India Rolls Out ₹10,000 Crore Startup India Fund of Funds 2.0, Allocates Up to ₹500 Crore for Deep‑Tech AIFs

The Department for Promotion of Industry and Internal Trade (DPIIT) issued operational guidelines for the new fund‑of‑funds, which will run across the 16th and 17th Finance Commission cycles. Instead of investing directly in startups, the scheme will place money into Sebi‑registered Category I and II Alternative Investment Funds (AIFs). Those AIFs will then allocate capital to DPIIT‑recognised startups through equity, equity‑linked or debt instruments. The Small Industries Development Bank of India (SIDBI) is named as the initial implementation agency, with a second domestic agency to be added later.

- The government may contribute up to 40 % of a deep‑tech AIF’s corpus, capped at ₹500 crore, for a maximum tenure of 18 years. - For smaller early‑stage AIFs (corpus ≤ ₹400 crore), support is limited to 30 % or ₹100 crore, with a tenure of up to 10 years. - Manufacturing‑focused AIFs can receive up to 30 % or ₹200 crore, while sector‑agnostic AIFs qualify for up to 25 % or ₹180 crore. - The scheme requires investment multipliers: deep‑tech AIFs must invest 1.5 times the committed amount, early‑stage funds 2×, manufacturing funds 1.75×, and sector‑agnostic funds 2.5×. - Total government contributions to any single AIF cannot exceed 50 % of its corpus, though the Venture Capital Investment Committee may set a lower limit. - Selection follows a two‑stage process: the implementation agency invites proposals and conducts due diligence, the VCIC screens and recommends, and a sub‑committee of the agency’s board gives final sanction. - Monitoring includes annual utilization reports, half‑yearly DPIIT reviews, and third‑party evaluations every five years. Up to 5 % of returns may fund ecosystem‑building activities such as workshops and mentorship programmes.

By channeling public money through established AIFs, the government aims to crowd‑in private capital and broaden access to funding across sectors, stages and geographies. The deep‑tech focus signals an intent to back high‑risk, high‑reward areas like artificial intelligence, biotechnology and advanced materials. Observers will track how quickly SIDBI onboards fund managers, whether the multiplier rules spur additional private investment, and if the scheme leads to a measurable rise in startup patents and product launches.