Union Finance Minister Nirmala Sitharaman made a slew of announcements for the Indian startup sector on Saturday. During her budget speech, the FM announced that a new Fund of Funds will be set up for startups with an expanded scope and fresh contribution of Rs 10,000 crore.
Notably, the Alternate Investment Funds (AIFs) for startups received commitments of more than Rs 91,000 crore, supported by the Fund of Funds set up with a government contribution of Rs 10,000 crore. Now, a new Fund of Funds will be set up with a fresh contribution of another Rs 10,000 crore, the FM said.
“The increase in credit guarantee for startups from Rs 10 crore to Rs 20 crore is a much-needed demand that has been finally accepted. This will not only enable startups to have access to debt capital it will also help them scale faster with less equity dilution. Hence, it will lead to a virtuous cycle of higher top line, less equity dilution, better valuation, and better fundraising,” Mayuresh Raut, Managing Partner, Seafund said.
Anirudh A. Damani, Managing Partner, Artha Venture Fund hailed the Fund of Funds announcement by FM Sitharaman. He said, ” The renewal of the Rs 10,000 crore Fund of Funds and the focus on deep-tech funding will provide much-needed capital to early-stage ventures and India’s next wave of innovation”.
Additionally, the government would be exploring a Deep Tech Fund of Funds to catalyze the next generation of startups.
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According to Bhaskar Majumdar, Managing Partner, Unicorn India Ventures, “Given that deep tech is being seen as an area for growth at the national level, with a China +1 macro and creation of the PLI/DLI schemes of the government, this is a great step. The Government has created this FoF for deep tech to enable funds to invest in deep tech and back highly innovative startups that can put India in a competitive global AI race. Hand in hand, in continuation of the R&D fund of last year, the Government has enhanced the same for enterprises to enable technology innovation”.
Bruce Keith, Co-founder and CEO, InvestorAi said, “The crucial fund of funds of Rs 10,000 crore will play a key role in boosting domestic capital in the startup sector. The announcement on the deep tech fund, while details are awaited, should be viewed through the DeepSeek lens of what can be done with relatively small amounts of capital when provided to agile and creative teams. We expect the VC ecosystem to bring velocity and momentum into funding these enterprises”.