Startup India Seed Fund Scheme (SISFS)
The Startup India Seed Fund Scheme (SISFS) aims to provide financial assistance to startups for proof of concept, prototype development, product trials, market entry and commercialisation.
The Startup India initiative of the Government of India envisages building a robust Start-up ecosystem in the country for nurturing innovation and providing opportunities to budding entrepreneurs.
On February 5, 2021, the Government of India made an official announcement about the approval of SISFS. It has been approved for a period of four years and was implemented with effect from April 1, 2021.
This Action Plan laid down a roadmap for the creation of a conducive ecosystem for Startups in India. Subsequently, many activities have been undertaken to encourage Startups. Startup India Seed Fund Scheme (SISFS) is one such scheme provides financial assistance to early-stage startups.
About the benefits of SISF Scheme
- The Scheme aims to provide financial assistance to startups at the very initial stage of their project
- It has been approved for a time period of four years, starting from 2021-22
- Rs. 945 Crore corpus will be divided over the next 4 years for providing seed funding to eligible startups through eligible incubators across India
- It is expected that the Startup India Seed Fund Scheme shall help over 3600 startups in the country
- This scheme is in line with the Atmanirbhar Bharat Campaign launched in May 2020
- Seed Fund to an eligible startup by the incubator shall be disbursed as follows:
- Up to Rs. 20 Lakhs as a grant for validation of Proof of Concept, or prototype development, or product trials
- Up to Rs. 50 Lakhs of investment for market entry, commercialisation, or scaling up through convertible debentures or debt or debt-linked instruments.
What is Seed Funding?
Seed funding or seed-stage funding is a very initial investment. Generally, investors often get an equity stake in exchange for the capital invested. In case the founders use their savings to start up a business, it is called bootstrapping.
What is the Need For 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.
What is the objective of Startup Seed Funding Scheme in India?
The Indian startup ecosystem suffers from capital inadequacy in the seed and ‘Proof of Concept’ development stage. The capital required at this stage often presents a make or break situation for startups with good business ideas.
Many innovative business ideas fail to take off due to the absence of this critical capital required at an early stage for proof of concept, prototype development, product trials, market entry and commercialization. If seed funding is offered to such promising cases, then they can have a multiplier effect in validation of business ideas of many startups, leading to employment generation in the country.
This would enable these startups to graduate to a level where they will be able to raise investments from angel investors or venture capitalists or seek loans from commercial banks or financial institutions.
Who all are eligible for SISFS Scheme?
The eligibility criteria for a startup to apply under the Startup India Seed Fund Scheme shall be as follows:
- The startup must be recognised by the Department for Promotion of Industry and Internal Trade (DPIIT)
- It must have incorporated not more than 2 years ago at the time of application
- The startup must have a business idea to develop a product or a service with a market fit, viable commercialization, and scope of scaling.
- The startup should be using technology in its core product or service, or business model, or distribution model, or methodology to solve the problem being targeted.
- Preference would be given to startups creating innovative solutions in sectors such as social impact, waste management, water management, financial inclusion, education, agriculture, food processing, biotechnology, healthcare, energy, mobility, defence, space, railways, oil and gas, textiles, etc.
- The startup should not have received more than Rs 10 lakh of monetary support under any other Central or State Government scheme
- Shareholding by Indian promoters in the startup should be at least 51% at the time of application to the incubator for the scheme, as per Companies Act, 2013 and SEBI (ICDR) Regulations, 2018.
- A startup applicant can avail seed support in the form of grant and debt/convertible debentures each once as per the guidelines of the scheme.
What is the Experts Advisory Committee (EAC) under SISFS?
An Experts Advisory Committee (EAC) has been constituted by Department for Promotion of Industry and Internal Trade (DPIIT) , which will be responsible for the overall execution and monitoring of the Startup India Seed Fund Scheme.
The EAC will evaluate and select incubators for allotment of Seed Funds, monitor progress, and take all necessary measures for efficient utilization of funds towards fulfilment of objectives of Startup India Seed Fund Scheme.
Members from different departments shall be appointed in EAC, which comprises of the following:
- A Chairman
- Financial Advisor, DPIIT or his representative
- Additional Secretary/ Joint Secretary/ Director/ Deputy Secretary, DPIIT
- One Representative each from:
- Department of Biotechnology (DBT)
- Department of Science & Technology (DST)
- Ministry of Electronics and Information Technology (MeiTY)
- Indian Council of Agricultural Research (ICAR)
- NITI Aayog
- At least three expert members nominated by Secretary, DPIIT from the startup ecosystem, investors, experts in the domain of R&D, technology development and commercialization, entrepreneurship and other relevant domains.
Salient Features of Startup India Seed Fund Scheme
- Year-round ‘Call for Applications’ for Incubators and Startups
- No mandatory physical incubation
- PAN-India startup programme
- Startups can apply to 3 incubators simultaneously
How Startup India Seed Fund Will Operate
The Seed Fund will be disbursed to eligible startups through eligible incubators across India:-
- Department for Promotion of Industry and Internal Trade (DPIIT) – Nodal Department
- Experts Advisory Committee (EAC) – Government Representatives & Industry Experts
- Govt assisted/Not-Govt assisted Incubators (Incubators)- Operational for atleast 2-3 years
- DPIIT-recognised Startups (Startups) – Incorporated less than 2 years ago
How to Apply Online for Startup India Seed Fund Scheme
In order to apply for the SISFS Scheme you have to login at the official website https://seedfund.startupindia.gov.in Here is the complete process to apply online as incubator or startups under the SISFS Scheme:-
Incubator Application Form for SISFS
STEP 1: The first step is to visit the official website of Startup India Seed Fund Scheme at https://seedfund.startupindia.gov.in
STEP 2: At the homepage of the website, click at the “Apply Now” tab to open the page of how to apply online for Startup India Seed Fund Scheme:-
STEP 3: If you want to join Seed Fund Scheme as Incubator, then simply select the apply now button on the incubator side located at left side of the page.
STEP 4: Then making login using username and password as incubator / startups credentials which are required to login.
STEP 5: In the final step after login in the portal, candidates can make login to fill the Incubator Application Form.
Eligibility Criteria for Incubators under Startup India Seed Fund Scheme
1. The incubator must be a legal entity:
- A society registered under the Societies Registration Act 1860, or
- A Trust registered under the Indian Trusts Act 1882, or
- A Private Limited company registered under the Companies Act 1956 or the Companies Act 2013, or
- A statutory body created through an Act of the legislature
2. The incubator should be operational for at least two years on the date of application to the scheme
3. The incubator must have facilities to seat at least 25 individuals
4. The incubator must have at least 5 startups undergoing incubation physically on the date of application
5. The incubator must have a full-time Chief Executive Officer, experienced in business development and entrepreneurship, supported by a capable team responsible for mentoring startups in testing and validating ideas, as well as in finance, legal, and human resources functions
6. The incubator should not be disbursing seed fund to incubatees using funding from any third-party private entity
7. The incubator must have been assisted by the Central/State Government(s)
8. In case the incubator has not been assisted by the Central or State Government(s):
- The incubator must be operational for at least three years
- Must have at least 10 separate startups undergoing incubation in the incubator physically on the date of application
- Must present audited annual reports for the last 2 years
9. Any additional criteria as may be decided by the Experts Advisory Committee (EAC)
Startup Registration Form for SISFS
The Startup application will open on 1st July 2021. For more details, Please visit Official website.
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