FM introduces new Rs 10,000 crore Fund of Funds for startups in Budget 2025
FM Nirmala Sitharaman decision to launch a new FFS comes amid a growing emphasis on mobilising domestic capital for startup investments, particularly in the face of rapidly changing global macroeconomic conditions.
Finance Minister Nirmala Sitharaman said that the government plans to launch a new Rs 10,000 crore Fund of Funds to support startups, providing a significant boost to entrepreneurship in India, which currently ranks as the world's third-largest startup ecosystem.
“The Alternative Investment Fund (AIFs) for startups have received commitments of more than Rs 91,000 crore. These are supported by the fund of funds set up with the Government of India’s support of Rs 10,000 crore. Now, a new fund of funds with an expanded scope and a fresh contribution of another Rs 10,000 crore will be set up,” said Sitharaman during her Budget Speech on February 1.
The FM’s decision to launch a new FFS comes amid a growing emphasis on mobilising domestic capital for startup investments, particularly in the face of rapidly changing global macroeconomic conditions.
“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,” said Siddarth Pai, founding partner, 3One4 Capital, one of India’s most active early-stage venture capital firms.
In 2023, the government established an FFS with a corpus of Rs 10,000 crore to invest in startups with the Department for Promotion of Industry and Internal Trade (DPIIT) being the monitoring agency and the Small Industries Development Bank of India (SIDBI) being the operating agency.
“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,” Rehan Yar Khan, founding partner of Orios Ventures, another domestic venture capital firm, told YourStory.
The Finance Minister also said that a new fund of funds would be explored to catalyse the next generation of startups in the next five years. Further, she said that under the PM research fellowship scheme, the government will provide 10,000 fellowships for technological research, in IITs and IIScs with enhanced financial support.
“Although the corpus for the deeptech fund is not announced, it is also much needed for India to catchup in the AI race,” Khan told YourStory.