The Union Cabinet, headed by Prime Minister Narendra Modi, has authorized an investment of ₹10000 crores for the new Fund of Funds (FoF 2.0) to enhance India’s venture capital industry and support the development of deep-tech (advanced technology).
As announced by Union Minister Ashwini Vaishnaw in New Delhi, the new fund created to mobilize long-term domestic capital to fast-track the next chapter in India’s startup ecosystem.
What is Startup India Fund of Funds 2.0?
FoF 2.0 represents the second phase of the government’s Fund of Funds launched in 2016 as part of the larger Startup India initiative.
The original phase of FoF (FoF 1.0) was ₹ 10,000 crores that were allotted to invest through 145 (AIF) Alternative Investment Funds that went on to create Base Investments of more than ₹25,500 crores across more than 1 370 different companies in the following sectors – AI, Fintech, Clean Tech, Healthcare, Manufacturing, Space, and Biotech.
Building on that result, the FoF 2.0 programme will target additional sectors and have a more streamlined approach by addressing the current gaps with regard to equity capital ensuring access to high-risk capital; and by stimulating the flow of private venture capital into two important areas – Emerging Industries and Strategic Sectors.
A key aspect of the Startup India Fund of Funds version 2.0 is that it is focused on technology-based innovative manufacturing and deep-tech startups.
The deep-tech sectors (AI, robotics, semiconductors, and advanced materials) are typically high risk and have long incubation periods, which means that traditional venture capital is generally hesitant to invest. Therefore, this fund will fill that gap by providing the necessary patient, long-term capital to support the growth of these companies.
Additionally, the scheme will provide a financial safety net to assist early-stage startups through crucial phases when they require funding for expansion and minimise the occurrence of their failure due to insufficient funds.
Finally, as part of its efforts to promote investment and growth outside the major metropolitan areas, the government will try to extend innovation hubs into tier-2 and tier-3 cities.
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Strengthening India’s Domestic Venture Capital Base
Startup India’s FoF 2.0 is designed to enhance India’s domestic venture capital ecosystem by adding to the capital base of smaller funds and incentivising long-term capital mobilisation in the domestic market.
Since the inception of Startup India in 2016, the number of DPIIT-recognised (Department of Promotion of Industry and Internal Trade) startups has increased exponentially from fewer than 500 to more than 200,000. In 2025, the number of recognised startups was over 49,000 — the highest total on record in one year. India currently has approximately 100 unicorns, which are defined as startups with an estimated market value exceeding $1 billion.
The government has now more than doubled the earnings cap for recognition as a startup from ₹100 crore to ₹200 crore, meaning that many more businesses will be eligible to enter into formal startup ecosystem.
How This Affects the Innovation Economy Of India
The Startup India Fund of Funds 2.0 is in line with the vision of building a self-sustaining and innovation driven economy through Startups.
The intention of directing funds towards deep technology, advanced manufacturing and early-stage start-ups will help promote economic resilience, grow Quality Jobs and develop India as a global innovation hub.
The success of the FoF 2.0 will depend upon how rapidly they deploy the capital to the private sector and the level of participation from the private sector, if done effectively this fund has the potential to greatly amplify and help define the next generation of globally competitive startups in India through the estimated ₹10,000 crore fund.
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