The Department for Promotion of Industry and Internal Trade (DPIIT), under the Ministry of Commerce and Industry, has published operational guidelines for the Startup India Fund of Funds 2.0 (FoF 2.0), according to a ministry statement. These guidelines provide a detailed framework for managing the Rs 10,000 crore fund, including processes for investment, oversight, and evaluation to boost capital availability in India’s startup landscape. The program will operate by committing funds to Sebi-registered Category I and II Alternative Investment Funds (AIFs), which will then support startups recognized by DPIIT. This method aims to promote efficient funding distribution, attract private investments, and broaden access to capital across various industries, development phases, and regions. The Small Industries Development Bank of India (SIDBI) will serve as the primary agency for implementation, handling AIF selection and monitoring through a systematic approach. DPIIT plans to add another agency to increase coverage, deepen industry knowledge, and strengthen capabilities for managing similar initiatives. To tackle specific challenges in the ecosystem, the guidelines categorize AIFs into groups such as those focused on deep tech, micro venture capital for early-stage companies, funds targeting innovative manufacturing driven by technology, and general funds without sector or stage restrictions. Each category includes specific criteria like fund size limits, government funding caps, duration, and requirements for private investment ratios, directing resources to key areas while upholding market standards. The guidelines outline a two-phase AIF selection process: initial review and assessment by the implementation agency, followed by review from a Venture Capital Investment Committee. This committee evaluates proposals based on the team’s experience, management skills, and investment plans. It includes prominent figures from business, education, and innovation fields, along with agency representatives, offering varied insights in areas like advanced technology, production, regulations, and venture funding. The FoF 2.0 is intended to stimulate rather than directly invest, creating broader impacts by encouraging private involvement. The guidelines require a minimum level of private funding to promote market-oriented practices. They also allow some returns to support ecosystem improvements, including mentoring programs, shared facilities, and development projects. The program enables joint investments from other ministries, departments, and institutional backers in priority fields. The framework includes adaptability to adjust based on practical experiences, responding to changing needs in the ecosystem. Through its organized approach, Startup India FoF 2.0 is anticipated to greatly improve the scope and effectiveness of local venture capital, aid businesses focused on innovation, and solidify India’s role as a top global center for startups.
