Govt’s fund of funds scheme for startups has generated 18 unicorns in India

The FFS has mobilised Rs 17,534 crore of investments by AIFs in 969 unique startups.

The government’s Fund of Funds Scheme (FFS) for startups has committed Rs 10,229 crore to 129 alternative investment funds (AIFs) as of December 2024, and resulted in the funding of 18 unicorns in the country.

These unicorns include ShareChat, Lenskart, Digit, Acko, Unacademy, Slice, DealShare, CureFit, Spinny, Mamaearth and others. India currently has 105 unicorns.

Started in 2016, with a corpus of Rs 10,000 crore, the Small Industries Development Bank of India (SIDBI) Fund of Funds for Startups Scheme has become one of the popular limited partners (LPs) of the Indian startup ecosystem.

The FFS has mobilised Rs 17,534-crore investments by AIFs in 969 unique startups. Overall, the scheme has helped mobilise more than Rs 75,000 crore of domestic capital, according to SIDBI.

11% of the total investment in startups supported through the FFS scheme is for healthcare/ health-tech startups. 6% startups in the agriculture and agritech space were a part of the portfolio of FFS. Majority of the AIFs that invest into startups consider the impact parameters.

The scheme has given a much-needed boost to the investment managers, especially the ones who had launched their first funds.

SIDBI has invested in 46 first-time investment managers of the 129 funds it has invested in. It has funded more than 26 of the 129 AIFs before their first close.

After the inception of FFS, 129 startups beyond Tier 1 cities have received investments for Rs 1,590 crore, said SIDBI. Due to the effect of FFS, the industrywide deal activity in India beyond Tier 1 metros has also increased. Industrywide, in fiscal 2017, these cities saw just 38 deals. In fiscal 2023, the number soared to 97.

However, in this year's Budget, there has been a reduction in the allocation for the Small Industries Development Bank of India (SIDBI)-operated Fund of Funds Scheme (FFS). The allocation for FFS was cut down to Rs 1,200 crore, compared to the previous allocation of Rs 1,470 crore for the fiscal year 2023-24.

Startup credit guarantees and the Small Industries Development Bank of India (SIDBI) fund of funds scheme launched by the government are helping generate employment opportunities for the country's youth, Finance Minister Nirmala Sitharaman had said while presenting the interim Budget 2024.

"Startup credit guarantees, fund of funds scheme are assisting our youth and becoming 'rozgardata'," the finance minister had said.