Government Green Lights Rs. 10,000 Crore Fund of Funds 2.0 Under the Startup India Mission

The Union Cabinet, chaired by Prime Minister Narendra Modi, approved the establishment of the Startup India Fund of Funds 2.0 with a total corpus of Rs. 10,000 crore on Saturday. The new scheme follows the Fund of Funds for Startups 1.0, which was launched in 2016 to address funding gaps in the Indian startup ecosystem and help mobilise the domestic venture capital market. With the second edition, the Government is also taking a structured approach towards supporting new-age startups, highlighting a focus on deep tech, manufacturing, and early growth-stage companies.

Startup India Fund of Funds 2.0 Approved by the Cabinet

With the establishment of Startup India FoF 2.0, a corpus of Rs. 10,000 crore has been set aside to enable the private investors in the country to invest in startups. As explained in a TechCrunch report, the new scheme is a common venture capital model where the Government backs startups indirectly by providing capital to domestic investors.

This way, the venture capital market can have access to funds that it can bet on startups with a high-growth potential or an innovation that can disrupt the existing market. The previous iteration of the scheme was launched in 2016, and it committed funds to 145 Alternative investment Funds (AIFs). These AIFs, subsequently, invested more than Rs. 25,500 crore in over 1,370 Indian startups across agriculture, artificial intelligence (AI), robotics, automotive, clean tech, consumer goods, e-commerce, and more.

With Startup India FoF 2.0, the Government is taking a more targeted approach. It is aimed to support deep tech and tech-driven innovative manufacturing startups to prioritise breakthroughs in high-tech areas that typically have a long gestation period. Additionally, early-growth stage founders, who suffer from a lack of funding and a safety net, will also be prioritised in the second iteration.

The Union Cabinet is also shifting its focus to the hinterland of the country, encouraging venture capitalists to invest in startups beyond the metro cities. It has also identified high-risk capital gaps in areas which are critical for self-reliance and economic development, and startups working in these sectors will be prioritised.