The key objectives of the Startup India Seed Fund Scheme (SISFS) are:
- Provide adequate seed funding to startups and help validate their business ideas.
- Create a multiplier effect that drives significant growth in employment opportunities.
- Build a strong startup ecosystem across India.
- Support entrepreneurs in Tier 2 and 3 cities who often face challenges in accessing funding.
- Offer capital of up to Rs. 5 crore to selected incubators chosen by a committee.
- Allow these incubators to provide grants of up to Rs. 20 lakh to startups for prototype development, product trials, or proof-of-concept.
- Enable startups to access an additional Rs. 50 lakh for commercialisation through debt-linked financial instruments or convertible debentures, contingent on meeting specific milestones. This forms part of the overall support structure rather than a standalone grant.
Selection of Startups for Startup India Seed Fund Scheme
The Startup India Seed Fund Scheme (SISFS) follows a structured process to select startups. Incubators, which are authorised to distribute funds, play a central role in evaluating and shortlisting eligible applicants. Here’s an overview of the process:
- Initial Screening: Incubators review applications to assess the innovation and market fit of the startup’s idea.
- Evaluation Factors: The Incubator Seed Management Committee (ISMC) evaluates applications based on:
- Market Need: Does the startup address a real problem or gap in the market?
- Feasibility: Are the technical plans for product development practical and proven?
- Impact: How will the startup benefit customers or contribute to national development?
- Novelty: What makes the product or service unique?
- Team Strength: Does the founding team have the necessary skills and expertise?
- Presentation: Shortlisted startups may be asked to present their ideas to the ISMC for further assessment.
- Final Selection: Within 45 days, the ISMC selects startups for funding based on evaluations and presentations.
- Real-Time Tracking: Applicants can monitor the progress of their applications on the Startup India portal.
Eligibility Criteria for Startup India Seed Fund Scheme
To be eligible for a grant under the Startup India Seed Fund Scheme (SISFS), startups must meet the following conditions:
- The startup must be recognised by the Department for Promotion of Industry and Internal Trade (DPIIT).
- The business should be registered for no more than two years.
- The startup must use technology-driven solutions in its products, business model, core services, or distribution methods to address specific problems.
- The business idea should have commercial potential, meet market demand, and be scalable.
SISFS gives priority to startups offering innovative solutions in areas such as:
- Water management
- Social impact
- Waste management
- Financial inclusion
- Education
- Food processing
- Healthcare
- Agriculture
- Biotechnology
- Space
- Defence
- Oil and gas
- Railways, and others
Additional eligibility rules:
- Startups that have already received funding or aid up to Rs. 10 lakh from Central or State Governments are not eligible.
- The grant does not cover: subsidised working space, monetary benefits from competitions or challenges, lab facilities, monthly allowances, or prototyping services.
- As per the Companies Act, 2013 and SEBI (ICDR) Regulations, 2018, the startup must have an Indian promoter holding at least 51% of the shares.
- Seed support under SISFS may be provided as grants, convertible or debt debentures, or other instruments according to the scheme guidelines.
How to apply for the Startup India Seed Fund Scheme
Startups can follow these steps to apply for the Startup India Seed Fund Scheme:
- Go to the official Startup India Seed Fund Scheme website.
- Click on the 'Login' option at the top right of the homepage.
- Select 'Create an Account' to access the registration page.
- Enter your company’s name, mobile number, email ID, and create a password.
- Click 'Register'.
- Enter the OTP sent to your registered mobile number.
- Click 'Submit' to complete verification.
- On the homepage, select 'Apply Now' under the ‘For Startups’ section.
- Log in using your username and password.
- Fill in all required details, upload the necessary documents, and click 'Submit' to complete your application.
Disbursement of Seed Funds by Incubators to Startups
Once a startup is approved for the grant, the incubators distribute the seed fund according to the following guidelines:
- A grant of up to Rs. 20 lakh is released in instalments as each milestone is achieved. These funds can be used for:
- Developing a prototype
- Conducting product trials
- Completing the proof of concept
- A grant of up to Rs. 50 lakh is available for commercialisation or scaling, provided through debt-linked mechanisms.
- The seed fund must only be used for the intended purposes and cannot be used to build physical facilities.
- The incubator sets the loan tenure at approval, up to a maximum of 5 years.
- A moratorium period of 12 months may be granted to the startup.
- Loans are unsecured since startups are in early stages, so promoters do not need to provide guarantees.
- Before releasing the first instalment (within 60 days of application), the incubator signs a legal agreement with the startup.
- Funds are transferred directly to the startup’s company bank account.
- Startups must submit a utilisation certificate to receive the next instalment and provide an interim progress report before subsequent funds are released.
Implementation of Startup India Seed Fund Scheme
The DPIIT has set up an Experts Advisory Committee (EAC) to manage and oversee the implementation of the Startup India Seed Fund Scheme (SISFS). The EAC is responsible for selecting incubators, monitoring progress, and ensuring that funds are used efficiently.
- Incubators receive grants of up to Rs. 5 crore in three or more milestone-based instalments, with the exact amount determined through evaluation.
- Each incubator under SISFS has an Incubator Seed Management Committee (ISMC) to evaluate and select startups for seed funding. Shortlisted startups may need to present their ideas to the ISMC.
- The ISMC assesses applications based on submissions and presentations and selects startups for funding within 45 days of application. Approved startups receive their seed fund through the designated incubator.
Conclusion
The Startup India Seed Fund Scheme (SISFS) serves as a vital platform for nurturing innovative startups across India, particularly in their early stages. By providing structured financial support, mentoring through incubators, and access to additional funding opportunities, the scheme empowers startups to transform ideas into scalable businesses. With a clear selection process, milestone-based funding, and focused support for technology-driven solutions, SISFS not only fuels entrepreneurship but also contributes to job creation, economic growth, and the development of a robust startup ecosystem throughout the country.
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