Finance Minister Nirmala Sitharaman has proposed to expand the scope of the Small Industries Development Bank of India (Sidbi) Fund of Funds for Startups (FFS) by allocating an additional Rs 10,000 crore in corpus to the scheme, in a bid to offer funding to startups.
With the fresh allocation, the scheme's total outlay would reach a total of Rs 20,000 crore.
“The Alternative Investment Funds (AIFs) for startups have received commitments of more than Rs 91,000 crore. These are supported by the fund of funds set up with the government of India’s commitment of Rs 10,000 crore. Now, a new Fund of Funds with expanded scope and a fresh contribution of another Rs 10,000 crore will be set up,” the Finanace Minister said in her budget speech on February 1.
What is the Sidbi Fund of Funds for Startups?
The Sidbi FFS is one of three key schemes promoted by the government under the Startup India initiative.
Launched on January 16, 2016, the FFS invests in Alternative Investment Funds (AIFs), rather than investing in startups directly. Through it, Sidbi has so far deployed over Rs 11,000 crore in venture capital and venture debt firms, including Stellaris Venture Partners, Sanjay Nayar’s Sorin Investments, Fireside Ventures, Chiratae Ventures, Trifecta Capital and Alteria Capital.
According to Sidbi data, as many as 144 such funds have raised capital commitments from it.
The increased allocation to the FFS scheme drew praise from startup industry stakeholders, who expect the move to drive domestic venture capital for startups.
“Great news that the Finance Minister Nirmala Sitharaman has expanded the Fund of Funds by another Rs 10,000 crore! This has been such a force multiplier for the domestic venture capital ecosystem and will continue to be so. Domestic capital needs to be the bedrock for startups,” said Kunal Bahl, co-founder of Snapdeal and Titan Capital, in a post on social media platform X.
According to Anirudh A. Damani, Managing Partner, Artha Venture Fund – a micro-venture capital firm that has received commitments from the Sidbi FFS, the initiative will provide much-needed growth capital to early-stage startups.
“The renewal of the Rs 10,000 crore commitment to the Fund of Funds for AIFs is a significant step forward for the Indian startup and investment ecosystem…I fully expect this fresh infusion to attract an additional Rs 1 lakh-1.5 lakh crore in capital,” Damani said.
Other government funding schemes
In addition to the FFS scheme, the government had also established a Credit Guarantee Scheme for Startups in January 2016 with a fixed corpus to provide guarantees to loans extended to DPIIT-recognised startups by banks, non-banking financial companies (NBFCs), and Sebi-registered venture debt funds.
The government also provides funding to startups through the Startup India Seed Fund Scheme (SISFS). Launched by the Department for Promotion of Industry and Internal Trade (DPIIT) in April 2021 with an outlay of Rs 945 crore, the scheme provides financial assistance to startups for proof of concept, prototype development, product trials, market entry, and commercialisation.
India currently has over 1.64 lakh DPIIT-recognised startups, according to its website.
Recovering funding environment
The fresh allocation in FFS comes at a time when the Indian startup space is showing signs of recovery after a funding winter of more than two years. Funding among Indian startups increased 14 percent year-on-year to $10.94 billion in 2024, data from market intelligence firm Venture intelligence shows.
The recovery has largely been spurred by a buoyant public market, as initial public offering (IPO)-bound firms raised large funding rounds. The year 2024 saw 13 startups, including Swiggy, Mobikwik, and Ola Electric, go public, which together raised over Rs 29,000 crore ($3.4 billion). There five such listings in 2023 and just two in 2022.
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