The alternative investment funds (AIFs) financing startups under the government’s Fund of Funds Scheme (FFS) have requested a special window or carve-out to support deep-tech startups. In a meeting with the Department for Promotion of Industry and Internal Trade (DPIIT) the 75 AIFs, which receive a portion of the funds they invest from the government also called for an increase in the corpus of the FSS and extend its duration. The scheme is set to run across the 14th and 15th Finance Commission cycles.
Currently, the Startup India Initiative, launched in 2016, under which the FFS scheme operates, does not differentiate between types of startups. However, the government is deliberating on a Deep Tech Startup Policy, which includes plans for a dedicated Deep Tech capital guidance fund.
Deep-tech startups are early-stage ventures built on scientific and engineering advancements that have yet to be developed for commercial applications. Unlike other startups, which are differentiated by business models and can be replicated, deep-tech startups are distinguished by their technology. Due to the nature of their functions, deep-tech startups take longer to mature and require substantial capital injections.
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Out of more than 1,58,000 startups across over 55 industries, over 46,000 entities have been recognised as startups in various technology and allied sectors, which may include deep-tech fields such as artificial intelligence (AI), biotechnology, nanotechnology, robotics, technology hardware, and augmented reality/virtual reality (AR/VR), among others.
Under the FFS, AIFs receiving support are required to invest at least twice the amount committed by the government. As of October 31, 2024, FFS-supported AIFs have invested Rs 20,572.14 crore in startups, meaning that around Rs 7,000 crore of the Rs 10,000 crore allocated under the scheme has been deployed and will soon need replenishment.
Among the prominent AIFs of leading startup investment firms supported under FFS are Chiratae Ventures, India Quotient, Blume Ventures, IvyCap, Waterbridge, Omnivore, Aavishkaar, JM Financial, and Fireside Ventures.
Apart from FFS the StartUps India initiative has two other schemes — Startup India Seed Fund Scheme (SISFS) and the Credit Guarantee Scheme for Startups (CGSS).
SISFS provides financial assistance to seed-stage startups through incubators and Rs 454.04 crore has been approved so far by selected incubators to startups. CGSS enables collateral-free loans to startups and has facilitated loans amounting to Rs 555.24 crore.
