Startup India Seed Fund Scheme

The Department of Promotion of Industry and Internal Trade (DPIIT) has launched an initiative called the Startup India Seed Fund Scheme (SISFS). This project offers financial support to emerging startups and assists them in the early stages of business.

This scheme provides assistance to startups in the following ways:

• Offers support right from the proof-of-concept stage
  

• Eases their market access
  

• Aids in the prototype advancement
  

• Helps in product trials and commercialisation
  

The Startup India Seed Fund Scheme facilitates the furnishing of capital for eligible startups with the help of incubators spread across India

The scheme plans to support around 3,600 entrepreneurs via 300 incubators between 2021 and 2025. This scheme also empowers startups to get loans from lenders, financial institutions, or commercial banks and generate investments from venture capitalists or angel investors.

The following points highlight the objectives of SISFS:

• Providing adequate seed funds to the startups and validating their business ideas
  

• This scheme has a multiplier effect, leading to exponential growth in employment opportunities
  

• SISFS aims to transform India into a country with a robust startup ecosystem
  

• As the entrepreneurs in Tier 2 and 3 cities have difficulty getting the required funding, SISFS supports budding entrepreneurs in smaller cities with the necessary assistance
  

• This scheme grants capital of up to ₹5 Crores to the qualified incubators chosen through a select committee
  

• These incubators have the authority to provide a maximum grant of ₹20 Lakhs to assist the startup in prototype development, product trials, or proving their concept
  

• Startups can get an additional ₹50 Lakhs for commercialisation through debt-linked financial instruments or convertible debentures. This funding is contingent upon meeting certain milestones and is part of the overall support structure rather than a standalone grant.

The Startup India Seed Fund Scheme (SISFS) has a clear, structured process for selecting startups. Incubators, authorised to distribute funds, play a key role in evaluating and shortlisting eligible startups. Here’s a simplified breakdown of how the selection works:

• Initial Screening: Incubators conduct an initial review, checking the innovation and market fit of the startup’s idea

• Evaluation Factors: The Incubator Seed Management Committee (ISMC) evaluates applications based on key factors:
  

  • Market Need: Does the startup solve a real-world problem or address a market gap?

  • Feasibility: Are the technical methods for product development realistic and proven?

  • Impact: How will the startup benefit customers or contribute to the nation's development?

  • Novelty: What makes the startup's product or service unique?

  • Team Strength: Does the founding team have the right skills and expertise?
    

• Presentation: Shortlisted startups may have to present their ideas to the ISMC for further review

• Final Selection: Within 45 days, the ISMC selects startups for funding based on their evaluations and presentations

• Real-time Tracking: Applicants can track the status of their applications on the Startup India portal

The startups need to follow these steps to apply for this scheme:

• Visit the official Startup India Seed Fund Scheme's website at https://seedfund.startupindia.gov.in/
  

• Click on the 'Login' option on the top right corner of the homepage
  

• Choose the 'Create an Account' option and navigate to the registration page
  

• Enter your company’s name, mobile number and email ID, and create a password
  

• Click on the 'Register' button
  

• Enter the OTP sent to your registered mobile number
  

• Click the 'Submit' button to verify
  

• Click on 'Apply Now' under the ‘For Startups’ option on the homepage
  

• Log in with your username and password
  

• Enter all the required details, upload the documents, and click on the 'Submit' button

Once the startup qualifies for the grant, the incubators will distribute the seed fund as per the following parameters.

• A grant of up to ₹20 Lakhs is disbursed in instalments with every milestone achieved. These are to be used for the following:
  

  • Developing the prototype

  • Product trials

  • Carrying out proof of concept
    

• The grant of up to ₹50 Lakhs will be disbursed for commercialisation or scaling up supported by debt-linked mechanisms
  

• The seed fund received by the startups must only be used for the intended purposes and not to build facilities
  

• The incubator finalises the tenure when he approves the loan, subject to a maximum of 5 years
  

• A moratorium period of 12 months can be offered to the startup
  

• The loans sanctioned are unsecured loans as the startups are in their initial phases, so the promoters need not submit any guarantee
  

• Before releasing the first instalment (within 60 days of application), the incubator signs a legal agreement with the concerned startup
  

• The fund would be strictly transferred to the company’s bank account of the startup
  

• Startups must provide a utilisation certificate to qualify for the next instalment. They further need to submit an interim progress update before the funds are released.

To monitor and execute the rules and regulations of this Startup India Fund, the DPIIT has formed an Experts Advisory Committee (EAC). The EAC assesses and chooses the incubators to grant the seed funds, monitor the progress and perform all other required administrative tasks. 

This way, EAC ensures efficient funds utilisation and helps accomplish objectives set by the SISFS. The EAC is the deciding authority for the value of grant instalment size and directs the incubators based on its assessment.