Union Budget 2025: New ₹10,000 Crore Fund of Funds Announced by Indian Government to Support Startups

The Indian government is set to introduce a new Rs 10,000 crore Fund of Funds aimed at bolstering startups. This initiative is expected to significantly enhance entrepreneurship in India, which currently ranks as the third-largest startup ecosystem globally. Finance Minister Nirmala Sitharaman announced this during her Budget Speech on February 1.

In 2023, the government had already established an FFS with a similar corpus of Rs 10,000 crore. This fund was designed to invest in startups, with the Department for Promotion of Industry and Internal Trade (DPIIT) overseeing it and the Small Industries Development Bank of India (SIDBI) managing its operations.

Boosting Domestic Capital

Siddarth Pai, founding partner at 3One4 Capital, highlighted the importance of this new fund. "The Government has acceded to the AIF Industry's request for a new Fund of Funds of Rs 10,000 crore. The capital support acts as a nucleus for various AIFs investing in Indian entrepreneurship. This will increase rupee capital participation in Indian startups and increase the pace of entrepreneurship in India," he stated.

The new fund aims to mobilise domestic capital for startup investments amidst evolving global macroeconomic conditions. The previous fund had received commitments exceeding Rs 91,000 crore from Alternative Investment Funds (AIFs), supported by the government's initial Rs 10,000 crore contribution.

Supporting Technological Research

Finance Minister Sitharaman also mentioned plans to explore another fund of funds to catalyse future startups over the next five years. Additionally, under the PM research fellowship scheme, the government will offer 10,000 fellowships for technological research at IITs and IIScs with increased financial backing.

Rehan Yar Khan from Orios Ventures expressed optimism about this renewal. "The Rs 10,000 crore FFS for startups is a renewal of the previous fund that was exhausted. Great boost for AIFs as the corpus is larger as the previous fund has been returning money as well," he noted.

Khan further emphasised the need for a deeptech fund to help India compete in AI advancements. "Although the corpus for the deeptech fund is not announced, it is also much needed for India to catchup in the AI race," he remarked. This strategic move by the government underscores its commitment to fostering innovation and supporting India's burgeoning startup ecosystem through substantial financial initiatives and research opportunities.

Source