The Government has issued operational guidelines for the second ₹10,000 crore tranche of the Fund of Funds (FoF) scheme for startups, as per news reports.
The framework has been released by the Department for Promotion of Industry and Internal Trade(DPIIT). It sets out the process for deployment of funds, governance arrangements and monitoring requirements.
The scheme is intended to streamline the flow of capital into startups by defining how funds will be allocated and reviewed. It builds on the earlier FoF structure under the Startup India programme.
Funds under the scheme will be channelled through SEBI-registered Category I and II Alternative Investment Funds (AIFs). These AIFs will invest in startups that are recognised by DPIIT.
The government will not invest directly in companies. Instead, it will commit capital to AIFs, which will take investment decisions. The structure is for widening access to funding across sectors and stages, including early-stage ventures.
The Small Industries Development Bank of India (SIDBI) has been appointed as the initial implementation agency. It will manage the selection of AIFs, fund commitments and ongoing monitoring.
The DPIIT may appoint an additional agency to support implementation. This is to expand the scheme’s reach and provide sector-specific capability where required.
The guidelines classify AIFs into different segments based on their focus. These include funds for deep technology, micro venture capital funds for early-stage startups, and funds targeting innovation-led manufacturing.
There will also be sector-agnostic and stage-agnostic funds. The categorisation is intended to address funding gaps in specific areas of the startup ecosystem.
Proposals from AIFs will undergo initial screening and due diligence by the implementation agency. These will then be placed before a Venture Capital Investment Committee for evaluation.
The committee includes members from industry and academia, such as Vallabh Bhansali, Ashok Jhunjhunwala, Renu Swarup, Chintan Vaishnav and Rajesh Gopinathan. Assessment will consider factors such as track record, investment strategy and fund management capability.
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The notified guidelines provide a defined structure for deployment and oversight of the second FoF tranche. They outline the process through which capital will be routed to startups via AIFs.
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Published on: Apr 27, 2026, 2:50 PM IST
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