Government approves Rs 10,000 crore Fund of Funds 2.0 to boost startup ecosystem

In a major step to strengthen India’s rapidly expanding startup landscape, the Union Cabinet chaired by Narendra Modi has approved the creation of the Startup India Fund of Funds 2.0 with a total corpus of ?10,000 crore. The initiative aims to mobilise long-term domestic capital and provide stronger financial support to startups across the country.

The scheme is intended to accelerate the next phase of India’s startup growth by strengthening the venture capital ecosystem and promoting innovation-led entrepreneurship. According to the government, the new fund will help channel patient and risk capital into emerging, high-potential sectors.

Startup India FoF 2.0 builds upon the success of the earlier Fund of Funds for Startups, launched in 2016 under the Startup India programme. Since its launch, India’s startup ecosystem has witnessed remarkable expansion, with the number of startups growing from fewer than 500 to over two lakh recognised by the Department for Promotion of Industry and Internal Trade.

The year 2025 recorded the highest annual startup registrations so far, reflecting the growing momentum in the sector. Under the first phase of the Fund of Funds, the entire ?10,000 crore corpus was committed to 145 Alternative Investment Funds, which collectively invested more than ?25,500 crore in over 1,370 startups across sectors such as agriculture, artificial intelligence, robotics, automotive, clean technology, consumer goods, e-commerce, education, fintech, food and beverages, healthcare, manufacturing, space technology, and biotechnology.

Officials said the first phase played a crucial role in supporting first-time entrepreneurs and attracting private investment into the venture capital ecosystem. The new fund aims to carry forward this progress with a more targeted and segmented funding strategy.

Startup India FoF 2.0 will prioritise deep-tech and advanced manufacturing projects that require sustained long-term investments. It will also support early-growth stage founders to reduce startup failures caused by funding shortages. Additionally, the government emphasised that the fund will encourage investments beyond major metropolitan cities to promote innovation across diverse regions of the country.

The initiative is also expected to bridge high-risk capital gaps in strategic sectors crucial for self-reliance and economic growth, while strengthening India’s domestic venture capital base, particularly by supporting smaller investment funds.

With inputs from IANS