India has approved a ₹10,000 crore (~ $1.2 billion) Startup India Fund of Funds 2.0, giving a fresh boost to startup financing at a time when global venture funding has slowed, and early-stage companies are finding it harder to raise capital. Cleared by the Union Cabinet led by PM Narendra Modi, the initiative will invest government money into SEBI-registered venture capital funds instead of directly funding startups, helping attract larger pools of private investment. The new fund builds on the original 2016 programme and is expected to support early-stage and deep-tech startups in areas like artificial intelligence, semiconductors, climate technology, biotechnology, and advanced manufacturing.
The programme follows a fund-of-funds model, under which public capital is routed into Alternative Investment Funds (AIFs) and venture capital funds that then deploy investments into startups. This structure allows professional fund managers to evaluate opportunities while ensuring that government participation catalyses additional private capital. The scheme will continue to be operationally managed by the Small Industries Development Bank of India (SIDBI) under the supervision of the Department for Promotion of Industry and Internal Trade (DPIIT).
The approval comes amid a global slowdown in venture capital deployment. Since 2022, rising interest rates, tighter liquidity, and investor focus on profitability have reduced funding volumes worldwide. Indian startups have felt the impact, particularly at the seed and Series A stages, where funding rounds have become more selective and valuations more conservative. And deep-tech ventures, which require long development cycles and substantial upfront investment, have faced even greater funding constraints.
The fund builds on the earlier Fund of Funds for Startups launched in 2016 under the Startup India initiative, which also had a ₹10,000 crore corpus.
“Under FFS 1.0, the entire corpus of Rs. 10,000 crore has been committed to 145 Alternative Investment Funds (AIFs). Such supported AIFs have invested over Rs. 25,500 crore in more than 1,370 startups across the country in sectors such as agriculture, artificial intelligence, robotics, automotive, clean tech, consumer goods & services, e-commerce, education, fintech, food & beverages, healthcare, manufacturing, space tech, and biotechnology, amongst others,” the government said in an official statement.
Now, the new phase shifts strategic focus toward deep technology and innovation-led industrial growth, aligning with national priorities like semiconductor manufacturing, supply-chain resilience, clean energy transition, and self-reliance in critical technologies.
The development becomes even more significant as India’s startup ecosystem has expanded at impressive speed over the past decade. From only a few hundred recognised startups in 2016, the country now hosts more than 200,000 DPIIT-recognised ventures operating across over 750 districts. India has emerged as one of the world’s largest startup ecosystems and is home to more than 100 unicorns. This growth has been fuelled by widespread smartphone adoption, some of the world’s lowest mobile data costs, and digital public infrastructure like UPI.
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