Startup India Seed Fund Scheme (SISFS) was established by the Department for Promotion of Industry and Internal Trade (DPIIT) with an investment of INR 945 million to provide startups with financial assistance for Proof of Concept, prototype development, product trials, market-entry, and commercialization. In the next four years, it will provide support to about 3,600 entrepreneurs through 300 incubators.
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Subsidizing from private backers and funding firms opens up to new companies solely after the verification of the idea has been given. In a similar vein, applicants who are backed by assets are the only ones eligible for loans from banks. To carry out proof-of-concept trials, it is essential to provide startups with innovative ideas with seed funding.
In his Grand Plenary address to Prarambh, the Hon’ble Prime Minister of India announced the scheme: The Startup India International Summit will take place on January 16, 2021. The plan was announced on January 21, 2021, following approval from the EFC and Hon’ble Finance Minister.
Through eligible incubators located all over India, the Seed Fund will be distributed to startups that qualify.
Objectives of Startup India Seed Fund Scheme (SISFS)
- A lot of creative business ideas don’t succeed because they don’t have the necessary early capital for proof of concept, prototype, product trial, market entry, and commercialization.
- The Startup India Seed Fund Scheme (SISFS) aims to provide startup companies with financial support for proof-of-concept, prototype, product testing, market entry, and commercialization.
- This would enable these startups to advance to the point where they can obtain loans from commercial banks or other financial institutions or raise investments from angel investors or venture capitalists.
- Offering seed capital to such promising cases may result in the validation of numerous startup business concepts and the creation of employment.
Benefits of the Startup India Seed Fund Scheme
The Startup India Seed Fund Scheme was officially approved by the Indian government on February 5, 2021. It was put into effect on April 1, 2021, after being approved for four years.
- Through eligible incubators located all over India, the Seed Fund will be distributed to startups that qualify.
- The incubators will provide the startups with physical infrastructure, testing support, prototype or commercialization mentoring, human resources, and legal compliance once they have been incubated.
Eligibility Of Startup India Seed Fund Scheme
- At the time of application, a startup has been approved by DPIIT (Ministry of Commerce and Industry) and had not been formed for more than two years.
- There should not have been more than Rs 10 lakhs given to startups for financial assistance from any other program of the federal or state governments.
- Startups working on innovative solutions in areas like social impact, waste management, water management, financial inclusion, education, agriculture, food processing, biotechnology, healthcare, energy, mobility, defense, space, railways, oil and gas, textiles, and others should be given preference.
- At the time of application to the incubator for the scheme, Indian promoters should hold at least 51% of the startup, as per the Companies Act, 2013 and SEBI (ICDR) Regulations, 2018
Selection Standards of SISFS:
- There is no minimum education qualification expected for organizers to apply for SISFS.
- You can learn more about the requirements for applying at https://seedfund.startupindia.gov.in/about
- Private Limited Partnership Registered Partnership or Limited Liability Partnership can apply. Start-ups cannot be sole proprietorships or public limited companies.
- If the startup’s annual revenue has not exceeded INR 100 crore in any fiscal year.
- Start-up shouldn’t have been framed by separating or remaking a business currently in present.
Support and Grants:
- In the next four years, it will provide support to about 3,600 entrepreneurs through 300 incubators.
- The committee will award up to five crores to the eligible incubators it selected.
- Grants of up to Rs 20 lakhs will be provided by the selected incubators for startup product trials, prototype development, or proof of concept validation.
- Through convertible debentures or debt-linked instruments, 50 lakhs will be given to startups for market entry, commercialization, or scaling up.
Why is a Seed Fund Required?
- In the early stages of a business’s growth, entrepreneurs need easy access to capital.
- The inadequacy of seed and “Proof of Concept” capital is a problem in the Indian startup ecosystem.
- Startups with good business ideas frequently face a make-or-break situation due to the need for capital at this stage.
- Due to a lack of the crucial capital needed at an early stage for proof of concept, prototype development, product trials, market entry, and commercialization, many innovative business ideas fail.
- Offering seed capital to such promising cases may result in the validation of numerous startup business concepts and the creation of employment.
Features Of Startup India Seed Fund Scheme
- Annual “Call for Applications” for Startups and Incubators
- Sector-agnostic
- No physical incubation is required.
- PAN-India startup initiative
- Three incubators accept applications from startups at once.
What Exactly is the SISFS Experts Advisory Committee (EAC) under SISFS?
The Startup India Seed Fund Scheme’s overall execution and monitoring will fall under the purview of DPIIT’s Expert Advisory Committee (EAC). The evaluation and selection of incubators for the distribution of Seed Funds will be handled by the EAC, which will also keep track of progress and take any necessary steps to ensure that the funds are used effectively.
In the EAC, members from various departments will be appointed, and they include:
- 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 professionals were selected by the Secretary, DPIIT, and drawn from the start-up ecosystem, investors, R&D, technological development and commercialization, entrepreneurship, and other related fields.
Startup India Seed Fund Scheme Application Procedure
The procedure for applying for the Startup India Seed Fund Scheme is as follows:
The Incubator Seed Management Committee (ISMC), made up of experts who can evaluate and select startups for seed support, will be made up of Startup Incubators selected for the Startup India Seed Fund Scheme.
Online Application
An online call for applications will be held on the Startup India portal.
Entrepreneurs can apply for seed funds at any three incubators chosen as this scheme’s disbursing partners, in any order they choose. The following information must be provided by the applicant:
- Team profile
- Problem statement
- Product/service overview
- Business model
- Customer profile
- Market size
- Quantum of funds needed
- Projected utilization plan for funds
Conclusion
In this article, we have provided the details on Startup India Seed Fund Scheme (SISFS). It is important to know about it as this scheme is a startup’s earliest funding stage. Getting ideas off the ground and giving a potential business an ideal life require seed funding.