Startup India Fund of Funds 2.0: Key Policy Push for Startups

Context

The Union Cabinet has approved the Startup India Fund of Funds (FoF) 2.0, with a corpus of ₹10,000 crore, aimed at enhancing venture capital availability and strengthening India’s startup financing framework.

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Startup India: Policy Framework

• Institutional Background: Startup India is a flagship policy initiative of the Ministry of Commerce and Industry.
• Initiation Year: 2016
• Administrative Body: Department for Promotion of Industry and Internal Trade (DPIIT).
• Policy Rationale: To address credit constraints faced by startups and create a supportive entrepreneurial environment.
• Strategic Outcomes:
  • Promote innovation and enterprise formation
  • Facilitate startup scaling through institutional support
  • Generate employment opportunities
  • Foster sustained economic growth
  • Encourage a shift towards a job-provider economy
• Annual Observance: 16 January is observed as National Startup Day.

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Fund of Funds Model: First Phase

• Scheme Design: Implemented by DPIIT under the Startup India Action Plan.
• Fund Management: Small Industries Development Bank of India (SIDBI).
• Approved Corpus: ₹10,000 crore.
• Investment Strategy: Channelising funds through SEBI-registered Alternative Investment Funds (AIFs) to expand domestic risk capital.
• Performance Snapshot:
  • Commitments extended to 145 AIFs
  • Investments exceeding ₹25,500 crore
  • Support provided to more than 1,370 startups
• Ecosystem Impact:
  • Crowded in private capital
  • Supported first-generation entrepreneurs
  • Strengthened India’s venture capital landscape

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Fund of Funds Model: Second Phase

• Policy Context: Introduced to build on the achievements of the first phase.
• Development Focus: Scaling innovation-driven and technology-intensive startups.
• Distinctive Elements:
  • Strategic Sector Orientation: Emphasis on priority sectors, deep-tech, and advanced manufacturing
  • Early-Growth Support: Addresses funding gaps during critical growth stages
  • Nationwide Outreach: Encourages startup expansion beyond major urban centres
  • Capital Indigenisation: Strengthens domestic venture capital funds, particularly emerging AIFs
• National Significance:
  • Expected to accelerate innovation-led development
  • Promotes balanced regional growth
  • Contributes to the vision of Viksit Bharat @2047

Source : PIB