Synopsis
This second tranche of the Fund of Funds will seek to mobilise venture capital and support deeptech, tech-driven, innovative manufacturing startups, and early-growth stage enterprises.The second tranche of FoF was approved by the Cabinet in February. It is aimed at mobilising venture capital and supporting deeptech, tech-driven, innovative manufacturing startups, and early-growth stage enterprises.
The FoF 2.0 has been designed to continue the momentum of investments in startups, with an expanded scope over the Fund of Funds Scheme (FFS 1.0).
“Distributions (both capital redeemed and returns earned) from Startup India FoF 2.0, net-off utilisation of up to 5% of the returns for the purpose of capacity building of the startup ecosystem, will be deposited back to the Consolidated Fund of India (CFI),” the DPIIT said in a notification.
The scheme will contribute to the corpus of SEBI-registered alternative investment funds (AIFs) for investing in equity and equity-linked instruments of entities recognised as startups by the central government.
The corpus of the fund has been divided into four segments. The first segment will focus on AIFs supporting deeptech or startups engaged in developing novel solutions addressing complex problems that involve longer research and development (R&D) cycles and higher costs, while the second segment seeks to provide capital to smaller AIFs (micro VCs) supporting early growth-stage startups, that is, enterprises that are in the early phases of developing a technology, product, or service.
The third segment will support tech-driven innovative manufacturing startups, while the fourth will cater to AIFs supporting sector/stage-agnostic startups, it said.
It added that operational flexibilities will be incorporated in the guidelines to address the unique requirements of the segments.
This will include supporting AIFs with larger corpus to increase the availability of funds required for capital-intensive segments such as deeptech and manufacturing, and supporting longer-duration AIFs to cater to startups having longer R&D cycles and gestation periods.
The guidelines will be issued by the department. It will also include other aspects important to realise the expanded scope of the scheme.
The operational guidelines for FoF 2.0 will cover the detailed segment-wise provisions, eligibility criteria for AIFs and startups, selection and monitoring processes, reporting and assessment requirements, mechanisms for disbursal of funds to implementation agencies and AIFs, and composition of the investment committee.
An empowered committee chaired by the DPIIT secretary will be constituted to monitor the implementation and performance of the scheme.
