Finance Minister Nirmala Sitharaman recently announced a significant initiative in the 2025 Union Budget: a new Fund of Funds for Startups (FFS) with a corpus of ₹10,000 crore. This announcement underscores the Indian government's commitment to fostering innovation and entrepreneurship, particularly as the startup ecosystem continues to thrive, with over 1.5 lakh startups recognised by the Department for Promotion of Industry and Internal Trade (DPIIT).
What The FM Said
Presenting the budget in the Parliament, Finance Minister Nirmala Sitharaman said, “The Alternate Investment Funds (AIFs) for startups have received commitments of more than ` 91,000 crore. These are supported by the Fund of Funds set up with a Government contribution of ₹10,000 crore. Now, a new Fund of Funds, with expanded scope and a fresh contribution of another ₹10,000 crore will be set up.”
Supporting Entrepreneurs
The context of this initiative is critical. The FFS, first launched in 2016, has been instrumental in providing essential capital to startups at various stages, including early, seed, and growth phases. This renewed funding aims to reduce reliance on foreign capital while encouraging domestic investment through Alternate Investment Funds (AIFs). Sitharaman emphasised that this initiative would not only support emerging entrepreneurs but also catalyse domestic capital infusion, positioning India as a stronger player in the global startup landscape.
The Funding Winter
The implications of this funding are profound. With the Indian startup sector witnessing a 66% drop in funding value from January to November 2023, the new FFS is expected to revitalize investment flows and improve access to credit for startups.
The government plans to enhance loan guarantees for startups and explore specific funds targeting deep-tech innovations, which could spur advancements in critical sectors like electronics and electric vehicle technology.
Much Needed Growth Capital
Overall, this initiative is anticipated to provide much-needed growth capital to early-stage ventures, strengthen India's position as a global innovation hub, and foster a more robust entrepreneurial ecosystem. As the startup landscape evolves, such government support is crucial for sustaining momentum and driving future growth.
