Startup India Seed Fund Scheme

What is Startup India Seed Fund Scheme?

Easy availability of capital is essential for entrepreneurs at the early stages of growth of an enterprise.

Funding from angel investors and venture capital firms becomes available to startups only after the proof of concept has been provided. Similarly, banks provide loans only to asset-backed applicants. It is essential to provide seed funding to startups with an innovative idea to conduct proof of concept trials.

DPIIT has created Startup India Seed Fund Scheme (SISFS) with an outlay of INR 945 Crore to provide financial assistance to startups for Proof of Concept, prototype development, product trials, market entry, and commercialization It will support an estimated 3,600 entrepreneurs through 300 incubators in the next 4 years.

The Hon'ble Prime Minister of India announced the scheme in his Grand Plenary address of Prarambh, Startup India International Summit on 16th January 2021. After approval of EFC and Hon'ble Finance Minister, the scheme has been notified on 21.01.2021.

Features

• It will support an estimated 3,600 entrepreneurs through 300 incubators in the next 4 years.
• An Experts Advisory Committee (EAC), constituted by DPIIT, will be responsible for the overall execution and monitoring of the Scheme.
• Grants of up to Rs. 5 crore will be provided to the eligible incubators selected by the committee.
• The selected incubators will provide grants of up to Rs. 20 lakh for validation of proof of concept, or prototype development, or product trials to startups.
• Investments of up to Rs. 50 lakh will be provided to the startups for market entry, commercialization, or scaling up through convertible debentures or debt-linked instruments.

Expected Benefit

It will help in creating a robust startup ecosystem in Tier 2 and 3 regions, as the smaller towns in India are often not provided with appropriate funding.

Eligibility Criteria for Startups Under SISFS

• A startup recognised by the DPIIT and incorporated or registered not older than two years at the time of filing an application.
• Startups should have a business idea to develop a service or product with viable commercialisation, market fit and scope of scaling.
• Startups must use technology in their core service, product, distribution model, business model or methodology to solve the targeted problem.
• Preference is given to startups inventing innovative solutions in sectors like waste management, social impact, water management, education, financial inclusion, food processing, agriculture, healthcare, biotechnology, mobility, energy, space, defence, oil and gas, textiles, railways, etc.
• Startups that have received more than Rs.10 lakh of monetary support under any Central or State Government scheme are not eligible under this scheme. This amount does not include subsidised working space, prize money from competitions and grand challenges, access to labs, founder monthly allowance or access to prototyping facility.
• The shareholding of an Indian promoter in a startup must be at least 51% at the time of application to the incubator as per the Companies Act, 2013 and SEBI (ICDR) Regulations, 2018.
• A startup can obtain seed support in the form of grants and convertible/debt debentures, each one according to the scheme guidelines.

Eligibility Criteria for Incubators Under SISFS

• The incubator should be a legal entity, i.e. either of the following entity:
• Society registered or incorporated under the Societies Registration Act, 1860.
• Private Limited Company registered or incorporated under the applicable provisions of the Companies Act, 2013, or Companies Act, 1956.
• Trust registered or incorporated under the Indian Trusts Act, 1882.
• The statutory body created through an Act of the legislature.
• Incubators must be operational for at least two years prior to the date of filing the application.
• Incubators should have seating facilities of at least 25 individuals.
• Incubators should have at least five startups undergoing incubation physically prior to the date of filing the application.
• Incubators need to have a full-time Chief Executive Officer, experienced in entrepreneurship and business development and supported by a team capable and responsible for mentoring startups in validating and testing, legal, finance, and human resources functions.
• Incubators must not be disbursing seed funds to incubatees using funding from any third-party private entity.
• The Central or State Governments should have assisted incubators.

Application Procedure for Startups

• Go to the official website https://seedfund.startupindia.gov.in/
• Click on the "Login' button on the top right-hand side of the homepage.
• The "Login' tab will open. Click on the "Create an Account' option at the bottom of the tab.
• The registration page of the "Startup India' website will open.
• Enter the name, email ID, mobile number, password, confirm the password and click on the "Register' button.
• An OTP will be sent to the applicants' registered mobile numbers. Enter the OTP and click on the "Submit' button.
• Go to the official https://seedfund.startupindia.gov.in/ website and click on the "Apply Now' button on the right-hand side of the homepage.
• Select the "Apply Now' button under the "For Startups' option and log in using the username and password registered on the Startup India website.
• The application form will open. Enter all the details on the application form, upload the documents and click on the "Submit' button.

Upon clicking on the "Submit' button, the application will be submitted for selection of the startup for seed funding under the SISFS scheme.