New Delhi: India’s startup funding architecture is set for another policy push, with the DPIIT (Department for Promotion of Industry and Internal Trade) issuing operational guidelines for the Rs 10,000 crore Startup India Fund of Funds 2.0.
The scheme is designed to move capital into startups through SEBI-registered Category I and II Alternative Investment Funds, rather than direct government investment into companies. These AIFs will, in turn, invest in DPIIT-recognised startups.
SIDBI will serve as the initial implementation agency and will handle execution through a structured selection and monitoring process. DPIIT will also bring in another implementation agency to expand reach, deepen sectoral expertise and strengthen institutional capacity for managing the programme.
The guidelines create a more segmented funding approach. Capital will be channelled through deep-tech-focused funds, micro venture capital funds for early-growth startups, funds backing innovative and technology-led manufacturing, and sector- and stage-agnostic funds. Each segment will have its own parameters, including corpus thresholds, government contribution limits, tenure and private capital mobilisation requirements.
AIFs will be selected through a two-stage process. The implementation agency will first conduct screening and due diligence. Proposals will then be evaluated by a Venture Capital Investment Committee on the basis of team track record, fund management ability and investment strategy. The committee includes Vallabh Bhansali, Dr Ashok Jhunjhunwala, Dr Renu Swarup, Dr Chintan Vaishnav and Rajesh Gopinathan, along with representatives from the implementation agency.
The larger idea behind FoF 2.0 is not to replace private capital, but to pull more of it into the startup ecosystem. The guidelines require minimum private capital mobilisation, keeping the scheme market-led while using public money as a catalyst.
A portion of returns may also be used for ecosystem-building work such as mentorship, shared infrastructure and broader startup development interventions. The framework also allows co-investments and contributions from ministries, departments and institutional investors in priority sectors.
For Indian startups, especially those working in deep tech, manufacturing and early-growth segments, the scheme could become an important capital bridge at a time when funding quality, governance and domestic venture depth matter as much as headline valuations.
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