The Small Industries Development Bank of India has revised the drawdown mechanism governing its Fund of Funds for Startups, giving venture capital and alternative investment funds greater flexibility to access capital committed by the government-backed programme. The change replaces a fixed drawdown formula with a graded structure under which eligible funds can call larger amounts of committed capital as they deploy money into startups.
SIDBI manages the ₹10,000 crore Fund of Funds for Startups, which was established under the Startup India Action Plan to channel public capital through professionally managed, SEBI-registered alternative investment funds. Rather than investing directly in individual companies, the programme makes commitments to Category I and Category II AIFs, which then select and finance startups under their respective investment strategies.
The revised mechanism addresses the timing of capital availability rather than changing the size or core mandate of the programme. Venture funds typically draw committed capital in stages, synchronising calls from institutional investors with portfolio investments and operating expenses. A more flexible formula can reduce delays between a fund approving an investment and receiving its corresponding share of government-backed capital. SIDBI is also encouraging fund managers to complete drawdowns more quickly, placing greater emphasis on the pace at which existing commitments are converted into startup investments.
The programme’s existing eligibility and deployment conditions continue to define how the capital can be used. Eligible applicants must be registered, or have applied for registration, as Category I or Category II AIFs with the Securities and Exchange Board of India. Funds seeking support must have a corpus below ₹1,000 crore and an investment strategy covering startups recognised under the government’s prevailing definition. SIDBI also requires participating funds to invest at least twice its contribution in qualifying startups. A fund receiving ₹100 crore from the programme, for example, must invest at least ₹200 crore in eligible companies.
Fund managers are assessed on investment experience, team credentials and regulatory eligibility. Key members must meet minimum credit-score requirements and cannot be legally barred from serving as directors or occupying managerial positions. Meeting the basic criteria does not guarantee a commitment; applications remain subject to evaluation on their merits by SIDBI’s venture capital investment process.
The graded drawdown system arrives as fund managers navigate uneven fundraising conditions and increasingly selective deployment. Faster access can remove an administrative bottleneck for funds with signed or advanced portfolio opportunities, although the accompanying push to deploy capital also increases the importance of maintaining investment discipline. SIDBI has not publicly indicated that the revision alters the programme’s startup-investment multiple, fund-eligibility requirements or overall ₹10,000 crore corpus.
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