Startup India Seed Fund Scheme (SISFS): Empowering Early-Stage Startups

The Startup India Seed Fund Scheme (SISFS) of the Government of India offers financial assistance to early-stage startups. It gives support during the proof of concept phase, prototype development, product trials, the entry stage into a market, and the commercialization phases. The SISFS attempts to bridge the funding gap that usually develops in the beginning stages of most startups. Therefore, it expected to play an important role in encouraging innovation and entrepreneurship in every corner of this country.

What is the Startup India Seed Fund Scheme?

Fundraising for new entrepreneurs is essential to setting up a business. Entrepreneurship ventures are necessary to make angel investors and venture capitalists believe that such innovative ideas can be brought to the marketplace that make profits. Bank financing only arrives for individuals with more assets to ensure a sure supply of those requirements. So, seed capital becomes of very significant value to entrepreneurial business ventures wishing to try their innovative ideas out for market proof.

A network of incubators across India will be very judiciously used, and the Seed Fund should be allocated to promising entrepreneurs, thus encouraging innovation in the entrepreneurial landscape.

Many new business ideas often fail in their initial stages mainly because of inadequate capital. This lack of capital prevents them from taking important steps like proof of concept, prototype development, product trials, market-entry, and commercialization. These promising concepts, therefore, fail to take off and become successful.

Objectives of SISFS

The primary objective of the Startup India Seed Fund Scheme is to provide seed capital to innovative startups so they can conduct proof-of-concept trials. This seed money allows the startups to grow in stature so that they might attract angel investors, venture capitalists, or loans from commercial banks or financial institutions.

Eligibility Criteria for Startups

To be eligible for the Startup India Seed Fund Scheme, one has to meet the following requirements:

DPIIT Recognition: The startup must have been recognised by the DPIIT.
Incorporation Period: The period in which the startup should have been incorporated should not be more than two years from the date of the application.

An Innovative business concept: The startup needs an innovative business idea that can take it to develop a product or service suitable for the market, commercially viable, and has potential for growth.

Use of technology: The startup should use its main product or service on technology, business model, how it distributes its product, or methods to help address the problem it solves.

At least 51% of shares need to be owned by Indian promoters for availing the startup. The requirement is under the Companies Act of 2013 and SEBI (ICDR) Regulations, 2018.

Eligibility Criteria for Incubators

Incubators have the primary role in the SISFS ecosystem in choosing and supporting startups. For qualification, incubators must meet the following requirements:
Operational History: Should have been operational for two years from the date of application to the scheme.
Infrastructure: Should have facilities to seat at least 25 people.
Track Record: Show at least five startups currently undergoing incubation physically, on the date of applying.
Full-Time CEO: Have a full-time experienced Chief Executive Officer in business development and entrepreneurship.
Assistance to Start-ups: Charges no fee, whether cash or kind from the applicant under the scheme to the processes of selection, disbursal, incubation, or monitoring.

Funding Support Provided & Benefits

A number of startups receive grants with financial support under the Startup India Seed Fund Scheme which consists of two forms.

Grants-upto ₹ 20 lakhs for proof of concept, prototyping, and other product tests. Milestones-based grant disbursals.
Debt/Convertible Debentures Upto ₹50 Lakhs: This support focuses on converting, for purposes of commercialization and scalability through convertible debentures or debt-linked instruments and for entry into the market, to commercialize through the market.

Application Process: Startup India Seed Fund Scheme

Step 1: Apply through the Startup India portal online.

Step 2: If your startup has been recognized by DPIIT then log in to the official Startup India Portal (https://seedfund.startupindia.gov.in/)

Step 3: Click on the ‘Apply Now’ button on the home page and select ‘Apply Now’ for startups.

Step 4: Log in with the details you provided when your startup was acknowledged to complete the application form.

Step 5: You will be eligible to apply for seed funds from as many as three incubators running under this program in order of preference you choose.

Note For Startup India Seed Fund Scheme

You can apply fully online, where you do not have to send any paper-based documentation.

All the applications that are submitted will be online shared with the relevant incubators for review purposes.

You will be required to provide information about your team, the problem statement, an overview of your product or service, your business model, your target customers, the size of the market, and how much funding you would require, as well as your plan for using such funds.

The selected startup of the incubator does not pay any fees once there is incubator support for it. The incubator or staff members can not even charge fees or cash on the applicant or beneficiaries either for their selection, financing, assistance, or oversight. The incubation application is free to apply in this program.

Selection of Startups:

To be eligible for the Startup India Seed Fund Scheme, each incubator must have a committee, termed as the Incubator Seed Management Committee (ISMC). The ISMC would comprise experts who assess and select the startups for seed funding. The composition of ISMC is to be decided through this process.

Chairman of the Incubator Nominee
A representative from the State Government’s Startup Team
A representative from a Venture Capital Fund or Angel Network
An industry expert
An academic expert
Two successful entrepreneurs
Any other relevant stakeholder

1. The final composition and membership of their respective Incubator Selection Management Committees that would be formed are approved by the Evaluation and Approval Committee, and this one aspect forms an integral part of the whole selection process for incubators.

2. We will select the startups through an open, fair, and transparent process that includes the following:

ISMC will evaluate eligible applications based on the following criteria:

Need for this Idea: To identify market size, fill up gaps in the market, and solve real-world problems.
Feasibility: Suggest if the technical claims made are viable. Describe the methodology to show PoC and validate the concept. Suggest a roadmap to product development.
Potential Impact: Determine who your customers are, what effect technology will have on them, and its national importance.
Novelty: Highlight the unique selling point (USP) of the technology and any related intellectual property (IP).
Team: Assess their strengths, which will cover the technical and business expertise of the team.
Fund Utilization Plan: Clear presentation of how the funds would be used.
Additional Parameters: Include all the other relevant factors that would be considered by the incubator.
Presentation: Overall assessment.

Documents Required for Startup India Seed Fund Scheme

1. Board resolution, authorization letter, or power of attorney
2. PAN card
3. GST number
4. Aadhaar card
5. Bank account details
6. Certificate of incorporation or partnership deed
7. Financial statements
8. A video about your startup that explains your product, service, or business model
9. Any other relevant documents, if needed.

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Final Words

The Startup India Seed Fund Scheme helps early-stage startups by providing them with funds to convert their innovative ideas into reality. This scheme is crucial for filling the funding gap at the seed stage, and it can help in the development of a strong startup ecosystem in India. It also helps in the growth of the economy and helps in establishing the country as a global hub for innovation and entrepreneurship.

FAQ’s for the Scheme

Q: How much seed funding can a startup receive?

Ans: Eligible start-ups can get seed finance through the incubator in the following ways:

Up to ₹20 Lakhs is available as a milestone-based grant for validation of Proof of Concept, prototype building, or product trials. Under convertible debentures or debt instruments, market-entry, commercialization, and scaling up to ₹50 lakhs can be availed by the startups. According to the scheme guidelines, every startup can avail seed support as a grant and also as debt/convertible debentures only once.

Q: How do I apply to SISFS?

Ans: A new startup scheme will soon go online for application on the portal of Startup India. Such startups recognized by DPIIT can log in using credentials from the recognition process.

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