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(THE GIST OF PIB) Fund of Funds for Startups Scheme

(JANUARY-2025)

The Union Minister for Commerce and Industry recently emphasized that much of the success of the Startup India mission can be attributed to key funding mechanisms, particularly the Fund of Funds for Startups (FFS).

It was approved and established in 2016 with a corpus of Rs 10,000 crore, with contribution spread over the 14th and 15th Finance Commission cycle based on progress of implementation.
Objective: To provide much-needed boost to the Indian startup ecosystem and enable access to domestic capital.
The scheme does not directly invest in startups; instead, it provides capital to SEBI-registered Alternative Investment Funds (AIFs), known as daughter funds, who in turn invest money in growing Indian startups through equity and equity-linked instruments.
Small Industries Development Bank of India (SIDBI) has been given the mandate of operating this fund through the selection of suitable daughter funds and overseeing the disbursal of committed capital.
AIFs supported under FFS are required to invest at least 2 times the amount committed under FFS in startups.

It was established under an Act of the Parliament in 1990.
It is the Principal Financial Institution engaged in promotion, financing & development of the Micro, Small and Medium Enterprises (MSMEs) sector and coordination of the functions of the various institutions engaged in similar activities.
It helps MSMEs in acquiring the funds they require to grow the market, develop, and commercialize their technologies and innovative products.
SIDBI was made responsible for administering the Small Industries Development Fund and the National Equity Fund that were administered by IDBI before.
Besides focusing on the development of the MSME sector, SIDBI also promotes cleaner production and energy efficiency.