The Rs 10,000 crore second Startup India Fund of Funds would adopt a segmented approach to push innovation and support downstream funds specifically designed for the needs of deep tech, tech-driven innovative manufacturing and startups in the early stage of developing a technology or service.

The Startup India FoF 2.0 approved on February 14 and notified on Monday would also be different from the earlier Fund of Funds for Startups as more than one implementing agency would be running the scheme.

Startup India FoF 1.0 was implemented by Small Industries Development Bank of India (SIDBI). While SIDBI remains in the second fund too, having more than one Implementation Agency (IA) for building capacity of other institutes to manage such schemes is one of the purposes of FoF 2.0, the notification said. With the issuance of the notification the scheme has come into force.

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 AIFs will also bring in other investors to meet the target corpus amount.

Under the FoF 2.0 the four segments of startups have been identified for support and for each of them focussed AIFs would be supported. In the first segment are Deep Tech startups engaged in developing novel solutions addressing complex problems that involve longer Research & Development cycles, higher costs.

The second segment is for smaller AIFs supporting early growth stage startups which are in the early phases of developing a technology, product or service. The segment three will be those AIFs which will support tech-driven innovative manufacturing startups in the champion sectors under “Make in India” for promoting innovative manufacturing. The last and fourth segment will be for AIFs supporting sector and stage agnostic startups.

Operational flexibilities to address the unique requirements of the segments will be incorporated in the operational guidelines. This will include supporting AIFs with larger corpuses to increase the availability of funds required for capital intensive segments such as deep tech and manufacturing. Other flexibility could be for supporting longer duration AIFs to cater to startups having longer R&D cycles and gestation periods. Higher contribution from the Scheme for specific segments as deep tech and manufacturing wherein private capital is limited and cautious.

After Monday’s notification, the operational guidelines will be issued by the Department for Promotion of Industry and Internal Trade (DPIIT). The guidelines will cover the detailed segment-wise provisions, eligibility criteria for AIFs and startups, selection and monitoring processes and other details.

The Fund of Funds for Startups (FFS 1.0) launched in 2016 also had a corpus of Rs 10,000 crore. The entire amount has been committed to 145 AIFs. The AIFs in turn have invested over Rs. 25,500 crore in more than 1,370 startups across various sectors.