Overview on Start Up India Scheme

All about the start-ups & Other related Scheme 

BRIEF INTRODUCTION

• In India, the start-up ecosystem has been increasing at a fast pace and has gotten a lot of support from the government in latest years.
• Many eligible new businesses can plan and utilise the comprehensive tax and regulatory benefits pertaining to start-ups that are outlined in this compendium.

StartUP India Scheme

• The Govt launched “Startup India Seed Fund Scheme” to supply funding for start-ups powered by technology.
• This scheme was approved by Central Government, in order to provide startups with the sought of financial assistance in order to finance their concept, prototype creation, product trials, market presence and commercialization.
• Startup India Seed Fund Scheme tends to provide start-ups with financial assistance through corpus of INR 945 Crore, which shall be disbursed by selected incubators across India in 2021-25.
• This program is sector-agnostic and will therefore benefit the start-ups in all sectors to raise finance to meet their demands.
• This scheme will have a central general application on a continuous basis for start-ups and incubators on the Startup India platform.
• SISFS scheme was implemented by the Department of Promotion of Industry and Internal Trade, Ministry of Commerce and Industry, Government of India.

STARTUP INDIA SEED FUND SCHEME (SISFS)

ELIGIBILITY CRITERIA FOR STARTUP

Start-ups are required to comply with following criteria, to be qualified for the Start-up India Seed Fund Scheme:

• A Startup will be recognized by Department of Promotion of Industry and Internal Trade (DPIIT), incorporated at the time of application not later than 2 years ago.
• Startups must have a business idea so as to develop a product or service with market fit, effective marketing and commercialization.
• In order to beat the matter being solved, startups should use technologies in their core product or service, or business model, or delivery model, or technique.
• Startups having innovative approaches in sectors like social effects, waste management, water management, financial inclusion, education, agriculture, food production, biotechnology, healthcare, electricity, transportation, defense, space, rail, oil and gas, textiles, etc. are going to be given preference.
• Startups under any other Central or government scheme shouldn’t have earned greater than Rs 10 lakh of monetary funding.
• This doesn’t include any sought of award money from tournaments and big challenges, subsidized workspace, monthly payment from the founder, admission to laboratories, or access to prototyping facilities.
• As per Companies Act, 2013 and SEBI (ICDR) Regulations, 2018, the shareholding of Indian promoters within the start-up should be at least 51 percent at the time of submission to the incubator for the scheme.
• According to guidelines, any startup cannot receive seed funding more than once every time.

ELIGIBILITY CRITERIA FOR INCUBATORS

Incubators would be required to comply with the following criteria, to be eligible for the Startup India Seed Fund Scheme:

• Incubator must be legal entity: A legal entity must be the incubator:
• Society must register under the Societies Registration Act 1860, or
• Trust must register under the Indian Trusts Act 1882, or
• Private limited business must register under the 1956 Companies Act or the companies Act 2013
• Statutory entity, being incorporated under an Act of Legislature.
• The incubator should be operating for a minimum of 2 years from the date of the scheme application.
• On the date of registration, the incubator must have a minimum of 5 start-ups physically incubated.
• The incubator must have facilities to hold a minimum of 25 Individuals.
• Incubator must have a full-time Chief executive officer with experience in business growth and entrepreneurship, assisted by a capable team within the testing and analysis of ideas, as well as in the roles of finance, legal and human resources, responsible for mentoring start-ups.
• The incubator doesn’t distribute seed funds to incubates using funds from any private entity of a 3rd party.
• Central/State Government assistance must be provided to the incubator (s)
• Where the incubator does not obtain any assistance from the central or state government(s)
• The incubator must be operative for a minimum of period of three years.
• Must have a minimum of 10 different start-ups incubated physically in an incubator on the date of application.
• Audited Annual Statement, in respect of last 2 years be submitted\
• Any additional requirements as could also be defined by the Experts Advisory Committee (EAC)

ASSISTANCE TO INCUBATORS

• An Expert Advisory Committee (EAC) is constituted for the purpose of evaluation of incubators for grant assistance.
• Up to Rs. 5 crores in milestone-based three (or) more instalments shall be granted to a particular incubator.
• The Experts Advisory Committee (EAC) will determine the precise sum of grants and instalments for every incubator on the basis of its evaluation.

 

DISBURSEMENT OF THE SEED FUND

Disbursement of the seed fund shall be provided to eligible start-up by an incubator as per the following norms –

• In the form of a grant, where the validation of Proof of Concept, or prototype creation, or product trials is up to INR 20 Lakhs. Such a grant shall be paid out in milestone-based installments.
• These milestones are often associated with prototype development, product testing, the creation of a product ready for market launch, etc.
• Up to INR 50 Lakhs of investment, in respect of market entry, commercialization or expansion, by issuing convertible debt or debt or debt-related instruments
• The Seed Fund shall not be used solely by start-ups for the development of any facilities and shall be used for the reason for which it’s been granted.

EXPERT ADVISORY COMMITTEE

• Expert Advisory Committee (EAC) shall be established by the DPIIT, which will be accountable for the overall execution and supervision of the Startup India Seed Fund Scheme.
• EAC will evaluate and select incubators for the distribution of seed funds, monitor progress, and take all necessary actions for the optimal utilization of funds to attain the goals of the Startup India Seed Fund Scheme.
• The EAC shall be comprised of the subsequent members:
• • Chairperson, the individual of eminence
  • Any person representing the Ministry of Electronics and Communication Technology (MeiTY)
  • Deputy Secretary/Director/Additional Secretary/Joint Secretary, DPIIT (Convener)
  • Any person representing the Department of Biotechnology (DBT)
  • Financial Adviser, DPIIT or its representative.
  • Any person representing the Department of Science and Technology (DST)
  • A Person representing NITI Aayog
  • Any person representing the Indian Agricultural Research Council (ICAR)
  • At least three experts, being nominated by the Secretary of the start-up ecosystem DPIIT, developers, R&D experts, technological creation and commercialization, entrepreneurship and other related fields.

SELECTION OF INCUBATORS

• Online applications by incubators across India would be invited to participate within the Scheme on www.startupindia.gov.in or any other forum specifically built for this purpose.
• On the basis of the subsequent criteria, the incubators shall be selected:

1. 1. Eligibility criteria should be the fulfillment
   2. Quality of the Incubator team
   3. Accessible infrastructure, laboratories for testing, etc.
   4. ISMC composition (as defined in para 7)
   5. Incubation support overall within the last 3 years by the incubator:

• • • No of Incubated Startups.
    • A number of startups have graduated, i.e. they must have progressed from one stage of the business development cycle to the next.
    • of start-ups raising follow-on investments
    • Number of startups that have exceeded Rs 1 Crore in revenue during the last 1 year
    • 2-year startup survival rate since the date of joining an incubator

6. Funding support being extended to incubators during the last 3 years:

• • • Total corpus assigned to incubates
    • Investment agreements executed between the incubators and start-ups of the startups that are invested in
    • Total investment made by incubates using external sources.

7. Mentoring offered to incubates within the last three years:

• • Number of Mentors recruited
  • Average mentoring hours, being provided per startup every month
  • IP number (patents, copyrights, designs and trademarks) registered by incubators

8. Other assistance extended to incubators within the last three years:

• • Industry/Business Communicates
  • Events hosted for stakeholder contributions
  • Involvement in other events;

9. Number of startups to be supported by the incubator
10. Quantum of resources raised, together with timelines for the deployment of fund
11. Any other specific parameters defined by the EAC

• • Incubator call for Applications and the same shall be available online throughout the year.
  • EAC shall convene a meeting, at least on a quarterly basis for:

1. 1. 1. Evaluation of the applications, being received during a specific timeframe
      2. Selection of incubators funds under the Scheme
      3. Deciding the amount of the fund and therefore the number of instalments in respect of each incubator to be allocated.
      4. Specifying the milestones for the payment of instalments to be met by each incubator

• The EAC shall also monitor the progress of incubators against the appropriations approved under the Scheme and take further action as is also necessary.
• EAC can provide, enhanced guidelines for the choice of incubators under the scheme from time to time,

SELECTION OF STARTUP

• Incubator Seed Management Committee (ISMC) composition

A committee in the name of Incubator Seed Management Committee (ISMC) shall be constituted in respect of each of the incubators applying for the Startup India Seed Fund Scheme, consisting of experts who will evaluate and choose startups for seed funding. ISMC’s composition shall be as follows:

1. 1. Incubator’s nominee (Chairman)
   2. Representative of the Startup Nodal Unit state government
   3. A venture capital Investor or Angel Network Representative
   4. Two successful businessmen
   5. A domain specialist from academia
   6. Any other capable stakeholder
   7. A domain specialist from Industries
   8. The final composition and the members of the ISMC in respect of every incubator shall be approved by the EAC and shall constitute an important parameter in respect of the selection of incubators.

• Start-ups shall be selected through an open, transparent, and fair process, consisting of the following steps –

1. 1. The online imply applications on the Startup India portal will be hosted on a continuing basis.
   2. Applicants may apply for a seed fund on the premise of their preference for any three incubators selected as disbursing partners for this scheme.
   3. All applications submitted are shared for further evaluation online with the respective incubators.
   4. The candidate is asked to supply details of the team profile, problem statement, summary of the product/service, business model, customer profile, market size, the sum of funds available, estimated fund utilization plan, etc.
   5. Incubators must shortlist candidates in keeping with the eligibility criteria set as per the rules,
   6. Based on the evaluation as per the presentation presented before ISMC, Incubator will be shortlisted.
   7. Within 45 days from the receipt of the submission, ISMC shall review the application along with the supported documents and presentations and pick start-ups for the Seed Fund.
   8. All incubators must provide real-time reports on the progress of start-up evaluations to the Startup India portal.
   9. Selected startups receive seed funding under the respective incubator, which selects them as beneficiaries in line with their shared preference during the application
   10. All the applicants are provided an interface for monitoring the progress of their applications in real-time on the Startup India portal.
   11. Applicants that are rejected will be notified by email.
   12. An applicant can apply afresh if rejected once,

• EAC may lay down enhanced guidelines for choosing start-ups under the scheme from time to time, By the tip of 2024-25,

• the Department will evaluate the final result of the scheme, especially with reference to financial, social and economic returns.