Daybreak Only 30% invested from a Rs 10,000 cr startup fund. Yet India obsesses over a new fund
Jan 11, 2026
India's startup funding is facing challenges as the first Fund of Funds winds down, disbursing only ₹6,500 crore of its ₹10,000 crore mandate. Despite spurring growth from 3,000 to over 200,000 startups, the initiative has drawn criticism for its slow disbursal process and lack of transparency. Fund managers voice concerns about high hurdle rates and fee disputes. As the second phase gears up, there's pressure for more focused investments, especially in AI and deep tech, amid glaring shortfalls in job creation.
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FFS Multiplied Capital — But Money Didn't Fully Reach Startups
- The Fund of Funds (FFS 1.0) had a strong multiplier effect, leveraging private capital into startups at roughly 7.5:1 ratio.
- Yet only a fraction of commitments became actual startup deployment, so headline numbers overstate on-ground capital flow.
Operational Gaps Undermined FFS Outcomes
- FFS 1.0 underdelivered on outcomes like job creation and timely disbursal despite its catalytic role.
- Operational delays and transparency gaps have meaningfully reduced the program's effectiveness.
Managers Call FFS A Game Changer — With Caveats
- Several fund managers and founders described FFS funding as a 'game changer' that validated their funds to other investors.
- One manager said SIDBI's early terms were so demanding he withdrew an application and partners refused to accept them.