The Department for Promotion of Industry and Internal Trade (DPIIT) created the Startup India Seed Fund Scheme (SISFS) with an outlay of Rs.945 crore to provide financial assistance to the startups for prototype development, proof of concept, market-entry, product trials, and commercialisation.
The Hon’ble Prime Minister, Shri. Narendra Modi announced the SISFS scheme on 16th January 2021. After the approval from the Hon’ble Finance Minister and the Expenditure Finance Committee (EFC), the DPIIT notified this scheme on 21st January 2021.
The funding from the venture capital firms and angel investors is available to startups only after providing their proof of concept. Similarly, banks offer loans to asset-backed startups. Thus, it is necessary to provide seed funding to the startups in India having an innovative idea to conduct proof of concept trials.
The SISFS provides seed funding to eligible startups through incubators across India for developing proof of concept. It will support approximately 3,600 entrepreneurs through 300 incubators in the next four years, i.e. 2021-2025. The seed fund will enable the startups to seek loans from commercial banks or financial institutions or raise investments from angel investors or venture capitalists.
Objectives of SISFS
The startup ecosystem in India generally suffers from capital inadequacy in the proof of concept development stage. The capital required by the startups at the stage of developing the proof of concept often makes or breaks a situation for startups with good business ideas.
Several innovative business ideas fail due to inadequate critical capital requirements at an early stage for prototype development, proof of concept, market-entry, product trials and commercialisation. Seed funding to such promising startups can have a multiplier effect for validating the business ideas of startups, ultimately leading to employment generation.
Eligibility Criteria for SISFS
The eligibility criteria for a startup and incubator to apply for the Startup India Seed Fund Scheme are mentioned below.
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.
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.
Application Procedure for Startups
The application procedure for availing the seed fund from the incubators by the startups under the SISFS are as follows:
Go to the official Startup India Seed Fund Scheme website.
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 Startup India Seed Fund Scheme 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.
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Further funding/incubation support after the prototyping stage.
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