The Department for Promotion of Industry and Internal Trade has issued operational guidelines for Startup India Fund of Funds 2.0 (FoF 2.0) to operationalise a Rs100 billion (Rs100 bn) corpus aimed at improving the efficiency of capital flows into India’s startup ecosystem. The scheme will deploy funds through SEBI-registered Category I and Category II Alternative Investment Funds (AIFs) that will invest in DPIIT-recognised startups. The framework seeks disciplined capital allocation, crowding-in of private investment and wider access to funding across sectors, stages and geographies.

Small Industries Development Bank of India (SIDBI) will act as the initial implementation agency and will undertake execution through a structured AIF selection and monitoring process, while DPIIT will onboard an additional implementation agency to expand reach and build institutional capacity. The guidelines introduce segmentation of funds into deep tech-focused vehicles, micro venture capital funds supporting early-growth startups, funds for innovative and technology-led manufacturing and sector and stage-agnostic funds. Each segment carries defined corpus thresholds, government contribution limits, tenure and minimum private capital mobilisation ratios to ensure capital reaches priority areas while maintaining market discipline.

A two-stage selection process will underpin AIF appointments, with the implementation agency carrying out initial screening and due diligence, followed by evaluation by a Venture Capital Investment Committee that will assess track record, fund management capability and investment strategy. The committee will comprise leaders from industry, academia and the innovation ecosystem and will include representatives from the implementation agency to bring perspectives across deep tech, manufacturing, policy and venture ecosystems. The process is intended to strengthen governance and align fund managers with scheme objectives.

FoF 2.0 is designed to act as a catalytic vehicle rather than as a direct investor, mandating minimum private capital mobilisation to leverage market-led investment discipline and enabling multiplier effects through co-investment and contributions from ministries, departments and institutional investors. Provision is made to allocate a portion of returns towards ecosystem capacity building such as mentorship and shared infrastructure, and the framework allows flexibility to evolve with implementation experience.