusing on high-growth sectors.

Venture Capital (VC) is a form of early-stage equity financing provided to startups with high growth potential. Apart from funding, VC firms also offer strategic guidance and mentorship.

Static GK fact: SEBI regulates AIFs in India under the SEBI (AIF) Regulations, 2012.

Governance and selection process

The selection of AIFs under FoF 2.0 is conducted by the Venture Capital Investment Committee (VCIC). This committee comprises experienced professionals from the startup ecosystem.

For monitoring and governance, an Empowered Committee (EC) is established under the chairmanship of the Secretary of DPIIT (Department for Promotion of Industry and Internal Trade). This ensures transparency and accountability in fund allocation.

Additionally, apart from SIDBI, other domestic implementing agencies may be selected to improve efficiency and outreach.

Segmented investment strategy

FoF 2.0 adopts a segmented approach to target diverse startup needs. A significant focus is placed on deep tech startups, which involve complex technologies and require longer research and development cycles.

The scheme also supports micro VCs, which cater to early-stage startups needing smaller investments. Another segment targets technology-driven manufacturing startups, aligning with the Make in India initiative.

Finally, it includes AIFs that are sector-agnostic, allowing flexibility in funding innovative ideas across industries.

Static GK Tip: The Finance Commission in India is constituted every five years to recommend distribution of financial resources between the Centre and states.

Significance for India’s startup ecosystem

FoF 2.0 is expected to boost innovation, generate employment, and strengthen India’s position as a global startup hub. By addressing funding constraints, it enables startups to scale and compete internationally.

The scheme also enhances India’s capability in emerging technologies and manufacturing sectors, contributing to long-term economic growth and self-reliance.

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Startup India Fund of Funds 2.0 Scheme: