The Indian government has announced the Startup India Fund of Funds 2.0, with a total corpus of Rs 10,000 crore, to mobilize venture and growth capital for the country’s startup ecosystem.
The fund will have an expanded scope, with the corpus divided into four segments, including dedicated support for deep-tech and manufacturing startups, according to a DPIIT notification.
The government said that the Startup India Fund of Funds 2.0 has been designed to sustain the momentum of investments in startups, with an expanded scope compared to the Fund of Funds Scheme (FFS 1.0).
Startup India Fund of Funds 2.0: Key objectives
Ministry of Commerce & Industry said that the second tranche of Fund of Funds was approved by the Cabinet in February. It is aimed at mobilizing venture capital (VC) and supporting deep-tech, tech-driven, and innovative manufacturing startups and early-growth-stage enterprises.
“Startup India Fund of Funds 2.0 will have an expanded scope with segmented approach to target key segments for real innovation,” the notification by Department for Promotion of Industry and Internal Trade (DPIIT) said.
The scheme will contribute to the corpus of SEBI-registered Alternative Investment Funds (AIFs) for investing in equity and equity-linked instruments of entities recognized as startups by the central government.
Startup India Fund of Funds 2.0: Key focus areas
The first segment will focus on AIFs supporting deep tech, that is, startups developing novel solutions to complex problems that entail longer R&D cycles and higher costs.
The second segment will provide capital to smaller AIFs (micro VCs) supporting early-growth-stage startups, that is, enterprises in the early phases of developing a technology, product, or service.
On the other hand, the third segment will support tech-driven, innovative manufacturing startups, while the fourth will cater to AIFs supporting sector- and stage-agnostic startups, it said.
It added that operational flexibilities will be incorporated in the guidelines to address the unique requirements of the segments.
This will include supporting AIFs with larger corpora to increase the availability of funds required for capital-intensive segments such as deep tech and manufacturing, and supporting longer-duration AIFs to cater to startups having longer R&D cycles and gestation periods.
Startup India Fund of Funds 2.0: rollout
The guidelines will be issued by the department. It will also include other aspects important to realize the expanded scope of the scheme.
The operational guidelines for FoF 2.0 will cover the detailed segment-wise provisions, eligibility criteria for AIFs and startups, selection and monitoring processes, reporting and assessment requirements, mechanism for disbursal of funds to implementation agencies and AIFs, and composition of the investment committee.
Small Industries Development Bank of India (SIDBI), which was the implementation agency of FFS 1.0, will also be the implementing agency for FoF 2.0. In addition, another domestic agency shall be selected to implement the scheme.
An empowered committee chaired by the Secretary, DPIIT, will be constituted to monitor the implementation and performance of the scheme.
