₹10,000 Crore Fund of Funds 2.0 Launches: Structured Pillars Aim for Deep-Tech and Manufacturing Breakout

The government has significantly expanded the scope of the startup ecosystem funding through the introduction of the ₹10,000 crore Fund of Funds 2.0 (FoF 2.0). According to a notification from the Department for Promotion of Industry and Internal Trade (DPIIT), the revamped fund is designed to channel concentrated capital into four key, specialized segments.

The second tranche of this Fund of Funds was previously approved by the Cabinet in February. It aims to mobilize substantial venture capital (VC) while providing specialized support to deep technology, tech-driven manufacturing, and high-potential early-growth enterprises.

Expanding the Startup Investment Mandate with FoF 2.0​

The new FoF 2.0 represents an expansion over the original Fund of Funds Scheme (FFS 1.0). Its core objective is to sustain and accelerate investment momentum within India’s startup landscape.

DPIIT stated that the new scheme utilizes a segmented approach to target critical areas, thereby promoting real innovation across diverse sectors. The Fund will contribute its corpus to SEBI-registered Alternative Investment Funds (AIFs). These AIFs, in turn, will invest in the equity and equity-linked instruments of startups recognized by the central government.

Targeting Growth Through Four Specialized Segments​

A defining feature of FoF 2.0 is its detailed, segmented structure. This architecture ensures that specialized capital reaches specific high-potential areas of the economy.

The first segment is dedicated to AIFs supporting deep tech. This targets startups developing novel solutions for complex problems, which typically require longer Research and Development (R&D) cycles and higher upfront costs.

Secondly, a segment is earmarked for smaller AIFs, or micro VCs. This provision provides crucial support to early growth stage startups—enterprises still in the initial phases of developing their technology, product, or service.

The third pillar focuses exclusively on supporting tech-driven innovative manufacturing startups. Meanwhile, the fourth segment caters to AIFs that support startups regardless of their sector or stage.

Building Operational Flexibility for Intensive Growth​

The guidelines for FoF 2.0 incorporate significant operational flexibilities to meet the unique demands of these specialized segments. This flexibility is designed to maximize fund availability where it is needed most.

The framework supports AIFs with larger corpuses, which is essential for capital-intensive segments like deep tech and manufacturing. Furthermore, it enables support for longer duration AIFs, accommodating startups that inherently face extended R&D cycles and gestation periods.

Implementation and Oversight Mechanism​

Small Industries Development Bank of India (SIDBI) will serve as the implementing agency for FoF 2.0, maintaining its role from the successful FFS 1.0. However, the department has confirmed that another domestic agency will be selected to assist in implementing the scheme.

Oversight of the entire scheme will be managed by an empowered committee. This committee will be chaired by the Secretary, DPIIT, and will be responsible for monitoring the implementation and overall performance of FoF 2.0.

The detailed operational guidelines will govern everything from eligibility criteria for AIFs and startups to selection, monitoring, reporting, and fund disbursal mechanisms. These comprehensive guidelines are set to realize the full potential of the expanded scheme.