Startup India Fund of Funds 2.0 with ₹10,000 crore approved by Union Cabinet to boost deep-tech startups, entrepreneurship, and economic growth across India.
Union Cabinet Approves ₹10,000 Crore Startup India Fund of Funds 2.0 to Boost Innovation and Growth
The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved the establishment of the Startup India Fund of Funds 2.0 (FoF 2.0) with a corpus of ₹10,000 crore to empower India’s startup ecosystem.
This new initiative will aim to mobilise domestic venture capital by investing in SEBI‑registered Alternative Investment Funds (AIFs), which in turn will invest in Indian startups, especially in deep‑tech, tech‑driven innovative manufacturing, and early‑growth sectors.
What Is Startup India Fund of Funds 2.0?
The Startup India Fund of Funds 2.0 is an upgraded version of the earlier Fund of Funds for Startups (FFS) launched in 2016. Under the first fund, the government had committed ₹10,000 crore that helped mobilise more than ₹25,500 crore in venture investments across 1,370 startups.
Unlike direct funding, the FoF model provides capital to venture capital funds rather than startups directly, thereby allowing specialised investors to evaluate and invest in promising startups with high growth potential. The government’s role is to catalyse investment, not directly pick individual companies.
Key Features of the Fund
Large Government Corpus to Stimulate Growth
With a substantial ₹10,000 crore corpus, this fund represents one of the largest government‑backed efforts to support the startup ecosystem and encourage greater risk capital flow into technology‑led ventures.
Focus on Deep‑tech and Innovation
FoF 2.0 will prioritize startups involved in deep technology (AI, robotics, biotech, clean energy technologies), innovative manufacturing, and next‑generation tech solutions that require long gestation periods and patient capital.
Pan‑India Reach
Unlike some earlier programmes that benefitted mainly metro cities, this fund aims to expand venture capital accessibility across Tier‑2 and Tier‑3 cities, helping to decentralize innovation.
Support for Early‑Growth Startups
One of the main goals of FoF 2.0 is to bridge the early‑stage funding gap where many startups struggle due to high risk and limited access to capital.
Boost to Domestic Venture Capital Ecosystem
By investing in AIFs, the fund strengthens India’s venture capital market and encourages smaller and emerging funds to participate in startup financing at scale.
Expected Impact on the Startup Ecosystem
Acceleration of Innovation and Entrepreneurship
With enhanced access to capital, startups can invest more in R&D, product development, scaling operations, and global market expansion — pushing India upward in the global innovation index.
Job Creation and Economic Growth
Startups are a key source of employment generation, especially for young graduates and skilled professionals, while fuelling growth in sectors like IT, biotech, cleantech, and advanced manufacturing.
Strengthening India’s Position in Global Markets
Supporting deep‑tech and manufacturing startups will help India emerge as a global hub for technology and innovation, attract foreign investments, and reduce dependence on overseas expertise.
Why This News Is Important for Government Exam Aspirants
Relevance to Economic & Policy Sections
For aspirants of competitive exams like UPSC Civil Services, PSCs, Banking, Railways, Defence, and Teaching, understanding government initiatives aimed at economic growth and innovation is crucial. The Startup India Fund of Funds 2.0 reflects India’s policy direction to strengthen enterprise-led development and market‑led innovation.
This move also aligns with the broader Vision of Viksit Bharat @ 2047, which emphasises technology‑driven growth, self‑reliance (Aatmanirbhar Bharat), and job creation through entrepreneurship.
Government exam syllabi often include sections on Government Schemes, Economic Reforms, and Startups, where FoF 2.0 can be a direct question in prelims, mains, and interviews, especially under topics like Indian Economy, Infrastructure, Innovation Policies, and Entrepreneurship. Knowledge of such a policy indicates awareness of contemporary developments and policy mechanisms, an attribute highly valued in exams like IAS, IPS, PCS, RBI/Banking exams, and SSC.
Significance in Economy and Industry
With private investment waning in recent times, government‑backed funds play a major role in injecting confidence and liquidity in the ecosystem. FoF 2.0 is expected to reduce funding gaps at early growth stages, empowering startups with patient capital that supports risk‑heavy innovations.
Understanding this news aids in comprehending how public policy intersects with market finance, capital formation, and national innovation goals, making it a high‑yield topic in exams.
Historical Context of Startup India Fund of Funds Initiative
Launch of Startup India Initiative
In 2016, the Government of India launched the Startup India initiative to promote innovation and entrepreneurship across the country by creating a conducive environment for startups to grow.
A major component of this initiative was the Fund of Funds for Startups (FFS) — a ₹10,000 crore corpus aimed at mobilising capital for startups through venture capital funds (Alternative Investment Funds or AIFs).
First Fund of Funds Success Story
Under the first FoF scheme, the government committed capital to 145 AIFs, which in turn invested over ₹25,500 crore into more than 1,370 startups across sectors. This initiative played a significant role in putting India on the global startup map, encouraging mass entrepreneurship and ecosystem growth.
Growing Need for Enhanced Support
Despite successes, consistent challenges emerged — especially in deep tech, early growth funding, and tier‑2/3 startup support — necessitating an upgraded initiative. Recognising these gaps and the need for strategic capital infusion, the government approved the Startup India Fund of Funds 2.0 in 2026.
This initiative reflects a policy shift towards deeper value creation, focusing on sectors where long‑term innovation and manufacturing capabilities can flourish, steering India towards global competitiveness and economic resilience.
Key Takeaways from Startup India Fund of Funds 2.0
| S.No. | Key Takeaway |
|---|---|
| 1 | Union Cabinet approved Startup India Fund of Funds 2.0 with a corpus of ₹10,000 crore. |
| 2 | The fund operates via Alternative Investment Funds (AIFs) that will invest capital into startups. |
| 3 | It focuses on deep‑tech, tech‑driven manufacturing, and early‑growth startups. |
| 4 | FoF 2.0 aims to bridge funding gaps and strengthen India’s domestic venture capital ecosystem. |
| 5 | The initiative builds on the 2016 Startup India FoF scheme that mobilised investment into 1,370+ startups. |
FAQs: Frequently Asked Questions
1. What is the Startup India Fund of Funds 2.0?
The Startup India Fund of Funds 2.0 (FoF 2.0) is a government-backed initiative with a corpus of ₹10,000 crore, designed to provide funding to startups through SEBI-registered Alternative Investment Funds (AIFs). It is an upgraded version of the 2016 Fund of Funds.
2. How does the Fund of Funds 2.0 work?
The government invests capital in AIFs, which in turn invest in promising startups, especially in sectors like deep-tech, manufacturing, and early-growth ventures. This model allows expert investors to select and manage investments.
3. What sectors are prioritized under FoF 2.0?
FoF 2.0 prioritizes deep-tech, AI, robotics, biotech, clean energy technologies, and innovative manufacturing startups, encouraging innovation and long-term growth.
4. Why was there a need for FoF 2.0?
While the original 2016 FoF helped mobilize ₹25,500 crore into startups, gaps remained in early-stage funding, deep-tech startups, and support for tier-2 and tier-3 cities. FoF 2.0 addresses these issues and strengthens India’s venture capital ecosystem.
5. How does FoF 2.0 benefit India’s economy?
By supporting startups, the fund accelerates job creation, innovation, R&D, and economic growth, making India a global hub for technology and entrepreneurship.
6. Who benefits from this initiative?
Startups, venture capitalists, investors, and young entrepreneurs across India, particularly in non-metro cities, gain access to funding and support for scaling operations.
7. Is FoF 2.0 a direct investment in startups?
No, FoF 2.0 invests through AIFs, which then provide capital to startups, ensuring expert evaluation and professional fund management.
8. How does this relate to government exams?
Questions on government schemes, Startup India initiative, economic reforms, and innovation policies may appear in exams like UPSC, PSCs, Banking, Railways, and Defence exams.
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