The Indian government has formally notified the creation of a Rs 10,000 crore “Fund of Funds 2.0,” marking a renewed push to deepen access to capital for startups and strengthen the country’s venture ecosystem. The development was first reported in the Economic Times article titled “Govt notifies establishment of Rs 10,000 crore Fund of Funds 2.0.”
The new fund builds on the earlier Fund of Funds for Startups (FFS), which was introduced in 2016 and allocated Rs 10,000 crore to be deployed through SEBI-registered alternative investment funds. That earlier initiative played a key role in catalyzing domestic venture capital by channeling government-backed capital into private funds, which in turn invested in emerging companies across sectors.
Fund of Funds 2.0 is expected to follow a similar structure, with the Small Industries Development Bank of India (SIDBI) continuing as the managing entity. Rather than investing directly in startups, SIDBI will allocate capital to venture funds, which then deploy it into high-potential companies. This approach is intended to leverage private sector expertise while amplifying the impact of public capital.
The government’s decision comes at a time when India’s startup ecosystem is facing tighter funding conditions after a period of rapid expansion. Venture capital flows have moderated globally, and Indian startups have been adjusting to a more cautious investment environment marked by increased scrutiny on profitability and governance. Policymakers are aiming to counterbalance this slowdown by ensuring continued access to growth capital, particularly for early- and mid-stage ventures.
Fund of Funds 2.0 is also expected to prioritize sectors considered strategically important, including deep technology, artificial intelligence, climate technology, and advanced manufacturing. By directing capital into these areas, the government is seeking to align startup financing with broader national economic and technological goals.
Industry participants have broadly welcomed the move, noting that government-backed anchor investments can help crowd in additional private capital and improve fund-raising prospects for domestic venture firms. At the same time, effective deployment and timely disbursement will be critical to achieving the program’s intended impact, given that delays and uneven capital distribution were among the concerns associated with the first fund.
The notification of Fund of Funds 2.0 signals a continued commitment by the Indian government to support innovation-led growth, even as the startup landscape matures and becomes more selective. Its success will likely depend on how efficiently capital is allocated and whether it can address funding gaps without distorting market dynamics.
