All you need to know about Start-up India Seed Fund Scheme

On January 16, 2014, the Government of India introduced the Start-up India Seed Fund Scheme (SIFSS) to create chances for the growth of businesses and create a start-up-friendly ecosystem. Through the incubators, companies would receive early financial support of up to Rs. 50 lakh. A budgetary allotment of Rs. 945 crore for the SIFSS programme. The government will give money to incubators, which will subsequently give money to companies. The SIFSS incubators will help 3600 entrepreneurs over the course of the following four years. The goal of the Start-up India Seed Fund Scheme is to give entrepreneurs financial support for market entry, product testing, prototype creation, proof of concept, and commercialization.
Aren’t you excited about delving deeper in this amazing scheme of Government of India? I’m sure you will be, Great lets discuss, Startup India Seed Fund Scheme in this article.

What is Start-up India Seed Fund Scheme?

On January 16, 2016, the Government of India launched the Start-up India Seed Fund Scheme in order to build a robust start-up ecosystem by providing opportunities for entrepreneurs to grow their businesses. Our honourable Prime Minister, Mr. Narendra Modi, made the announcement to launch this scheme. Financial assistance of up to Rs 50 lakh will be provided to start-ups at the early stage through incubators under this scheme. The government has set aside Rs 945 crore for this scheme. Proof of concept, prototype development, product trial, market entry, and commercialization will be supported by this fund.

The government will provide funds to incubators under this scheme. The incubator will be in charge of distributing these funds to the start-ups. In the next four years, the Start-up India seed fund scheme will benefit 3600 entrepreneurs through 300 incubators.

The need for Start-up Seed Funding Scheme in India

The need for Start-Up Seed Funding Scheme in India is as follows:

• Easy access to capital is essential for entrepreneurs in the early stages of business growth.
• Funding from angel investors and venture capital firms will be available to start-ups only after proof of concept is submitted. 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 objectives of the Start-up India Seed Fund Scheme

The following are the objective of the Start-Up India Seed Fund Scheme:

• The Government of India has launched the Start-up India Seed Fund Scheme 2021 to encourage the growth of start-ups in India.
• SISFS was launched on January 16 to provide entrepreneurs with opportunities to grow their businesses.
• Early-stage start-ups will be given financial assistance of up to Rs 50 crore through incubators.
• The fund will be used for proof of concept, prototype development, product testing, market entry, commercialization, etc.

Implementation of Start-Up Seed Funding Scheme (SISFSS)

The implementation of Start-Up Seed Funding Scheme is as follows:

• DPIIT has established an Expert Advisory Committee (EAC), which is responsible for monitoring and implementing the SISFS. The EAC evaluates and selects incubators for allocation of seed funds, monitors progress, and takes necessary action for effective use of funds to meet SISFS objectives.
• The EAC will evaluate the selected incubators for grant assistance and provide a grant of up to Rs. 5 million to the selected incubators in three or more milestone-based instalments. The EAC decides on the exact instalments and amounts of grants for each incubator based on its evaluation.
• Each incubator within SISFS will form a committee known as the Incubator Seed Management Committee (ISMC), consisting of experts who can select and evaluate start-ups for seed support. Based on their evaluation, incubators can shortlist start-up applicants for presentation to the ISMC.
• ISMC will evaluate applicants based on their pitches and submissions and select start-ups for the seed fund within 45 days of receiving applications. Selected start-ups will receive seed funding within the respective incubator, which will select them as beneficiaries based on their shared preferences.

Who are the Incubators?

Incubators are organisations that support innovation and entrepreneurship among citizens. Incubators provide funds and basic infrastructure to start-ups to carry out business activities such as product development, market entry, commercialization, etc. Under the Start-up India Seed Fund Scheme 2021, the government is going to provide grants to 300 incubators. Applications for incubators can be made through the official portal. Start-ups can also apply for this scheme directly from the portal and can also choose incubators of their choice.

Application Procedure for Incubators

The application process for incubators for SISFSS is as follows:

• Go to the official website of the Start-up India Seed Fund Scheme.
• Click the “Sign In” button at the top right of the home page.
• The “Login” tab will open. Click the “Create Account” option at the bottom of the tab.
• The registration page of the “Start-up India” website will open.
• Enter name, email ID, mobile number, password, confirm password, and click on the “Register” button.
• A one-time password will be sent to the applicant’s registered mobile number. Enter the OTP and click on the “Submit” button.
• Go to the official website of the Start-up India Seed Fund Scheme and click on the “Apply Now” button on the right side of the home page.
• Select the “Apply Now” button under the “For Incubators” option and login using the username and password registered on the Start-up India website.
• Select the country, click on the input letter, and click “Next.”
  The application form will open. Enter all the details in the application form and click on the “Save Profile” button.
• The profile will be sent to a moderator for approval. Once approved, login to the Start-up India Seed Fund Scheme website.
• Click “Apply Now” below the seed fund scheme.
• Enter details in the application form, such as general details, incubator support details, incubator team details, funding requirements details, etc.

Eligibility Criteria for Incubators under SISFSS

The incubator should be a legal entity, i.e., one of the following:

• A company incorporated or registered under the Companies Registration Act 1860
• A Limited Liability Company registered or incorporated under the relevant provisions of the Companies Act, 2013 or the Companies Act, 1956.
• A Trust registered or incorporated under the Indian Trusts Act, 1882.
  A statutory body created by an act of the legislature.
• Incubators must have been in operation for at least two years prior to the application date- Incubators should have seating for at least 25 people.
• Incubators should have at least five start-ups undergoing physical incubation prior to the application date.
• Incubators must have a full-time CEO experienced in entrepreneurship and business development, supported by a team capable of and responsible for mentoring start-ups in validation and testing, legal, financial, and human resources.
• Incubators may not disburse seed funds to incubated entities using funds from any third-party private entity.
• Central or state governments should help the incubators.

Eligibility Criteria for Start-ups under SIFSS

The eligibility criteria for a start-up to apply under the Start-up India Seed Fund Scheme are as follows:

• The start-up should be recognised by DPIIT and established no more than 2 years ago at the time of application.
• A start-up must have a business idea to develop a product or service that fits the market, is viable for commercialization, and has scope for scaling.
• A start-up should use technology in its core product, service, business model, distribution model, and methodology to solve a target problem.
• A start-up should not get more than Rs. 10 crore in cash assistance under any other government scheme. This does not include prize money from competitions and grand challenges, subsidised workspace, a monthly founder allowance, access to labs, or access to prototyping facilities.
• Shareholding of Indian promoters in the start-up should be at least 51% as per the Companies Act, 2013 and SEBI Regulation (ICDR) 2018.

Start-up India Seed Fund Scheme Application Procedure

The application for the Start-up India Seed Fund Scheme is as follows:

• Start-up selection: Incubators applying for the Start-up India Seed Fund Scheme will form a committee called the Incubator Seed Management Committee (ISMC), consisting of experts who can evaluate and select start-ups for seed support.
• Online application: The online call for applications will be continuously hosted on the Start-up India portal.
  Entrepreneurs can apply for seed funding to any three incubators selected as paying partners for this programme in the order of their preferences. The applicant must provide the following information:
  • Team profile
  • Problem statement
  • Product/Service Overview
  • Business model
  • Customer profile
  • Market size
  • Amount of funds needed
  • Estimated plan for the use of funds

What is the Experts Advisory Committee (EAC) under SISFS?

DPIIT will constitute an expert advisory committee that will be responsible for the overall implementation and monitoring of the Start-up India Seed Fund Scheme. EAC will evaluate and select incubators for allocation of seed funds, monitor progress, and take all necessary measures for effective utilisation of funds.

Members from various departments are appointed to the EAC, which includes:

• Chairman
• Financial Advisor, DPIIT, or his representative
• Additional Secretary/Joint Secretary/Director/Deputy Secretary, DPIIT
• Each representative of
• Institute of Biotechnology (DBT)
• Institute of Science and Technology (DST)
• Ministry of Electronics and Information Technology (MeiTY)
• Indian Council of Agricultural Research (ICAR)
• NITI Aayog
• At least three expert members will be nominated by the Secretary, DPIIT, from the start-up ecosystem: investors, experts in R&D, technology development and commercialization, entrepreneurship, and other relevant domains.

Disbursement of Seed Fund to Start-ups by Incubators

The start-up capital fund eligible for start-up by the incubator will be paid as follows:

• The government will provide up to Rs. 20 lakhs as a grant for proof-of-concept validation, prototype development, or product testing. The grant will be paid in instalments according to milestones. These milestones can be related to prototype development, product testing, building a ready-to-market product, etc.
• The government will provide up to Rs. 50 million in investment for market entry, commercialization, or expansion through convertible bonds, debt, or debt-linked instruments.

Conclusion

When a business is still young, it needs the easiest possible access to finance so that its founders can focus on building the business. Once the business has demonstrated its concept, it will be eligible for funding from angel investors and venture capital firms. In the same way, banks only lend to applicants with collateral.