The Union Cabinet has approved the second phase of the Startup India Fund of Funds, allocating a corpus of ₹10,000 crore to strengthen India’s startup ecosystem. The move, widely referred to as Startup India Fund 2.0, is aimed at improving access to long-term capital, with a strong focus on deep tech, advanced manufacturing, and innovation-led enterprises.
Officials said the expanded fund is designed to address funding gaps faced by startups operating in research-intensive and capital-heavy sectors. By channeling government support through professionally managed investment funds, the initiative seeks to encourage private participation while ensuring capital reaches ventures with strong innovation potential and long-term growth prospects.
What Is Startup India Fund 2.0?
Startup India Fund 2.0 is the continuation of the Fund of Funds for Startups (FFS) launched under the Startup India programme. Unlike direct funding, the government invests through SEBI-registered Alternative Investment Funds (AIFs), which then deploy capital into eligible startups.
This structure allows investment decisions to be driven by market expertise while maintaining regulatory oversight. By partnering with AIFs, the programme aims to improve capital efficiency, support diversified portfolios, and reach startups across different stages without direct government involvement in day-to-day operations.
Focus on Deep Tech and Manufacturing
According to government statements, the second phase will prioritise startups working in areas such as artificial intelligence, semiconductors, robotics, biotechnology, clean energy, and advanced manufacturing. These sectors typically require higher upfront investment and patient capital, making them less attractive for early-stage private funding.
Officials said the approach is intended to balance policy objectives with commercial discipline. Allowing experienced fund managers to lead investment decisions is expected to improve capital allocation, encourage innovation-led growth, and support the creation of sustainable enterprises aligned with long-term economic and technological goals.
Eligibility and Key Criteria
While detailed guidelines are expected to be issued separately, startups must generally be recognised under the Startup India framework to qualify indirectly through AIF investments. This includes compliance with age limits, turnover thresholds, and innovation-based business models, as defined by the Department for Promotion of Industry and Internal Trade (DPIIT).
In addition, startups are expected to meet regulatory and compliance requirements prescribed by the Department for Promotion of Industry and Internal Trade. Fund managers are likely to assess factors such as scalability, technology depth, and governance standards before making investment decisions under the scheme.
Why the Fund Matters
The first phase of the Fund of Funds played a key role in mobilising private capital and expanding India’s venture ecosystem. With Startup India Fund 2.0, the government aims to build on that base by supporting scale-ups and technology-led ventures that can compete globally.
Industry observers said the Cabinet’s decision reinforces the government’s commitment to supporting the startup ecosystem despite tighter global investment flows. The approval is seen as a positive signal for founders and investors seeking stable, long-term policy support for innovation-driven businesses.
Officials indicated that detailed operational guidelines, including fund deployment schedules and implementation frameworks, will be announced in due course. These clarifications are expected to provide greater visibility to fund managers and startups planning to participate under Startup India Fund 2.0.
Eligibility and Funding Structure Under Startup India Fund 2.0
Under Startup India Fund 2.0, startups are expected to be recognised under the Startup India framework and meet prescribed criteria related to age, turnover, and innovation focus. Eligibility is assessed indirectly through SEBI-registered Alternative Investment Funds, ensuring that investment decisions follow market-based evaluation and regulatory standards.
The funding structure channels government capital into professionally managed funds rather than directly into companies. This model is designed to improve efficiency, attract private co-investment, and ensure that financial support reaches startups with scalable business models and strong governance practices.
Also read: Top Car Launches Expected in India in 2026: EVs and Hybrids Take Center Stage
Add Digital Herald as a preferred source on Google – Click Here
Last Updated on: Saturday, February 14, 2026 3:10 pm by Digital Herald Team | Published by: Digital Herald Team on Saturday, February 14, 2026 3:09 pm | News Categories: Business