Cabinet Clears ₹10,000 Crore Startup India Fund 2.0 — What It Means for Indian Founders

India has just taken another big step to support entrepreneurs. The Union Cabinet has approved the second phase of the Startup India Fund, also called the Fund of Funds for Startups (FFS), with a fresh allocation of  ₹10,000 crore in the Budget 2025–26. This comes after the first ₹10,000 crore fund was almost fully deployed and played a major role in building India’s startup ecosystem over the last few years.

This new fund is expected to give a strong boost to early-stage startups across the country, especially in Tier-2 and Tier-3 cities, deep-tech sectors, and new-age industries like AI, EVs, climate tech, and manufacturing.

What is Startup India Fund (Fund of Funds)?

The government does not give this money directly to startups. Instead, the money goes to SEBI-registered venture capital (VC) funds, which then invest in startups.

Think of it like this:
Government → Venture Capital Funds → Startups

This model helps in two ways:

1. It brings private investors and government support together.
2. It ensures startups are evaluated professionally before funding.

The fund is managed by SIDBI (Small Industries Development Bank of India).

Why the second ₹10,000 crore fund was needed

The first fund was launched in 2016 when India’s startup ecosystem was still growing. At that time, early-stage funding was limited and many founders struggled to raise capital.

Since then, the startup ecosystem has exploded:

 India now has 100,000+ registered startups
 India has become the 3rd largest startup ecosystem in the world
 Dozens of unicorns have emerged across sectors

The government saw that the first fund worked well and decided to launch Startup India Fund 2.0 to continue the momentum.

How successful was the first ₹10,000 crore fund?

The first Fund of Funds created a massive impact:

 Government committed ₹10,000 crore
 This money helped VC funds raise ₹90,000+ crore in total capital
 That means every ₹1 from the government attracted **₹9 from private investors

This multiplier effect is the biggest success of the scheme.

Through this fund:

 Thousands of startups received funding indirectly
 Many unicorns and high-growth startups benefited
 Early-stage funding in India became much easier to access

In simple words, the first fund helped kickstart India’s venture capital ecosystem.

How Startup India Fund 2.0 will help entrepreneurs

The new ₹10,000 crore fund will focus on areas where funding is still difficult.

1. Early-stage startups

Seed and Series A funding is still tough to get in India.
This fund will increase capital availability for young startups.

2. Deep-tech and innovation

Government wants India to build technology locally.
Funding will focus on:

AI and machine learning
Semiconductor and electronics
Space and defence tech
Climate and clean energy
EV and mobility
Biotechnology

These sectors require long-term capital and patient investors.

3. Startups beyond metro cities

Earlier, most startup funding went to:

Bengaluru
Delhi NCR
Mumbai

Now the focus is shifting to Bharat startups in smaller cities.

This fund will help founders from Tier-2 and Tier-3 cities get better access to investors.

4. Job creation and manufacturing

The government wants startups to create jobs and build products in India.
Manufacturing and hardware startups are expected to benefit heavily.

How startups can apply and benefit

Startups cannot apply directly to the government for this fund.

Instead, they should follow this path:

1. Register on the Startup India portal and get DPIIT recognition.
2. Build a strong business plan and traction.
3. Approach venture capital funds supported by SIDBI.
4. Raise funding from those VC funds.

The benefit is indirect but powerful — because there will be more VC funds with more money to invest.

For founders, this means:

 More funding opportunities
 Easier access to capital
 Better valuation environment

 Why this matters now

Startup funding slowed down globally in the last two years. Many startups struggled to raise money due to global economic uncertainty.

Startup India Fund 2.0 sends a strong signal that:
India is committed to supporting innovation and entrepreneurship for the long term.

This move is especially important when:

AI and deep tech are reshaping industries
Manufacturing is shifting to India
Young entrepreneurs are emerging from smaller cities

 The bigger vision

The government’s long-term goal is clear:

Make India a global startup hub
Create millions of jobs
Build world-class technology from India
Reduce dependence on foreign innovation

The new ₹10,000 crore fund is another step toward that vision.

 Final thoughts

The first Startup India Fund helped build the foundation of India’s startup ecosystem.
The second fund aims to scale the next generation of Indian startups.

For founders, this means one thing:
More capital, more opportunities, and a stronger ecosystem to build in.

India’s startup journey is far from over — in many ways, it is just getting started.