States Urged to Pool Funds for Startup Growth

India's commerce ministry has advised states and Union territories to cease establishing separate startup funding vehicles. Instead, they are encouraged to co-invest through the ₹10,000-crore Startup India Fund of Funds (FoF) 2.0, a move designed to centralize public capital and broaden venture financing access. This strategy targets startups in smaller cities and capital-intensive sectors such as deep technology and advanced manufacturing.

The FoF 2.0 framework introduces four investment segments: deep tech, manufacturing, micro venture capital, and agnostic funds. It raises the government's contribution to Alternative Investment Funds (AIFs) from 25% to up to 40% and extends the investment tenure for deep-tech and manufacturing funds from 12 to 18 years. This updated scheme aims to address funding gaps and boost entrepreneurship beyond major metropolitan areas.

As part of the implementation, states are expected to bolster incubators in innovation-led sectors, improve startup investment readiness, and organize outreach programs connecting founders with investors. Public sector undertakings and industry bodies are also encouraged to co-sponsor sector-specific AIFs to enhance capital availability in strategic areas, promoting a collaborative approach to national startup ecosystem development.