In one of the first key policy clearances from the newly set up Prime Minister’s Office (PMO), Seva Teerth, Prime Minister Narendra Modi has approved the second phase of the Startup India Fund of Funds (FoF) scheme with a total corpus of ₹10,000 Cr.
“This will encourage startups in early stages and deeptech research,” Prime Minister Narendra Modi said in a post on X.
The decision reflects the Centre’s continued commitment to strengthening India’s startup ecosystem, particularly ventures focused on advanced technology and research-led innovation.
The Fund of Funds for Startups (FFS) was first introduced in 2016 as part of the Startup India Action Plan, with an initial allocation of ₹10,000 Cr. The objective at the time was to stimulate private investment in Indian startups by positioning the government as an anchor investor.
Unlike direct funding schemes, the FoF does not invest in startups itself. Instead, it allocates capital to SEBI-registered Alternative Investment Funds (AIFs). These professionally managed funds then invest in startups across various sectors, leveraging government backing to attract additional private capital.
The operational management of the scheme is handled by the Small Industries Development Bank of India (SIDBI). The bank administers the fund under the supervision of the Department for Promotion of Industry and Internal Trade (DPIIT).
This two-tier structure ensures professional fund allocation while maintaining policy-level monitoring by the government.
In a written response presented in the Rajya Sabha, Minister of State for Commerce Jitin Prasada shared updated data on the scheme’s performance.
He informed that AIFs supported under the initiative have collectively invested ₹25,548 Cr in 1,371 startups spread across 29 states and union territories. “Such supported startups have generated over 2 Lakh jobs,” Prasad noted.
These figures demonstrate the leveraging power of the FoF model, where public funds help unlock much larger volumes of private investment and employment generation.
Finance Minister Nirmala Sitharaman, during her 2025 Budget speech, had announced an additional ₹10,000 Cr corpus for a fresh fund of funds dedicated to startups. The government had also indicated plans for a separate fund targeting deeptech ventures.
Deeptech startups — including those working in artificial intelligence, semiconductors, space technology, biotechnology, and quantum computing — typically require substantial capital and longer development cycles. The second phase of the FoF is expected to address funding gaps in these high-potential but capital-intensive sectors.
The government currently promotes entrepreneurship through three flagship programmes:
Fund of Funds for Startups (FFS)
Startup India Seed Fund Scheme (SISFS)
Credit Guarantee Scheme for Startups (CGSS)
Launched in April 2021, SISFS provides financial support to seed-stage startups via recognised incubators. Assistance is extended in the form of grants, convertible debentures, debt, or debt-linked instruments.
As of December 31, 2025, incubators under this scheme have disbursed ₹590.93 Cr to 3,271 startups across 32 states and union territories.
Introduced in April 2023, CGSS enables startups to secure debt funding by offering credit guarantees. The scheme is administered by the National Credit Guarantee Trustee Company Limited.
As of December 2025, the programme has guaranteed 334 loans amounting to around ₹808.18 Cr across 20 states and UTs.
The rollout of FoF 2.0 coincides with broader policy adjustments aimed at supporting innovation-driven enterprises.
Recently, the government extended the eligibility timeline for deeptech startup recognition to 20 years. Additionally, the turnover threshold was raised to ₹300 Cr from ₹200 Cr, expanding the pool of startups eligible for incentives.
Other measures include:
Section 80-IAC profit-linked tax deductions
Deferred TDS on ESOPs
Relaxed rules for carrying forward losses
GST benefits for incubator-supported startups
These reforms are intended to ease compliance burdens and foster long-term innovation.
The second phase of the FoF is expected to improve funding access for early-stage companies, especially those struggling to secure institutional backing.
With global competition intensifying in advanced technologies, the enhanced fund could help India build capacity in AI, semiconductor manufacturing, clean energy, defence technology, and biotechnology.
Given that the first phase helped generate over 2 Lakh jobs, the new ₹10,000 Cr allocation may further boost job creation and support startup growth in emerging innovation hubs beyond metro cities.
The approval of Startup India FoF 2.0 with a ₹10,000 Cr corpus marks a significant step in reinforcing India’s innovation ecosystem. Building on the momentum created since 2016, the expanded fund aims to mobilise private investment, support early-stage ventures, and accelerate deeptech advancement.
Combined with complementary initiatives such as SISFS and CGSS, as well as regulatory and tax reforms, FoF 2.0 strengthens the foundation for India to emerge as a global innovation leader.