Government Greenlights Rs 10,000 Crore Startup India Fund 2.0 to Fuel Innovation
In a significant boost to India's entrepreneurial ecosystem, the government on Friday approved the second phase of the Startup India Fund of Funds Scheme with a substantial corpus of Rs 10,000 crore. Prime Minister Narendra Modi announced this pivotal decision through a social media post, emphasizing its focus on encouraging early-stage startups and advancing deep-tech research initiatives.
Strategic Move on Historic Day
The approval came on Prime Minister Modi's first day at his new office, Seva Teerth, where he signed multiple files aimed at empowering various sections of society including the poor, farmers, youth, and women. This transition from the colonial-era South Block building coincided with February 13, marking 95 years since New Delhi's formal inauguration as India's modern capital in 1931.
Evolution of the Fund of Funds Mechanism
The government initially established a Fund of Funds worth Rs 10,000 crore in 2016, designed to provide crucial seed capital and enable startups to undertake calculated risks. Following the successful utilization of the first tranche, the Union Budget for 2025-26 sanctioned this second phase with an identical allocation of Rs 10,000 crore.
To date, more than 200,000 entities have received official recognition as startups from the Department for Promotion of Industry and Internal Trade (DPIIT), making them eligible for various incentives under the comprehensive Startup India action plan.
Operational Framework and Investment Structure
The scheme operates through a sophisticated investment mechanism aimed at catalyzing venture capital investments across the startup landscape. The Small Industries Development Bank of India (SIDBI) serves as the operational agency, channeling capital to Securities and Exchange Board of India (SEBI)-registered Alternative Investment Funds (AIFs).
These AIFs, in turn, invest directly in promising startups, creating a multiplier effect in the entrepreneurial funding ecosystem. A critical requirement of the scheme mandates that AIFs supported under the Fund of Funds Scheme must invest at least twice the amount committed under FFS in startups, ensuring maximum capital deployment into the innovation economy.
Monitoring and Implementation Architecture
DPIIT functions as the monitoring agency overseeing the scheme's implementation, while SIDBI handles the day-to-day operational responsibilities. This dual-agency approach ensures both strategic oversight and efficient execution of the funding mechanism.
The renewed focus on early-stage ventures and deep-tech research reflects the government's commitment to fostering innovation-driven economic growth and positioning India as a global hub for technological advancement and entrepreneurial excellence.
