The Government of India has issued operational guidelines for the ₹10,000 crore Startup India Fund of Funds 2.0 to accelerate investments in DPIIT-recognised startups through SEBI-registered AIFs.
Government Framework Streamlines Capital Deployment Through SEBI-Registered AIFs
The Department for Promotion of Industry and Internal Trade issued operational guidelines for the ₹10,000 crore Startup India Fund of Funds 2.0, establishing a structured framework to improve capital deployment efficiency across India’s startup ecosystem. The scheme, notified on April 13, 2026, represents government commitment to disciplined venture capital mobilisation through professionally managed Alternative Investment Funds rather than direct startup investing.1
The fund will not invest directly in startups but will channel capital through SEBI-registered Category I and II Alternative Investment Funds, which will then invest in DPIIT-recognised startups. This indirect approach ensures rigorous due diligence, private capital crowding-in and sector-specific expertise as AIFs are segmented across deeptech, early-stage, manufacturing and sector-agnostic verticals.2
SIDBI will act as the primary implementation agency alongside an additional domestic implementation agency to be selected by DPIIT in the near future. The framework includes government stake caps at 40 percent to prevent excessive public sector dominance while ensuring alignment with private investors.3
Oversight operates at multiple governance levels. An empowered committee chaired by the DPIIT secretary will review fund performance periodically. Third-party evaluations will assess outcomes, and a portion of returns generated will fund ecosystem development activities including mentorship and infrastructure support, with remaining returns flowing to India’s Consolidated Fund.4
The guidelines emphasise expanding funding beyond established startup hubs toward emerging cities and underserved regions. Co-investment arrangements allow other ministries and institutional investors to participate in priority sectors, creating flexible capital pooling for capital-intensive ventures.5 This structured segmentation approach balances government capital efficiency with private sector discipline.
