Department for Promotion of Industry and Internal Trade (DPIIT) has officially notified the second iteration of the Startup India Fund of Funds (FoF) with a total corpus of ₹10,000 Cr a couple of months after the Union Cabinet approved the same.

The Startup India FoF 2.0 has come into force from today (April 13) and disbursals to alternative investment funds (AIFs) will be spread over the 16th and 17th finance commission cycles.

The DPIIT has expanded the scope of the Startup India FoF by enhancing its coverage to the following segments:

• AIFs supporting deeptech startups engaged in developing novel solutions addressing complex problems that involve longer R&D cycle and higher costs.


• Micro VCs supporting early growth stage startups that are in the early phases of developing their solutions.


• AIFs supporting tech-driven manufacturing startups.


• AIFs supporting sector and stage agnostic startups.

Prime Minister Narendra Modi approved the second edition of the FoF in February. The Startup India FoF 1.0 scheme was first launched by the Union Government in 2016 under the Startup India action plan, with an initial corpus of ₹10,000 Cr. At the time, the primary goal of the initiative was to catalyse private investment into Indian startups.

In a written reply before the Rajya Sabha in February, minister of state for commerce, Jitin Prasada, said that the supported AIFs under the schemes have invested ₹25,548 Cr in 1,371 startups across 29 states and union territories (UTs). “Such supported startups have generated over 2 Lakh jobs,” Prasad noted.

While the FoF does not invest directly in startups, it provides capital to SEBI-registered alternative investment funds (AIFs). These investment vehicles, which are managed by institutional investors, then deploy the capital in startups.

The SIDBI will act as the implementing agency for the scheme. Besides, the DPIIT also intends to select another implementation agency for the scheme.

The IAs will seek proposals from AIFs and conduct due diligence. Then, a DPIIT constituted Venture Capital Investment Committee (VCIC), which would include representation from the industry, subject matter experts, will consider the proposals for investments.

“VCIC will consider AIFs managed by experienced professionals with proven track records for funding under the Scheme,” the notification read.

AIFs will evaluate startups for investments, which will take place in tranches, after which they are also required to mentor and nurture the startups they’ve backed before they pare their stakes.

The AIFs are also permitted to raise funds from other investors besides the FoF to meet their target corpus.

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