What Happened
- The Union Cabinet approved the Startup India Fund of Funds 2.0 (FoF 2.0) with a corpus of Rs 10,000 crore on 14 February 2026.
- FoF 2.0 will not invest directly in startups; instead, it will channel capital into SEBI-registered Alternative Investment Funds (AIFs), which will in turn invest in startups.
- Key focus areas include deep-tech sectors: artificial intelligence, robotics, advanced computing, semiconductor-linked innovation, climate and clean-energy technologies, and tech-driven manufacturing.
- The scheme specifically targets early-growth stage startups and encourages funding beyond major metro hubs (Bengaluru, Delhi-NCR, Mumbai) to promote geographic decentralisation.
- The Department for Promotion of Industry and Internal Trade (DPIIT) is the monitoring agency, and the Small Industries Development Bank of India (SIDBI) is the operating agency.
Static Topic Bridges
Fund of Funds for Startups (FFS) — Structure and Mechanism
The Fund of Funds for Startups was launched on 16 January 2016 as part of the Startup India Action Plan. It operates as a government-backed capital mobilisation scheme that invests in SEBI-registered Category I and Category II Alternative Investment Funds (AIFs), which then deploy capital into startups through equity and equity-linked instruments. SIDBI manages the fund operationally, while DPIIT monitors performance. AIFs supported under FFS are required to invest at least 2 times the amount committed by the government in startups.
- FFS 1.0 corpus: Rs 10,000 crore, committed to 145 AIFs
- These AIFs invested over Rs 25,500 crore in 1,370+ startups
- Catalysed more than Rs 75,700 crore in private capital
- Beneficiary companies generated approximately 2.04 lakh jobs
- FoF 2.0 sanctioned in Union Budget 2025-26 as a second tranche
Connection to this news: FoF 2.0 builds on the success of FFS 1.0 but shifts focus from broad ecosystem creation to strategic, targeted deployment in capital-intensive deep-tech sectors where patient capital is scarce and the "valley of death" in venture financing is most acute.
Alternative Investment Funds (AIFs) — SEBI Regulatory Framework
Alternative Investment Funds are privately pooled investment vehicles that collect funds from sophisticated investors for investing in accordance with a defined investment policy. SEBI regulates AIFs under the SEBI (Alternative Investment Funds) Regulations, 2012, classifying them into three categories: Category I (venture capital, SME, social venture, infrastructure funds — receive government incentives), Category II (private equity, debt funds — no specific incentives or concessions), and Category III (hedge funds, PIPE funds — may employ leverage). FFS invests only in Category I and II AIFs.
- Minimum investment by each investor: Rs 1 crore (Rs 25 lakh for employees/directors of the fund)
- Minimum corpus for an AIF: Rs 20 crore (Category III: Rs 20 crore; Angel Funds: Rs 10 crore)
- Manager must have a continuing interest of at least 2.5% of the corpus (5% for Category III)
- AIF tenure: minimum 3 years (Category I and II)
- As of 2025, over 1,200 AIFs were registered with SEBI, managing assets exceeding Rs 10 lakh crore
Connection to this news: FoF 2.0 channels government capital through SEBI-regulated AIFs, ensuring regulatory oversight of fund management while leveraging the AIF ecosystem's expertise in identifying and nurturing high-potential startups across deep-tech domains.
India's Startup Ecosystem — Scale and Policy Architecture
India has the third-largest startup ecosystem globally, behind only the United States and China. The ecosystem is anchored by the Startup India initiative (launched January 2016), which provides recognition, tax benefits (Section 80-IAC of the Income Tax Act — 3-year tax holiday for DPIIT-recognized startups), and regulatory simplifications. DPIIT recognition requires a company to be incorporated less than 10 years ago, with turnover not exceeding Rs 100 crore in any financial year, and working towards innovation or scalable business models.
- Over 2,00,000 DPIIT-recognized startups as of December 2025
- 125 unicorns (valuation exceeding $1 billion) with combined valuation exceeding $366 billion
- Nearly 44,000 startups registered in 2025 — highest annual addition since inception
- Nearly half of DPIIT-recognized startups now emerge from non-metro cities (Indore, Kochi, Jaipur)
- Other support programmes: Startup India Seed Fund Scheme (Rs 945 crore), Credit Guarantee Scheme for Startups (CGSS)
Connection to this news: FoF 2.0's emphasis on deep tech and geographic decentralisation reflects the ecosystem's maturation — from broad-based promotion of any startup to targeted support for capital-intensive, nationally strategic sectors and Tier 2/3 city entrepreneurs.
Key Facts & Data
- FoF 2.0 corpus: Rs 10,000 crore
- Operating agency: SIDBI; Monitoring agency: DPIIT
- FFS 1.0 performance: 145 AIFs funded, Rs 25,500 crore deployed in 1,370+ startups
- Multiplier effect of FFS 1.0: Rs 75,700 crore private capital catalysed
- India's DPIIT-recognized startups: 2,00,000+ (December 2025)
- India's unicorns: 125 (combined valuation exceeding $366 billion)
- India's global startup ecosystem rank: 3rd (after US and China)
- Focus sectors: AI, robotics, semiconductors, clean energy, tech-driven manufacturing