Government to Prioritise AI, Machine Building in New ₹10,000 Cr Fund for Startups

The commerce and industry ministry is set to allocate a significant portion of the second ₹10,000 crore Fund of Funds Scheme (FFS) for startups in cutting-edge sectors such as new-age technology, artificial intelligence (AI), and machine building, a senior official confirmed.

Focus on High-Tech and Emerging Sectors

“We are going to dedicate a lot of this ₹10,000 crore fund of funds largely for the new age tech, AI, and machine building,” the official stated, underlining the government’s strategy to accelerate innovation and entrepreneurship in transformative industries.

The new FFS was announced in the Union Budget 2025, following the first iteration of the scheme that was launched in 2016 with a similar corpus to boost venture capital investments in Indian startups.

SIDBI Likely to Manage New Fund

Just like the 2016 scheme, the second Fund of Funds is expected to be managed by the Small Industries Development Bank of India (SIDBI). Under the current model, SIDBI allocates capital to SEBI-registered Alternative Investment Funds (AIFs), which in turn invest in eligible startups.

The original scheme played a crucial role in strengthening India’s venture capital ecosystem by acting as a catalyst for private investments in early- and growth-stage companies.

Building a Strong Startup Ecosystem

The new fund is part of the broader Startup India initiative, launched by the government on January 16, 2016, to foster innovation and support budding entrepreneurs. Under this initiative, over 1.5 lakh entities across more than 55 industries have been officially recognised as startups by the Department for Promotion of Industry and Internal Trade (DPIIT).

Recognised startups are eligible for a range of tax and non-tax benefits, including access to funding, regulatory support, and faster clearances under the Startup India Action Plan.

Conclusion 

The second ₹10,000 crore Fund of Funds Scheme reinforces the government’s commitment to fostering a vibrant startup ecosystem in India. By prioritising sectors like AI, machine building, and emerging technologies, the initiative aims to fuel innovation and drive long-term economic growth.

With SIDBI likely managing the fund again, the structured investment approach is set to empower thousands of early-stage ventures under the Startup India framework.

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