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The Government launched the “Startup India Seed Fund Scheme" to provide funding for start-ups powered by technology.
The 'Startup India Seed Fund Scheme (SISFS)' has been approved by the Central Government to provide startups with financial assistance for proof of concept, prototype creation, product trials, market presence, and commercialization. SISFS would provide start-ups with financial assistance through the corpus of Rs. 945 Crore, which will be disbursed by selected incubators across India in 2021-25. The program is sector-agnostic and can benefit start-ups in all sectors. The scheme will have a central general application on an ongoing basis for start-ups and incubators on the Startup India platform.
SISFS will be implemented by the Department of Promotion of Industry and Internal Trade, Ministry of Commerce and Industry, Government of India. The Instructions for the above scheme are available on Startup India's website at https://www.startupindia.gov.in/.
key Points regarding 'Startup India Seed Fund Scheme (SISFS)are as follows:
- Eligibility criteria 'Startup India Seed Fund Scheme (SISFS):
The eligibility criteria for start-ups to be qualified under the Start-up India Seed Fund scheme are as follows:
- A Startup will recognized by Department of Promotion of Industry and Internal Trade (DPIIT), incorporated at the time of application not more than 2 years ago.
- Startups must have a business idea in order to develop a product or service with the market fit, effective marketing, and commercialization.
- In order to overcome the problem being solved, startups should use technologies in their core product or service, or business model, or delivery model, or technique.
- Startups that create innovative approaches in sectors such as social effects, waste management, water management, financial inclusion, education, agriculture, food production, biotechnology, healthcare, electricity, transportation, defense, space, rail, oil and gas, textiles, etc. will be given preference.
- Startups under any other Central or State Government scheme should not have earned more than Rs 10 lakh of monetary funding. This does not include prize money from tournaments and big challenges, subsidized workspace, monthly payment from the founder, admission to laboratories, or access to prototyping facilities.
- As per the Companies Act, 2013 and SEBI (ICDR) Regulations, 2018, the shareholding of Indian promoters in 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 each time.
Eligibility criteria for incubators:
The following are the eligibility criteria for incubators to be eligible under the Startup India Seed Fund scheme:
- The incubator must be a legal entity: A legal entity must be the incubator:
(a) A Society must be registered under the Societies Registration Act 1860, or
(b) A Trust must be registered under the Indian Trusts Act 1882, or
(c) A private limited business must be registered under the 1956 Companies Act or the Companies Act 2013
(d) A statutory entity must create through an Act of Legislature
- The incubator should be operating for at least 2 years from the date of the scheme application.
- The incubator must have facilities to hold at least 25 Individuals.
- On the date of registration, the incubator must have at least 5 start-ups physically incubated.
- The incubator must have a full-time Chief Executive Officer with experience in business growth and entrepreneurship, assisted by a capable team in 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 does not distribute seed funds to incubates using funds from any private entity of a third party.
- Central/State Government assistance must have been provided to the incubator (s)
- If the incubator has not obtained assistance from the central or state government(s)
- The incubator must be in operation for at least a period of 3 years.
- Must have at least 10 different start-ups incubated physically in an incubator on the date of application.
- Audited annual reports for the past 2 years must be submitted
- Any additional requirements as may be defined by the Experts Advisory Committee (EAC)
- Assistance to Incubators: The Expert Advisory Committee (EAC) evaluates incubators for grant assistance. Up to Rs. 5 crores in milestone-based three (or) more installments will be granted to a selected incubator. The Experts Advisory Committee (EAC) will determine the exact sum of grants and instalments for each incubator on the basis of its evaluation.
- Disbursement of the seed fund to start-ups by incubators: The disbursement of the seed fund to an eligible start-up by an incubator is as follows:
- As a grant for validation of Proof of Concept, or prototype creation, or product trials is up to Rs. 20 Lakhs. The grant shall be paid out in milestone-based installments. These milestones can be related to prototype development, product testing, the creation of a product ready for market launch, etc.
- Up to Rs. 50 Lakhs of investment for market entry, commercialization, or expansion through convertible debt or debt or debt-related instruments
- The Seed Fund shall not be used solely by start-ups for the construction of any facilities and shall be used for the reason for which it has been granted.
- The Expert Advisory Committee: The Expert Advisory Committee (EAC) will be established by the DPIIT, which will be responsible for the overall execution and supervision of the Startup India Seed Fund Scheme.
- The 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 achieve the goals of the Startup India Seed Fund Scheme. The EAC will be comprised of the following members:
- Chairperson, the individual of eminence
- Financial Adviser, DPIIT or it's representative.
- Deputy Secretary/Director/Additional Secretary/Joint Secretary, DPIIT (Convener)
- A representative from the Department of Biotechnology (DBT)
- A representative from the Department of Science and Technology (DST)
- A representative of the Ministry of Electronics and Communication Technology (MeiTY)
- A representative of the Indian Agricultural Research Council (ICAR)
- A representative from NITI Aayog
- At least three experts nominated by the Secretary, the start-up ecosystem DPIIT, developers, R&D experts, technological creation and commercialization, entrepreneurship, and other related fields.
Selection of incubators:
A. Online applications by incubators across India will be invited to participate in the Scheme on www.startupindia.gov.in or some other forum specifically built for this purpose. On the basis of the following criteria, the incubators shall be selected:
- Eligibility criteria should be the fulfillment
- Quality of the Incubator team
- Accessible infrastructure, laboratories for testing, etc.
- ISMC composition (as defined in para 7)
- Incubation support overall in the last 3 years by the incubator:
- A number of Incubated Startups.
- A number of startups have graduated, i.e. they have progressed from one stage of the business development cycle to the next.
- No. of start-ups that raised follow on investments
- Number of startups that have exceeded Rs 1 Crore in revenue in the last 1 year
- 2-year startup survival rate since the date of joining an incubator
6. Funding support extended to incubators over the past 3 years:
- Investment agreements signed between incubators and start-ups
- No. of the startups that have been invested in
- Total corpus assigned to incubate
- Total investment by incubates from external sources
7. Mentoring offered to incubate in the last three years:
- Number of Mentors recruited
- Average mentoring hours provided per startup per month
- IP number (patents, copyrights, designs, and trademarks) registered by incubatees
8. Other assistance extended to incubatees in the last three years:
- Industry/Business Communicates
- Events hosted for stakeholder contributions
- Involvement in other events;
- The number of startups to be supported by the incubator
- Quantum of resources raised, along with timelines for the deployment of fund
- Any other specific parameters defined by the EAC
B. The Incubator Call for Applications will be available online throughout the year.
C. EAC shall convene at least on a quarterly basis to:
1. Evaluate the applications received during the timeframe
2. Select incubators funds under the Scheme
3. Decide the overall amount of the fund and the number of installments for each incubator to be allocated.
4. Specify milestones for the release of installments to be met by each incubator
d) The EAC shall also monitor the progress of incubators against the appropriations approved under the Scheme and take further action as may be necessary.
D. EAC can provide, enhanced guidelines for the selection of incubators under the scheme from time to time,
- Selection of Startup
A. A committee called the Incubator Seed Management Committee (ISMC) will constitute each of the incubators applying for the Startup India Seed Fund Scheme, consisting of experts who will evaluate and select startups for seed funding. ISMC's composition will be as follows:
- Incubator's nominee (Chairman)
- A representative of the Startup Nodal Unit State Government
- A Venture Capital Investor or Angel Network Representative
- A domain specialist from Industries
- A domain specialist from academia
- Two successful businessmen
- Any other capable stakeholder
- The final composition and the members of the ISMC of each incubator shall be approved by the EAC and shall constitute a crucial parameter in the selection of incubators.
b. Start-ups are selected by an open, transparent, and fair process consisting, inter alia as follows:
- The online call for applications on the Startup India portal will be hosted on the ongoing basis.
- Applicants may apply for a seed fund on the basis of their preference for any three incubators selected as disbursing partners for this scheme.
- All applications submitted will be shared for further evaluation online with the respective incubators.
- The candidate will be asked to provide details of the team profile, problem statement, summary of the product/service, business model, customer profile, market size, sum of funds available, estimated fund utilization plan, etc.
- Incubators must shortlist candidates according to the eligibility criteria set as per the guidelines,
- Based on their evaluation for a presentation before ISMC, Incubator can shortlist applicants
- Within 45 days of receipt of the submission, ISMC will review applicants based on their submissions and presentations and pick start-ups for the Seed Fund.
- All incubators must provide real-time reports on the progress of start-up evaluations to the Startup India portal.
- Selected startups receive seed funding under the respective incubator, which selects them as beneficiaries according to their shared preference during the application
- All applicants will be able to monitor the progress of their applications in real-time on the Startup India portal.
- Applicants that are rejected will also be notified by email.
- An applicant can apply afresh if rejected once,
C. EAC may lay down enhanced guidelines for selecting start-ups under the scheme from time to time,
- By the end of 2024-25, the Department will evaluate the outcome of the scheme, especially with regard to financial, social and economic returns.
