Union Budget 2025: Startup ecosystem hails Rs 10,000 crore fresh allocation to Sidbi Fund of Funds

Startup world hails Rs 10,000 crore fresh allocation to Sidbi Fund of Funds

Startup ecosystem stakeholders, including founders and investors, have lauded the government’s move to allocate Rs 10,000 in fresh capital to the Small Industries Development Bank of India (Sidbi) Fund of Funds for Startups (FFS), saying that move will improve access to domestic capital.

Touted as the Fund of Funds 2.0, the move is aimed at offering much-needed funding support to startups.

"The government’s commitment to fostering innovation is evident in the Rs 10,000 crore boost to the Fund of Funds for Startups and over Rs 91,000 crore in commitments from AIFs, ensuring sustained capital availability for high-growth ventures. This infusion will provide startups with the financial backing they need to scale rapidly, create jobs, and contribute to India's long-term economic resilience," said Accel's Prashanth Prakash.

Kunal Bahl, co-founder of Snapdeal and Titan Capital, said that the move will improve startup's access to domestic capital.

“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,” he said in a post on social media platform X.

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.

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.

Industry stakeholders are also expecting the move to reduce the reliance of Indian startups on foreign capital.

“The Fund (of Funds 2.0), which builds on the FFS scheme launched in 2016 will reduce reliance on foreign investments with essential capital up to the seed, growth stage. This would be in compliance with the Startup India action plan and will bring about a lot of domestic funding and innovation along with making India a global leader in deeptech and entrepreneurship," said Padmaja Ruparel, co-founder, IAN Group – another beneficiary of FFS’ commitments.

Chirag Shah, Fundraising and Strategy at venture debt firm BlackSoil, says that the move will drive innovation across sectors like fintech, health tech, and clean energy, providing crucial support for early-stage startups that face difficulties securing private investments.

“By routing funds through SEBI-registered Alternative Investment Funds (AIFs), the government leverages the expertise of professional fund managers, minimising the risk of inefficient capital allocation and reaffirming its confidence in startups as engines of economic growth and job creation,” he said.

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 Department for Promotion of Industry and Internal Trade (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 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 DPIIT’s website.