Recently, the “Start Up India Seed Fund” scheme has been launched by the Union Minister for Commerce and Industry, Piyush Goyal. The scheme aims to provide financial support to the startups for their prototype development, proof of concept, product trials, market entry and commercialization.
• The Scheme was announced by the Hon’ble Prime Minister, Shri Narendra Modi on 16th January 2021 in his Grand Plenary address
of ‘Prarambh: StartupIndia International Summit’, marking the five-year anniversary of the Startup India initiative.
• Rs. 945 Crore corpus will be divided over the next 4 years for providing seed funding to eligible startups through eligible incubators across India.
• The scheme is expected to support an estimated 3,600 startups through 300 incubators.
• The fund will support transformative ideas and kindle startup revolution.
• Nodal Department: Department for Promotion of Industry and Internal Trade.
Features of the scheme:
- The online portal created by DPIIT, for the scheme, will allow incubators to apply for funds under it.
- An Experts Advisory Committee (EAC) has been created by DPIIT to execute and monitor the Startup India Seed Fund Scheme.
- Grants of upto Rs 5 Crores shall be provided to the eligible incubators selected by the EAC.
- The selected incubators shall provide grants of up to Rs 20 lakhs for validation of Proof of Concept, or prototype development, or product trials to startups.
Eligibility Criteria of Startups
- A startup, recognized by DPIIT, 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.
- Startup should not have received more than Rs 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 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.
Eligibility Criteria of Incubators:
- 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,
*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.
- The incubator should be operational for at least two years on the date of application to the scheme.
- The incubator must have facilities to seat at least 25 individuals.
- The incubator must have at least 5 startups undergoing incubation physically on the date of application.
- 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.
- The incubator should not be disbursing seed fund to incubatees using funding from any third-party private entity.
- The incubator must have been assisted by the Central/State Government(s).
- 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.
- Any additional criteria as may be decided by the Experts Advisory Committee (EAC).
Significance of the scheme:
• The SISFS scheme will help startups in:
Secure seed funding
Support transformative ideas
Facilitate implementation and
Start startup revolution.
• The Scheme will also create a robust startup ecosystem particularly in Tier 2 and Tier 3 towns of India, which are often deprived of adequate funding facilities for startups.
Seed Funds and Their Need
• Seed Funds are those funds that are provided or used during the very beginning of an investment.
• Indian startups are facing capital inadequacy especially in the seed and Proof of Concept development stage.
• Capital requirement is highly crucial at this stage as it might make or break a situation for startups that possess good business ideas.