Startup India Fund 2.0: How the ₹10,000 Crore Deep-Tech Push Could Reshape India’s Innovation Economy

The Union Cabinet has approved a ₹10,000 crore Startup India Fund of Funds 2.0 to mobilise venture capital and accelerate deep-tech, advanced manufacturing, and early-growth startups. Building on the success of the 2016 fund, which supported over 1,370 startups through 145 AIFs, the new tranche aims to close high-risk capital gaps, boost domestic VC participation, and power the next generation of Indian unicorns.

India’s startup ecosystem is entering a decisive new phase. After a decade dominated by consumer internet, fintech, and e-commerce, the government is now shifting focus toward deep technology, advanced manufacturing, and innovation-led growth.

With the Cabinet’s approval of the ₹10,000 crore Startup India Fund of Funds 2.0, policymakers are attempting to build the next layer of India’s economic engine—one driven by intellectual property, research, and long-term capital.

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A Second ₹10,000 Crore Push: The Next Stage of Startup India

The government has approved the second tranche of the Startup India Fund of Funds scheme with a ₹10,000 crore corpus. This follows the first fund launched in 2016.

Core objectives of Fund of Funds 2.0

Focus Area	Strategic Goal
Deep-tech startups	Build high-impact, IP-driven companies
Early-growth startups	Reduce failure rates due to funding gaps
Tech-driven manufacturing	Boost industrial innovation
Sector-agnostic startups	Encourage broad-based entrepreneurship

The fund aims to mobilise long-term domestic venture capital, strengthening India’s investment ecosystem.

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The Legacy of Fund of Funds 1.0

The original fund, launched in 2016, played a crucial role in shaping India’s startup landscape.

Key achievements of the first fund

Metric	Result
Total corpus	₹10,000 crore
AIFs supported	145
Capital deployed by AIFs	₹25,500+ crore
Startups funded	1,370+
Sectors covered	AI, robotics, fintech, biotech, space tech, and more

The fund acted as a capital multiplier, crowding in private investment and enabling first-time founders to access risk capital.

Expert Insight: “The first Fund of Funds created the venture capital ecosystem. The second one is designed to create globally competitive deep-tech champions.”

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India’s Startup Explosion: From 500 to 2 Lakh+ Companies

Since the launch of Startup India in 2016, the ecosystem has grown exponentially.

Startup growth timeline

Year	Recognized Startups
2016	~500
2020	~50,000+
2025	2,00,000+
New startups in 2025 alone	49,400

India now hosts around 100 unicorns, placing it among the world’s leading startup ecosystems.

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Why Fund of Funds 2.0 Is Strategically Different

The new fund is not just a continuation—it represents a structural shift in policy priorities.

Key differences between Phase 1 and Phase 2

Feature	Fund 1.0	Fund 2.0
Core goal	Build startup ecosystem	Scale deep-tech innovation
Sector focus	Broad-based	Deep-tech and manufacturing
Stage focus	Early-stage	Early-growth and scaling startups
Geographic focus	Major startup hubs	Nationwide innovation push

The new fund is designed to:

• Address high-risk capital gaps.
• Support long-gestation technologies.
• Encourage innovation beyond metro cities.

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Deep-Tech: The New Engine of India’s Startup Economy

Deep-tech startups differ from traditional consumer startups because they:

• Require longer development cycles.
• Need significant upfront capital.
• Focus on breakthrough technologies.

Priority deep-tech sectors

Sector	Strategic Importance
Artificial intelligence	Productivity and automation
Robotics	Manufacturing efficiency
Space tech	Strategic and commercial gains
Biotechnology	Healthcare innovation
Clean tech	Energy transition

These sectors could:

• Increase India’s global competitiveness.
• Reduce dependence on imports.
• Create high-value jobs.

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How the Fund Works: The Capital Multiplier Model

Instead of investing directly into startups, the government invests in Alternative Investment Funds (AIFs), which then fund startups.

Funding flow model

Stage	Capital Movement
Government	Invests ₹10,000 crore
AIFs	Receive capital commitments
Startups	Get funding from AIFs
Private investors	Co-invest alongside AIFs

Capital multiplier effect

Government Capital	Private Capital Mobilised	Total Ecosystem Impact
₹10,000 crore	Multiple times higher	Large-scale startup funding

This structure ensures:

• Market-driven investment decisions.
• Efficient capital allocation.
• Larger overall funding pool.

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Policy Tailwinds: Easier Startup Recognition

Alongside the funding push, the government has:

• Doubled the startup turnover threshold.
• Increased it to ₹200 crore.

This move allows:

• More companies to qualify as startups.
• Greater access to incentives.
• A broader innovation base.

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Economic Impact: What This Means for India

Short-term effects

• Increased venture capital activity.
• More funding for early-growth startups.
• Stronger startup valuations.

Long-term effects

Outcome	Economic Impact
More deep-tech unicorns	Higher global competitiveness
Advanced manufacturing	Stronger industrial base
IP-driven companies	Higher export potential
Nationwide innovation	Balanced regional growth

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The Bigger Picture: India’s Shift to Innovation Capitalism

The Fund of Funds 2.0 signals a shift from:

• Consumption-driven startups to
• Innovation-driven enterprises

This could mark the beginning of:

• India’s deep-tech decade.
• A stronger domestic VC ecosystem.
• The rise of globally competitive Indian tech giants.

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Trading Platforms for Indian Investors

For investors tracking listed tech and startup-linked companies:

India-Based Platforms

• Zerodha
• Upstox
• Angel One
• Groww

Global Platforms

• Interactive Brokers
• eToro

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⚠️ DISCLAIMER: We Are Not Financial Advisors This article is for informational and educational purposes only and should not be considered financial or investment advice. Startup investments and equity markets involve significant risk. Always conduct your own research or consult a certified financial advisor before making investment decisions.