Start-up India Seed Fund Scheme is an initiative by the Government of India to provide funding support to early-stage startups. The scheme is aimed at providing seed-stage funding to startups that have innovative and disruptive ideas, but lack the resources to bring them to market.
What is Startup India Seed Fund Scheme?
Easy availability of capital is essential for entrepreneurs at the early stages of the 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 innovative ideas 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 the Hon’ble Finance Minister, the scheme has been notified on 21.01.2021.
IMPORTANCE OF THE SCHEME:
- 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 crores 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
What are the sources of seed funding for startups?
There are multiple sources of seed funding for startups available-
- Friends and family
- Angel Investors
- Corporate seed funds
What are the eligibility conditions for this Scheme?
- A startup, recognized by DPIIT, incorporated not more than 2 years ago at the time of application.
- Startups 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
- Business idea using technology in its core product or service/ business model/distribution model / problem-solving methodology.
- Those startups who are creating an innovative solutions in water management, waste management, education, agriculture food processing, etc will be given preference
- Any startup will not have access to seed support more than once
What is an Incubator?
Business incubators are institutions that work with startups. Also, they help entrepreneurs develop their businesses at the beginning of their development. They assist these startups with their financial and other needs to accelerate the growth of these new startups. Incubators may have multiple startups under their wing and work together to accelerate their development process.
Eligibility Criteria for Incubators to Avail Startup India Seed Fund Scheme
- Incubator must be registered as a legal entity,
- A society working under the Societies Registration Act 1860, or
- A Trust working under Indian Trusts Act 1882, or
- A Private Limited company working under Companies Act 1956 of the Companies Act 2013, or
- A statutory body established via Act of the legislature Incubator should serve two years of service life on the date of application.
- Incubator must have a sitting arrangement for at least 25 individuals.
- Incubator should have at least five startups actively serving incubation phase on the date of application,
- Incubator must have a proper workforce managed by a full-time Chief Executive Officer who has experience in entrepreneurship and business development.
- Incubators should not be providing seed funds to incubates via a third-party private entity.
- Incubator must have the back up of Central/State Government(s)