The startup ecosystem in India has experienced transformative growth in recent years. To support this momentum, various government-led initiatives have been launched. Among these, the SIDBI Fund of Funds scheme stands out as a cornerstone initiative aimed at nurturing innovative startups. This scheme, managed by the Small Industries Development Bank of India (SIDBI), provides much-needed funding support, but only to those who meet specific eligibility criteria. Startups registered with DPIIT (Department for Promotion of Industry and Internal Trade) and StartInUP are primarily targeted by this fund. Let’s delve into what the SIDBI Fund of Funds entails, its eligibility requirements, and the benefits offered under this powerful scheme.
What Is the SIDBI Fund of Funds?
The SIDBI Fund of Funds is a funding initiative introduced under the Startup India Action Plan by the Government of India. Instead of investing directly in startups, the funds are channeled through Alternative Investment Funds (AIFs), which in turn invest in eligible startups. This indirect investment model has been adopted to ensure that professional fund managers identify and back promising startups across diverse sectors.
Launched with a corpus of ₹10,000 crores, the Fund of Funds aims to catalyze equity investments of around ₹60,000 crores. It has been anchored by SIDBI, which has been entrusted with managing this initiative on behalf of the government.
Eligibility Criteria for SIDBI Fund of Funds
To access the benefits of the SIDBI Fund of Funds, certain eligibility conditions must be satisfied. The primary requirement is registration with DPIIT and StartInUP. Here’s a breakdown of the major eligibility factors:
1. DPIIT Registration
Startups must be recognized by the Department for Promotion of Industry and Internal Trade (DPIIT). DPIIT registration confirms that a startup is genuinely involved in innovation, product development, or improvement of existing services or products.
Eligibility under DPIIT includes:
- The startup must be less than 10 years old from the date of incorporation.
- Annual turnover must not have exceeded ₹100 crores in any financial year.
- The entity must be incorporated as a Private Limited Company, Registered Partnership Firm, or LLP.
- The business must be working towards innovation, development, or improvement of products or processes.
2. StartInUP Registration
StartInUP is a flagship initiative by the Government of Uttar Pradesh to promote entrepreneurship. DPIIT-recognized startups can register on the StartInUP portal to gain access to additional benefits and recognition at the state level.
StartInUP-registered startups are given:
- Access to funding support
- Incubation support and mentoring
- Assistance in regulatory compliance
- Recognition and visibility
Key Benefits of SIDBI Fund of Funds
Startups that fulfill the eligibility criteria and are selected by the participating AIFs can unlock several valuable benefits. However, the ultimate investment decision is made based on SIDBI’s evaluation and the fund manager’s assessment of the startup’s potential.
1. Access to Growth Capital
Funding provided under the SIDBI Fund of Funds enables startups to scale operations, hire skilled professionals, improve technology, and expand into new markets. Equity capital plays a vital role in the long-term success of any startup, and this scheme helps bridge that gap.
2. Credibility and Trust
Startups backed under this scheme are perceived as credible and trustworthy by other investors and stakeholders. The association with SIDBI acts as a vote of confidence and improves the startup’s ability to raise further rounds of funding.
3. Support from Professional Fund Managers
Through AIFs, startups receive not just capital but also strategic advice and mentorship from experienced fund managers. These professionals help refine business models, optimize financial performance, and connect with valuable networks.
4. Indirect Government Backing
Although direct funding is not provided, the government’s indirect support ensures accountability, proper monitoring, and efficient disbursal of funds through the AIF route. Startups benefit from a well-structured ecosystem supported by both central and state governments.
5. Equity Investment
Under the SIDBI Fund of Funds, investments are made in the form of equity, not debt. Startups are therefore not burdened with the repayment obligations of loans. This approach supports sustainable business growth without creating financial strain.
How SIDBI Evaluates Startups
Although the initial investment decision is taken by AIFs, SIDBI’s evaluation criteria play a crucial role. Startups must undergo a stringent assessment process that includes:
- The scalability and innovation of the business model
- The founding team’s experience and commitment
- Market potential and competition analysis
- Financial projections and use of funds
- Compliance with DPIIT and StartInUP guidelines
Only those startups that meet SIDBI’s quality benchmarks and AIFs’ investment goals are selected for funding.
Application Process for Startups
Although startups do not directly apply to SIDBI, a structured path is followed:
- DPIIT Registration: Startups must first obtain recognition from DPIIT via the Startup India portal.
- StartInUP Registration: Uttar Pradesh-based startups are advised to register with StartInUP for added advantages.
- Connect with AIFs: Startups must approach SIDBI-partnered Alternative Investment Funds. A list of these funds is available on SIDBI’s official portal.
- Pitch to Fund Managers: After submitting the business pitch and required documentation, startups may be invited for discussions and evaluations.
- SIDBI Approval: Once the AIF decides to invest, SIDBI’s evaluation is initiated before final approval and release of funds.
A Look at the Impact
As of the latest data, thousands of crores have already been sanctioned to various AIFs, and over 1000 startups have received funding. The scheme has become an essential tool for ensuring that high-potential startups across tier 1, 2, and 3 cities receive the right financial support to grow and thrive.
From agritech to edtech, and fintech to healthtech, startups across sectors have been empowered through the SIDBI Fund of Funds. Its reach and impact continue to expand, as more startups get DPIIT and StartInUP recognition every month.
Conclusion
The SIDBI Fund of Funds stands as a transformative initiative that empowers India’s startup ecosystem with growth capital, credibility, and access to professional mentorship. While the funding is routed through AIFs, the backbone of this support system is built on DPIIT and StartInUP registrations. For eligible startups, this presents a golden opportunity to unlock resources and take their ventures to new heights.
Entrepreneurs are encouraged to secure their DPIIT and StartInUP registrations at the earliest, explore the AIFs listed by SIDBI, and prepare compelling pitches. With the right mix of innovation, commitment, and strategic planning, Indian startups can be expected to continue flourishing with the support of the SIDBI Fund of Funds.
