Rs 10,000 crore boost for startups as Cabinet clears Fund of Funds 2.0

In a major decision aimed at strengthening India’s startup ecosystem, the Union Cabinet has approved the establishment of the Startup India Fund of Funds 2.0 (FoF 2.0) with a corpus of Rs 10,000 crore.

The decision was taken by the Union Cabinet chaired by Prime Minister Narendra Modi.

The announcement was made on Saturday by Union Minister Ashwini Vaishnaw.

Here is a breakdown of what the move means and how it builds on the earlier scheme.

What has been approved?

The Cabinet has cleared the second tranche of the Startup India Fund of Funds Scheme with a corpus of Rs 10,000 crore.

The new fund is aimed at mobilising venture capital for India’s rapidly expanding startup ecosystem. It is designed to accelerate the next phase of India’s startup journey by mobilising long-term domestic capital, strengthening the venture capital ecosystem, and supporting innovation-led entrepreneurship across sectors.

What will Startup India FoF 2.0 focus on?

According to Ashwini Vaishnaw, the key focus areas will include:

• Deep tech startups
• Early growth stage startups through smaller funds
• Tech-driven innovative manufacturing startups
• Sector and stage agnostic startups

The scheme adopts a targeted and segmented funding approach. It will prioritise deep tech and technology-driven innovative manufacturing ventures that require patient, long-term capital.

It will also support early-growth stage startups to reduce failures caused by limited access to capital in the initial years.

There will be operational flexibilities, including higher government contribution in Alternative Investment Funds (AIFs) funding deep tech and high-tech manufacturing.

The scheme also aims to expand investment beyond major metropolitan centres to ensure innovation grows across the country. It is designed to address high-risk capital gaps in priority sectors critical to self-reliance and economic growth, while strengthening India’s domestic venture capital base, particularly smaller funds.

How does this build on Startup India’s journey?

Startup India FoF 2.0 has been launched under the Startup India initiative.

Since the launch of Startup India in 2016, India’s startup ecosystem has grown from fewer than 500 startups to more than 2 lakh startups recognised by the Department for Promotion of Industry and Internal Trade (DPIIT).

The year 2025 recorded the highest-ever annual startup registrations.

The new fund builds on nearly a decade of efforts to position India among the world’s leading startup hubs.

What happened under Fund of Funds for Startups (FFS 1.0)?

Startup India FoF 2.0 follows the earlier Fund of Funds for Startups (FFS 1.0), launched in 2016 to address funding gaps and catalyse domestic venture capital investments.

Under FFS 1.0:

• The entire Rs 10,000 crore corpus was committed to 145 Alternative Investment Funds (AIFs).
• These AIFs have collectively invested over Rs 25,500 crore.
• More than 1,370 startups received funding.

Investments were made across sectors including agriculture, artificial intelligence, robotics, automotive, clean tech, consumer goods and services, e-commerce, education, fintech, food and beverages, healthcare, manufacturing, space technology and biotechnology.

The first phase played a key role in nurturing first-time founders and crowding in private capital to build a strong venture capital ecosystem.

What impact is expected?

The Ministry of Commerce and Industry said the new fund is expected to play a critical role in advancing India’s innovation-led growth agenda.

By supporting startups developing globally competitive technologies, products and solutions, the fund is expected to:

• Strengthen economic resilience
• Boost manufacturing capabilities
• Generate high-quality jobs
• Position India as a global innovation hub

The initiative is aligned with the government’s vision of Viksit Bharat @ 2047.

The Big Picture

With the approval of Startup India FoF 2.0, the government has reaffirmed its commitment to empowering entrepreneurs and unlocking the full potential of India’s startup ecosystem.

The Rs 10,000 crore corpus is aimed at mobilising venture capital, filling high-risk capital gaps, strengthening smaller domestic funds and supporting deep tech and manufacturing ventures as India moves into the next phase of its startup journey.