Startup

All about Start-up India Seed Fund Scheme

Start -up India Seed Fund Scheme (SISFS) was approved by the Government of India. The scheme aims to offer financial assistance to start-ups for various stages, including proof of concept, product trials, prototype development, market entry & commercialization.

SISFS allows the start-ups to grow and helps in raising the investments through the scheme. The seed fund is disbursed only to eligible start-ups through eligible incubators across India.

In this article, we will discuss the Start-up India Seed Fund Scheme in detail.

What is a start-up?

A start-up is a venture started by entrepreneurs to develop a product or service. The first and primary challenge for a start-up is to have funding to support its ideas of business. To receive funding, the start-up must have a business proposal and the financials to present.

Why is funding required?

The start-up needs funding for all the process to be followed. To get funding from Start-up India Seed Fund Scheme, one must have a detailed business plan and financials.

The purpose of needing funds for a start-up is:

• Proof of concept
• Product development
• Team hiring
• Products trial
• Prototype development
• Working capital
• Marketing & sales.

What is the Start-up India Seed Fund Scheme?

The Government of India has approved the Start-up India Seed Fund Scheme (SISFS) for the next 4 years, starting from 2021-2022. Its implementation will be from 1^st April 2021.

The scheme aims to offer financial assistance to the start-ups for various stages, including proof of concept, product trials, prototype development, market entry & commercialization.

A total of Rs. 945 Crores will be divided over the next 4 years through eligible incubators across India for seed funding to eligible start-ups. The scheme is expected to support 3600 start-ups approximately.

What are the benefits of start-up India Seed Fund Scheme?

The following are the benefits of start-ups:

• Start-ups should be allowed to self-certify their compliance with 6 labour laws and 3 environmental laws via an online process.
• For labour laws, no inspection will be carried out for 5 years. It may be inspected only when a written complaint is made, which is credible and verifiable and approved by at least one level senior to the inspecting officer.
• For environmental laws, white category start-ups will be able to self certify their compliance.

What is the eligibility criterion for start-ups?

The eligibility criteria for start-ups are:

• The start-up must be recognized by DPIIT^[1] (Department for Promotion of Industry and Internal Trade), and the age of the company must not be more than 2 years at the time of application.
• The start-up should have a business plan to develop a product or service with workable commercialization and scaling.
• The start-up must-have technology in its main product or service or business model or methodology to solve the problem.
• The start-ups must have innovative solutions or creations in social impact, water management, education, biotechnology, food processing, agriculture, waste management, financial inclusion, railways, oil& gas, defence, etc.
• The start-up should not have received more than Rs. 10 Lakhs of the financial support from any other Central or State Government Scheme.
• At least 51% of shareholders must be Indian Promoters at the time of application to an incubator for the scheme.
• The start-up will receive seed support only once as per the guidelines.

What is the eligibility criterion for Incubators?

A start-up incubator is a joint program designed to help and support new start-ups. They help entrepreneurs solve a few problems, namely, seed funding, mentoring, training, etc. the sole objective is to help the start-ups grow their business.

The eligibility criterion for incubators is:

• It must be a legal entity.
• It should be functional for at least 2 years on the date of application to the scheme.
• The incubator must have a seating capacity of 25 seats at least.
• It must have at least 5 start-ups undertaking incubation physically on the date of application.
• A Chief Executive Officer (CEO) having experience in business development and entrepreneurship must be in an incubator.
• No seed funding using any private third-party entity is disbursed.
• The Central or State Government should have assisted the incubator.
• Where the Central or State Government does not assist the incubator, it must be functional for at least 3 years. It must have at least 10 start-ups undergoing incubation physically on the date of application. Also, 2 years of audited report must be presented.

Expert Advisory Committee (EAC)

DPIIT will constitute an expert advisory committee (EAC) which will be responsible for monitoring and overall execution of the Start-up India Seed Fund Scheme. EAC will assess & select the incubators for the allotment of Seed Funds, monitor its progress, and take all the necessary measures for effective utilization of funds to fulfil the Start-up Scheme object.

Selection of Start-up India Seed Fund Scheme

Each incubators applying for the Start-up Scheme will constitute a committee ISMC (Incubator Seed Management Committee) consisting of experts to evaluate & select start-ups for seed funding. EAC will approve the composition of each ISMC. The selection of start-ups will be through an open, fair and transparent process.

ISMC shall select the start-ups based on their application & presentation within 45 days of receipt of application. The applicants will be able to track their progress on the Startup India Portal on a real-time basis. If an applicant is rejected, he may apply fresh.

Conclusion

A start-up is a venture started by entrepreneurs to develop a product or service. The first and primary challenge for a start-up is to have funding to support its ideas of business.

The Government approved start-up India Seed Fund Scheme (SISFS) of India. It aims to offer financial assistance to the start-ups for various stages, including proof of concept, product trials, prototype development, market entry & commercialization. This allows the start-ups to grow and helps in raising the investments through the scheme. Until now, the government has identified 41,061 start-ups in India.

Read our article:Registration of Startup in India: A step by step Guide