The Union Cabinet has approved the launch of Startup India Fund of Funds (FoF) 2.0 with an allocation of ₹10,000 crore (approximately US$ 1.2 billion), aimed at strengthening venture capital availability for India’s rapidly growing startup ecosystem.
Announced as part of the government’s continued push to support entrepreneurship, the second edition of the Fund of Funds seeks to unlock domestic long-term capital and stimulate greater private investment participation in innovation-led enterprises.
Strengthening Access to Patient Capital
The renewed fund is designed to provide “patient capital” — long-term funding that allows businesses the time needed to innovate, scale, and achieve sustainable growth.
FoF 2.0 will particularly focus on:
- Deep technology ventures
- Advanced and innovation-driven manufacturing startups
- Early-stage growth companies
- High-risk, research-oriented enterprises
By bridging funding gaps in sectors that often struggle to attract traditional capital due to longer gestation periods and higher risk profiles, the initiative aims to crowd in additional private investments and improve access to venture financing.
Building on the Startup India Momentum
The new fund builds upon the success of the Startup India initiative launched in 2016, which has significantly reshaped India’s entrepreneurial landscape.
Over the past decade, the number of recognised startups has grown from just a few hundred to more than two lakh, reflecting a strong combination of policy support, digital infrastructure development, and investor interest.
The Fund of Funds model does not invest directly in startups. Instead, it channels capital into SEBI-registered Alternative Investment Funds (AIFs), which in turn invest in startups across sectors and stages. This approach ensures professional capital allocation and wider sectoral reach.
Sector- and Stage-Focused Strategy
Startup India FoF 2.0 adopts a targeted investment framework, focusing on both specific sectors and stages of business development. This structured approach is intended to ensure more efficient deployment of capital, supporting startups from early innovation through expansion and scaling phases.
The initiative is expected to:
- Encourage technology-driven entrepreneurship
- Support domestic innovation capabilities
- Generate employment opportunities
- Strengthen India’s position as a global innovation hub
Alignment with Broader Economic Goals
The launch of FoF 2.0 aligns with India’s broader economic objectives, including:
- Promoting self-reliance (Atmanirbhar Bharat)
- Enhancing global competitiveness
- Supporting sustainable, long-term growth
By expanding access to domestic venture funding, the government aims to reduce reliance on foreign capital while fostering a more resilient and innovation-driven economy.
Summary
The Union Cabinet has approved Startup India Fund of Funds 2.0 with a ₹10,000 crore allocation to mobilise venture capital for Indian startups. The fund will provide long-term patient capital to deep-tech, manufacturing, and early-stage growth enterprises, addressing funding gaps in high-risk innovation sectors. Building on the success of the Startup India initiative, which has seen recognised startups cross two lakh, FoF 2.0 adopts a sector- and stage-focused investment strategy. The initiative aims to catalyse private investment, promote job creation, strengthen domestic innovation, and support India’s long-term economic competitiveness.
This article is intended solely for educational and informational purposes. The securities or companies mentioned are provided as examples and should not be considered as recommendations. Nothing contained herein constitutes personal financial advice or investment recommendations. Readers are advised to conduct their own research and consult a qualified financial advisor before making any investment decisions.
Investments in securities markets are subject to market risks. Please read all related documents carefully before investing.