Fund of Funds for Startup India

Syllabus: General Studies Paper 3

Govt commits Rs.7,385 crore under Fund of Funds for Startup India Investment for 88 Alternative Investment Funds (AIFs), 720 startups supported by AIFs.

• Amount committed under FFS records a CAGR of over 21% since launch in 2016
• Performing startups supported through FFS show valuation increase by more than 10 times with some achieving unicorn status.

Fund of Funds for Startups(FFS)

• It was launched in 2016 under Startup India Initiative.
• Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry is its nodal ministry.
• It has aim to increase capital availability as well as to catalyze private investments and thereby accelerate the growth of the Indian startup ecosystem. 
• The fund was announced with a corpus of Rs. 10,000 crores. The corpus is to be built up over the 14th and 15th Finance Commission Cycles through budgetary support.
• FFS does not invest in startups directly but provides capital to SEBI registered Alternate Investment Funds(AIFs) known as daughter funds which in turn invest money in high-potential Indian startups. 
• SIDBI has been given the mandate of managing the FFS through the selection of daughter funds and overseeing the disbursal of committed capital.
• FFS has not only made capital available for startups at the early stage, seed stage and growth stage but also played a catalytic role in facilitating the raising of domestic capital, reducing dependence on foreign capital and encouraging homegrown and new venture capital funds. 

Alternative Investment Fund

About Alternative Investment Fund (AIF):

• It means any fund established or incorporated in India which is a privately pooled investment vehicle which collects funds from sophisticated investors, whether Indian or foreign, for investing it in accordance with a defined investment policy for the benefit of its investors.
• Applicants can seek registration as an AIF in one of the following categories,
• Category I AIF: Venture capital funds (Including Angel Funds), SME Funds, Social Venture Funds, Infrastructure funds
• Category II AIF
• Category III AIF
• Fund of Funds is an investment strategy of holding a portfolio of other investment funds rather than investing directly in stocks, bonds or other securities. In the context of AIFs, a Fund of Fund is an AIF which invest in another AIF.