India's Employees' Provident Fund Organisation, which manages about INR 30 trillion in retirement savings, is drafting rules that would let it put up to 3% of its fresh annual inflows into venture capital and private equity funds, The Times of India reported last week, according to Business Standard. The report comes as the government finalizes 15 funds to be backed by its INR 100 billion Startup India Fund of Funds 2.0.

For investors in Asia, the two moves point the same way. A retirement body serving nearly 300 million members, writing even small checks into domestic funds, would give managers a large local backer with a long horizon.

What EPFO is considering

Under the reported plan, EPFO would allocate up to 3% of its fresh accretions, the new money that comes in each year, to Category I and Category II alternative investment funds (AIFs) registered with the Securities and Exchange Board of India. Category I covers venture capital, startup, small business and infrastructure funds. Category II covers private equity, private debt and real estate funds.

The allocation would be measured against annual inflows, not the full corpus, Mint noted. EPFO already has room for this: the finance ministry's investment pattern lets it place up to 5% of fresh accretions in asset-backed and trust-structured instruments, but it has never invested in Category I or II AIFs, Business Standard reported. The government approved the retirement body's entry into these asset classes five years ago.

The proposal was discussed at a meeting of Sebi's investment committee, and it is expected to go before EPFO's Central Board of Trustees, chaired by Labour Minister Mansukh Mandaviya, in November, according to the report. It has not been approved.

The draft guidelines reportedly include a minimum fund size of INR 1 billion (100 crore rupees), caps on exposure to any single fund, limits on investing in entities incorporated outside India and rules on the independence of fund managers. EPFO would start by routing money through institutional platforms, namely the National Investment and Infrastructure Fund and the Startup India Fund of Funds 2.0 run by the Small Industries Development Bank of India (SIDBI), rather than picking funds or startups itself.

The push came from New Delhi. The Department for Promotion of Industry and Internal Trade (DPIIT) wrote to EPFO in September asking it to take part in the new fund of funds, Business Standard reported.

Startup India Fund of Funds 2.0 picks its first managers

The government has finalized 15 AIFs under the scheme and earmarked INR 2.7 billion (270 crore rupees) for SIDBI to pass on to them, CNBC-TV18 reported on Oct. 27, citing government sources. The report did not name the funds.

DPIIT set up the program by a gazette notification dated April 13, 2026, with a total corpus of INR 100 billion (10,000 crore rupees) and commitments spread over two Finance Commission cycles. Like the first fund of funds launched in 2016, it does not invest in startups directly. It commits capital to Sebi-registered AIFs, which must raise the rest of their money from other investors and then back startups recognized by the government.

The new version splits eligible funds into four segments: deep tech, smaller "micro VC" funds for early-growth startups, technology-led manufacturing, and funds with no sector or stage limit. The notification allows larger funds and higher scheme contributions for deep tech and manufacturing, where it says private capital is limited and cautious, and longer fund terms for startups with long research cycles. It also lowers the investment multiplier, the minimum an AIF must invest in startups relative to the scheme's commitment, to let more funds qualify.

The notification describes the scheme as an umbrella that ministries and institutional investors can join with their own capital. Up to 5% of returns are set aside for ecosystem programs, and the rest flows back to the Consolidated Fund of India.

Founders turn fund managers

Private managers are lining up too. Unacademy co-founders Gaurav Munjal and Roman Saini are raising a INR 7 billion (700 crore rupees) fund, Longshot Capital, to back artificial intelligence and deep tech startups, Inc42 reported on Oct. 26, citing a report in The Economic Times that relied on unnamed sources. The fund has commitments of about INR 2.5 billion to 3 billion and is aiming for a first close in January 2027.

Inc42 said the vehicle is a Category II AIF and plans to back 25 to 28 startups at the seed and pre-Series A stages, with first checks of $500,000 to $1.5 million. It would run for 10 to 11 years, a long life meant to suit companies with slow development cycles. The founders declined to comment, Inc42 said. The fundraising comes less than two months after upGrad completed its purchase of Unacademy in an all-stock deal that valued it at INR 19.55 billion, more than 90% below its 2021 peak.

Those mandates match the government's targets. Funds focused on deep tech and early-stage companies are the ones the fund of funds is built to favor, and a domestic pension allocation would add a second local backer for them. For the wider regional picture, see Capital Times' review of Asia's third-quarter startup funding.

The next decision point is EPFO's trustee meeting in November. If the board approves the guidelines, the first money would most likely go through SIDBI's fund of funds and the National Investment and Infrastructure Fund, not straight to individual managers.