Public–Private Partnerships and Start-up Financing: Strengthening India’s Entrepreneurial Ecosystem

Dalavai Sreenivasulu

doi:10.36948/ijfmr.2026.v08i02.80852

Public–Private Partnerships and Start-up Financing: Strengthening India’s Entrepreneurial Ecosystem

Author(s)	Dr. Dalavai Sreenivasulu
Country	India
Abstract	India's start-up ecosystem has traversed a remarkable journey over the past decade, evolving from fewer than 500 recognised startups in 2016 to over 2,00,000 today, raising approximately $151 billion across more than 25,000 funding rounds and producing 118 unicorns. This extraordinary expansion has been underpinned by a sophisticated architecture of public–private partnerships (PPPs) that channel government resources through private investment vehicles, blending state support with market discipline. This paper examines the role of PPPs in strengthening India's entrepreneurial finance ecosystem, with particular focus on the Fund of Funds for Startups (FFS) framework and emerging collaborative models. The analysis reveals that the first iteration of the FFS, launched in 2016, committed ₹100 billion to 145 private funds, which have invested over ₹255 billion (approximately $2.8 billion) in more than 1,370 startups. Building on this success, the government has recently approved a second $1.1 billion fund targeting deep-tech, manufacturing, and early-stage ventures, while extending the startup definition period to 20 years and raising the revenue threshold for benefits to ₹3 billion. The paper also examines innovative PPP models including Gujarat's Indian AI Research Organisation (IAIRO)—a tripartite collaboration between state government, central government, and the Indian Pharmaceutical Alliance with a ₹300 crore corpus over five years. However, the ecosystem faces significant challenges: overall startup funding declined to $10.5 billion in 2025, down 17% from the previous year, with the number of funding rounds falling nearly 39%. Angel investments have contracted sharply—deal count falling 44% to 834 transactions following regulatory changes that raised participation thresholds. Simultaneously, public markets have emerged as a dominant funding channel, with startups raising over ₹44,000 crore ($5.3 billion) from IPOs and follow-on offerings in FY25—more than double the late-stage private capital raised during the same period. The paper concludes with policy recommendations for optimising PPP frameworks, including strengthening domestic institutional participation, addressing regulatory friction in angel investing, deepening exit ecosystems, and leveraging PPP models for strategic sector development.
Keywords	Public–private partnerships, start-up financing, venture capital, Fund of Funds, deep-tech, angel investment, initial public offerings, innovation ecosystem, India
Published In	Volume 8, Issue 2, March-April 2026
Published On	2026-03-30
DOI	https://doi.org/10.36948/ijfmr.2026.v08i02.80852

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Public–Private Partnerships and Start-up Financing: Strengthening India’s Entrepreneurial Ecosystem

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