Parliament Question: Fund of funds allocation to AI startups and systematic risk

GOVERNMENT OF INDIA MINISTRY OF COMMERCE & INDUSTRY DEPARTMENT FOR PROMOTION OF INDUSTRY AND INTERNAL TRADE RAJYA SABHA UNSTARRED QUESTION NO. 3878. TO BE ANSWERED ON FRIDAY, THE 27TH MARCH, 2026. FUND OF FUNDS ALLOCATION TO AI STARTUPS AND SYSTEMATIC RISK 3878. SHRI SANJAY KUMAR JHA: Will the Minister of Commerce and Industry be pleased to state: (a) whether it is a fact that the Ministry has planned to allocate a major part of the second Fund of Funds Scheme (FFS) to startups in new-age technology, Artificial Intelligence (AI), and Machine Learning (ML); and (b) if so, manner in which the Ministry plans to mitigate the associated non-diversifiable or systematic risks associated with high investments in the same sector? ANSWER THE MINISTER OF STATE IN THE MIN ISTRY OF COMMERCE & INDUSTRY (SHRI JITIN PRASADA) (a): The Union Cabinet has recently approved the establishment of the Startup India Fund of Funds 2.0 (Startup India FoF 2.0) with a total corpus of Rs. 10,000 crore. The Scheme is designed to accelerate the next phase of India’s startup journey by mobilising long- term domestic capital, strengthening the venture capital ecosystem, and supporting innovation across the country. The new fund will adopt a targeted and segmented funding approach, with a focus on deep-tech, technology-driven innovative manufacturing, and early-growth innovative ideas, thereby catalysing venture capital investments across emerging sectors, including new-age technologies. The Scheme builds upon the experience and performance of the Fund of Funds for Startups Scheme (FFS 1.0) implemented under the Startup India initiative. Under FFS 1.0, the Government provides capital to Securities and Exchange Board of India (SEBI)-registered Alternative Investment Funds (AIFs) through the Small Industries Development Bank of India (SIDBI), which in turn invests in startups across sectors. As on 31st January 2026, supported AIFs under the Scheme have invested Rs. 25,859.38 crore in 1,382 selected startups across over 20 sectors. The sector-wise details of startups supported by AIFs under the FFS are placed as Annexure-I. (b): The Fund of Funds for Startups (including Startup India FoF 2.0), does not directly invest in startups, instead provides capital to SEBI-registered AIFs, which in turn invest in startups, ensuring private capital participation and risk sharing, mitigating the systematic risks. AIFs are pooled investment vehicles which raise funds from investors/ contributors and invest, inter-alia, in securities of unlisted companies such as startups. AIFs are regulated under the provisions of SEBI (Alternative Investment Funds)Regulations, 2012 (AIF Regulations). Under these Regulations, AIFs are required to ensure that an effective risk management process and appropriate internal controls are in place. Further, the AIF selection under the Startup India FoF 2.0 provisions a two-stage process i.e. screening by a Venture Capital Investment Committee (VCIC) with external experts and detailed due diligence by the Implementation Agency (IA), followed by Board (of the IA) approval focusing on AIFs managed by professionals with proven track record. Further, continuous monitoring by the IA, periodic reporting (including portfolio details), review by the Department, oversight by an Empowered Committee, and third-party evaluation provide overall governance and monitoring for the Scheme. *******ANNEXURE-I ANNEXURE REFERRED TO IN REPLY TO PART (a) OF THE RAJYA SABHA UNSTARRED QUESTION NO. 3878 FOR ANSWER ON 27.03.2026. Sector-wise details of startups selected by AIFs under the FFS as on 31st January 2026 are as follows: Sector No. of startups Amount invested by AIFs selected by AIFs (in Rs. crore) Advertising/Media/Entertainment 60 760.44 Agriculture/Agritech 67 1776.14 Artificial Intelligence / Robotics 35 689.16 Automotive 25 662.13 BioTechnology 6 20.56 Business Product and Services 66 1446.40 Clean Tech/ Clean Energy 39 1057.62 Consumer Goods & Services 108 1895.57 E-Commerce 55 982.79 Education/Edtech 60 890.85 Environment 6 66.65 Financial Services/Fintech 132 3841.14 Food & Beverages 75 1579.40 Genomics 3 22.20 Healthcare/Health-tech 149 2999.17 IT & ITES 334 4170.28 Logistics/Transport 57 1244.57 Manufacturing 67 1230.24 Others 11 134.07 Space Tech 14 233.58 Travel and Tourism 13 156.44 Total 1,382 25,859.38 *******