Fund of Funds for Startups: how India's government corpus reaches founders

A fund of funds is a pool of money that invests in other funds. Instead of buying shares in companies, it becomes an investor in venture capital or private equity funds. Those funds then pick the companies.

The reason to build one is reach and spread. A single cheque into a fund gives indirect access to many startups, picked by professional managers. For a government, it is a way to support startups without choosing winners itself.

A fund of funds also helps a young market. New fund managers often struggle to raise their first fund because investors want a track record. A large, steady investor who commits early can break that deadlock, which in turn means more funds competing to back founders.

The Government of India set up the Fund of Funds for Startups (FFS) in 2016 as part of the Startup India push. The department that works on startup policy, DPIIT, oversees it. The Small Industries Development Bank of India (SIDBI), a government-owned bank, manages it day to day.

FFS does not write cheques to startups. It commits money to Alternative Investment Funds (AIFs) registered with the market regulator SEBI, usually in the venture capital category. Those funds must invest the money in startups, mostly Indian ones recognised by DPIIT.

Our guide on SEBI AIF categories explains how these funds are grouped. Funds apply to SIDBI, and SIDBI checks the manager, strategy and terms before agreeing to commit.

The first scheme had a corpus of ₹10,000 crore, and reports say it has been committed in full to funds. The Union Budget in February 2025 announced a fresh fund of funds of another ₹10,000 crore, and coverage says it was cleared as FoF 2.0 in 2026.

These figures come from news reports and government statements, and the details of timing and the split across years vary between sources. Treat the numbers as approximate and check the SIDBI or DPIIT pages for the latest.

Money committed is not the same as money invested. A commitment is a promise to put in money over time, as the fund finds companies. So a corpus figure tells you how much has been pledged to funds, not how much has reached startups. Reports also differ on how much of each fund the corpus may take, so confirm the share before quoting it.

The path has four steps. The government gives SIDBI the corpus. SIDBI decides which AIFs to back, using rules about the fund's track record, team and plan. The fund then raises the rest of its money from other investors. Finally, the fund invests in startups.

FFS usually takes only a part of any fund, so private investors still put in most of the money. The idea is to attract more private capital by giving a fund a strong anchor, not to replace it.

Because the corpus can be reused as funds return money, the same rupee can back more than one generation of funds. That is one reason policy documents talk about a revolving corpus. The pace depends on how quickly funds invest and exit.

• Government corpus goes to SIDBI.
• SIDBI commits to a SEBI-registered AIF.
• The AIF raises the rest from private investors.
• The AIF invests in startups it picks itself.
• Returns flow back up, and the corpus can be reused.

A founder cannot apply to FFS for money. The benefit is indirect. If a venture fund that you are pitching has a government commitment, it has more capital to invest, and may be able to write cheques in earlier rounds than a smaller fund could.

The funds backed by FFS must invest a set portion in startups, which can help early stage, deep-tech and smaller-city companies that private investors often overlook. The investors still use their own judgement, so being a startup does not mean getting a cheque.

In practice, a founder can check a venture fund's own website or press notes to see whether it counts SIDBI among its investors. That is a fact about the fund. It does not change how the fund will judge a pitch, and it does not give a startup any special claim on the money.

For a new fund manager, a commitment from FFS is a seal of approval and a large first cheque. It makes it easier to close the rest of the round from other investors, since they see a rigorous check has already happened.

The scheme also nudges funds toward certain behaviour, such as reporting to SIDBI and meeting investment targets. When reading news, a fund announcing that SIDBI has anchored its close is a signal about the fund, not about any one startup.

It also affects behaviour. Funds that take government money often commit to put a set share of what they raise into startups, which keeps capital pointed at young companies instead of later-stage deals. Some critics ask whether a government anchor changes how carefully a fund picks. Supporters say the private investors in the same fund keep that discipline.

Yes. Several state governments and agencies run their own funds that commit to venture funds. Development finance institutions, and a few large private investors, also invest in funds as limited partners. SIDBI also runs other fund programmes alongside FFS. Names, sizes and rules differ, so check each programme's own page.

A private fund of funds works like the government one. It puts its clients' money into several venture funds to spread risk. Treat any claim about size or returns as something to verify.

A headline saying a fund has raised money from SIDBI or the Fund of Funds for Startups means a government anchor commitment. It does not mean a startup got public money. Look at the fund's focus, size and whether the government commitment is a small or large part.

Also note the lag. A fund backed today may take years to invest, so headlines about a new corpus describe intent more than outcomes.

This is general information, not investment or legal advice. Check current government rules before relying on any of it.