The Union Cabinet has approved the Startup India Fund of Funds 2.0 with a corpus of Rs 10,000 crore to catalyse deep-tech innovation, advanced manufacturing and early-stage startups across India, aiming to mobilise long-term capital for high-risk, high-impact sectors and broaden entrepreneurial activity beyond major hubs.
Why the new fund matters
India’s startup ecosystem has expanded rapidly in recent years, with over two lakh startups registered with the Department for Promotion of Industry and Internal Trade (DPIIT). While registrations surged in 2025, global funding volatility has underscored the need for stable domestic capital. FoF 2.0 is positioned as a strategic, government-led intervention to attract professional venture capital into nascent but capital-intensive areas.
Strategic focus on deep tech and advanced manufacturing
FoF 2.0 prioritises deep-technology domains and technology-driven manufacturing—areas that typically require patient capital and longer development cycles. Target sectors include artificial intelligence, robotics, semiconductor design, biotechnology, aerospace and advanced industrial solutions.
By supporting startups that move prototypes toward commercial-scale manufacturing, the fund seeks to reduce import dependence, strengthen domestic supply chains and enhance India’s competitiveness in strategic technologies.
Building on the Fund of Funds model
The initiative extends the approach used under the first Fund of Funds for Startups (FFS), launched in 2016 with a similar government commitment of Rs 10,000 crore. Rather than investing directly in startups, the government allocates capital to SEBI-registered Alternative Investment Funds (AIFs), which then invest in startups.
This indirect model leverages professional fund management, promotes diversification, and widens geographic reach while crowding in private capital through co-investment and anchor commitments.
Support for early-growth stage and non-metro startups
A central objective of FoF 2.0 is to strengthen financing for early-growth stage ventures working on complex technologies, where higher risk and longer gestation often deter private investors. The fund aims to bridge this gap so that technically promising ideas can progress to commercialisation.
In addition, policymakers expect the fund to spur investment outside traditional startup clusters such as Bengaluru, Mumbai and Delhi, directing capital toward Tier II and Tier III cities to support more inclusive innovation and regional job creation.
Deepening India’s venture capital ecosystem
FoF 2.0 also targets the domestic venture capital base by supporting smaller, homegrown funds. The government’s role as an anchor investor is intended to attract additional private commitments, reduce overreliance on foreign capital and foster a more resilient funding ecosystem for Indian startups.
By promoting innovation-led manufacturing and research, the fund is expected to contribute to employment, technological self-reliance and India’s long-term ambition to become a global centre for advanced research and production.
