DPIIT Issues Guidelines for ₹10,000 Crore Startup India Fund of Funds 2.0 to Boost Domestic Venture Capital

The Department for Promotion of Industry and Internal Trade has issued the operational guidelines for the ₹10,000 crore Startup India Fund of Funds 2.0, setting the framework for how the new corpus will be deployed, governed and monitored. The scheme is aimed at improving the flow of capital into India’s startup ecosystem by using professionally managed investment funds rather than direct government investment into individual startups.

Under the framework, the Startup India FoF 2.0 will make commitments to SEBI-registered Category I and Category II Alternative Investment Funds. These AIFs will then invest in DPIIT-recognised startups, allowing public capital to work as a catalyst for larger private investment across sectors, stages and geographies. The structure is designed to promote disciplined fund allocation while expanding access to startup financing beyond a few major urban centres.

The Small Industries Development Bank of India will serve as the initial implementation agency for the scheme. SIDBI will manage the process of AIF selection, screening, due diligence and monitoring. DPIIT will also bring in an additional implementation agency to widen the scheme’s reach, improve sectoral expertise and strengthen institutional capacity for managing such large-scale startup financing programmes.

The new guidelines also introduce a segmented approach to fund deployment. Separate categories have been created for deep-tech-focused funds, micro venture capital funds supporting early-growth startups, funds targeting innovative and technology-led manufacturing, and sector- or stage-agnostic funds. Each segment will have specific parameters related to corpus size, government contribution limits, tenure and minimum private capital mobilisation requirements.

A two-stage selection process has been laid down for choosing AIFs. The implementation agency will first carry out initial screening and due diligence. Proposals will then be evaluated by a Venture Capital Investment Committee based on factors such as the track record of the fund team, fund management capability and investment strategy. The committee includes leaders from industry, academia and the innovation ecosystem, including Vallabh Bhansali, Dr Ashok Jhunjhunwala, Dr Renu Swarup, Dr Chintan Vaishnav and Rajesh Gopinathan, along with representatives from the implementation agency.

The Fund of Funds 2.0 is intended to operate as a catalytic investment mechanism. By mandating private capital mobilisation, the scheme seeks to ensure that government support does not replace market investment but instead multiplies it. A portion of the returns may also be used for ecosystem-building activities such as mentorship, shared infrastructure and wider startup development interventions.

The scheme also allows co-investments and contributions from ministries, departments and institutional investors in priority sectors. This flexibility is expected to help the framework respond to emerging needs in areas such as deep technology, advanced manufacturing and innovation-led entrepreneurship.

With its structured design, the Startup India Fund of Funds 2.0 is expected to deepen India’s domestic venture capital ecosystem, improve access to risk capital for startups and support the country’s ambition to become a stronger global hub for innovation-driven enterprises.