Start-up India Seed Fund Scheme

The Central Government of India approved the ‘Start-up India Seed Fund Scheme (SISFS)’ to provide financial assistance to start-

‘Start-up India’ program was a government initiative with a stated objective to build a strong ecosystem for nurturing innovation and start-ups in the country that would drive sustainable economic growth and generate large scale employment opportunities. India has strived to create a start-up ecosystem which will be based on the key principle of the youth, by the youth and for the youth.

The Ministry of Commerce and Industry organised the ‘Start-up India International Summit: Prarambh’ in mid-January, 2021. During the summit, the Government announced their plan to declare an INR 1000 crore seed fund in order to support start-ups in India. 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 start-ups 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 start-ups with an innovative idea to conduct proof of concept trials.

The Central Government of India approved the ‘Start-up India Seed Fund Scheme (SISFS)’ on 21st January, 2021 to provide financial assistance to start-ups for:
  • proof of concept,
  • prototype development,
  • product trials,
  • market entry
  • commercialization
The aim of this scheme is to provide financial assistance to start-ups via corpus of INR 945 crore that will be disbursed through selected incubators across India in 2021-25.This would enable these start-ups to reach 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.

Eligibility Criteria for Start-ups

The eligibility criteria for a start up to apply under SISFS are as follows:
  • Any start up recognized by the Department for Promotion of Industry and Internal Trade (DPIIT) which has been incorporated under a period of two years at the time of application.
  • The Start-up must have a business idea to develop a product or a service with market fit, viable commercialization, and scope of scaling.
  • The Start-up 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 is given to start-ups 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.
  • Start-up should not have received more than INR 10 lakh of monetary support under any other Central or State Government scheme. This does not   include   prize   money   from   competitions   and   grand   challenges, subsidized working space, founder monthly allowance, access to labs, or access to prototyping facility.
  • Shareholding by Indian promoters in the start-up should be at least 51% at the time of application to incubator for the scheme, as per Companies Act, 2013 and SEBI (ICDR) Regulations, 2018
  • A start-up can receive the seed support only once each as per provisions of the scheme.
The eligibility criteria for an incubator to apply in the Start-up India Seed Fund scheme are as follows:
  • Incubator must be a legal entity:
  1. A society registered under the Societies Registration Act 1860, or
  2. A Trust registered under the Indian Trusts Act 1882, or
  3. A Private Limited company registered under the Companies Act 1956 or the Companies Act 2013, or
  4. A statutory body created through an Act of legislature
  • Incubator should be operational for at least two years on the date of application to the scheme
  • Incubator must have facilities to seat at least 25 individuals
  • Incubator must have at least 5 start-ups undergoing incubation physically on the date of application
  • Incubator must have a full-time Chief Executive Officer, experienced in business development and entrepreneurship, supported by a capable team responsible for mentoring start-ups in testing and validating ideas, as well as in finance, legal and human resources functions
  • Incubator should not be disbursing seed fund to incubatees using funding from any third-party private entity
  • Incubator must have been assisted by Central/State Government(s)
  • In   case   the   incubator   has   not   been   assisted   by   Central   or   State Government(s):
  1. Incubator must be operational for at least three years
  2. Must have at least 10 separate start-ups undergoing incubation in the incubator physically on the date of application
  3. Must present audited annual reports for the last 2 years
  • Any additional criteria as may be decided by the Experts Advisory Committee (EAC)
Application and Selection process of the Start-ups:

The selection process of the start-ups which receive the seed funding is through an open, transparent and fair process, comprising:
  • An online call for applications shall be hosted on an ongoing basis on the Start-up India portal.
  • Applicants can apply for seed fund to any three incubators selected as disbursing partners for this scheme in order of their preference.
  • All applications received will be shared online with respective incubators for further evaluation.
  • The applicant may be asked to submit details on team profile, problem statement, product/service overview, business model, customer profile, market size, quantum of funds needed, projected utilization plan for funds, etc.
The eligible application would be then judged on the following criteria:

  • Pressing need for the particular idea/innovation in the market: whether there is a need for the idea proposed or not? This depends on the market size, what market gap is it filling, does it solve a real-world problem?

  • Feasibility: Feasibility and reasonability of the technical claims, methodology used/ to be used for proof of concept and validation, roadmap for product development

  • Potential Impact: Customer demographic and the technology’s effect on these, national importance

  • Novelty: unique selling proposition of the technology, associated intellectual property

  • Team: Strength of the team, Technical and business expertise

  • Fund Utilization Plan: Roadmap of money utilization

  • Presentation: Overall assessment

As the world is navigating and pivoting the unfolding of the new socio-economic landscape, the Indian start-up ecosystem too is flourishing acting as a key driver for creating a ‘self-reliant India’. The Indian government too intends to provide an all-inclusive vision for a vibrant and vigorous start-up movement.