DPIIT Issues Guidelines for INR 10,000 Cr Startup India Fund of Funds 2.0

The Department for Promotion of Industry and Internal Trade (DPIIT) has released operational guidelines for the INR 10,000 crore Startup India Fund of Funds 2.0 (FoF 2.0), outlining how the government plans to channel capital into the country’s startup ecosystem in a more structured and efficient manner.

The new framework focuses on improving the flow of funds to startups by investing through SEBI-registered Category I and II Alternative Investment Funds (AIFs). These AIFs will, in turn, deploy capital into DPIIT-recognised startups. The approach is aimed at ensuring better governance, disciplined investment practices and increased participation from private investors.

The Small Industries Development Bank of India (SIDBI) has been designated as the initial implementation agency for the scheme. It will oversee the selection of AIFs and monitor their performance. DPIIT also plans to bring in an additional implementation partner to widen the scheme’s reach and strengthen sector-specific expertise.

To address gaps in startup funding, the guidelines divide AIFs into different categories. These include funds focused on deep technology, micro venture capital funds for early-stage startups, funds targeting innovation-led manufacturing and those that are sector-agnostic. Each category comes with defined conditions such as fund size, limits on government contribution and requirements for raising private capital. This segmentation is expected to ensure that funds are directed towards priority areas while maintaining a balance between public and private investment.

A two-stage selection process has been introduced for AIFs. The implementation agency will first conduct screening and due diligence. This will be followed by an evaluation from a Venture Capital Investment Committee, which will assess proposals based on factors such as the fund manager’s track record and investment strategy. The committee includes members from industry, academia and the broader innovation ecosystem.

Unlike direct funding models, FoF 2.0 is designed to act as a catalyst by encouraging private investment alongside government support. The guidelines also include provisions to reinvest a portion of returns into initiatives such as mentorship and infrastructure development for startups.

The scheme allows participation from various ministries, departments, and institutional investors with flexibility built in to adapt to future needs. Overall, the initiative aims to strengthen venture funding in India and support innovation-driven enterprises across sectors.