START-UP INDIA SEED FUND SCHEME

India has become the third-largest startup ecosystem in the world with a total of 51 unicorns recorded by the end of August 2021. Various policies have been framed by the Modi government, over the years, to facilitate the rise. The first Start-Up India initiative was launched in 2016, to create a strong startup ecosystem in the country, foster innovation and create opportunities for budding entrepreneurs. The action plan of this initiative focuses on the following three areas:

1. Simplification and Handholding.

2. Funding Support and Incentives.

3. Industry-Academia Partnership and Incubation.

Startup India Seed Fund Scheme (SISFS)

The scheme was announced at "Prarambh: Startup India International Summit" marking the fifth anniversary of the Startup India initiative. To facilitate the Startup ecosystem in India, Shri Piyush Goyal, Honourable Cabinet Minister for Railways, Commerce and Industry, Consumer Affairs, Food and Public Distribution; launched the Startup India Seed Fund Scheme on 19th April 2021 with an outlay of Rs. 945 Crore. The policy aims to provide financial assistance to startups for proof of concept, prototype development, product trials, market-entry, and commercialization. SISFS aims to Secure seed funding, Inspire innovation, Support transformative ideas, Facilitate implementation, and Start a startup revolution. The ministry has promised to act as a guide, with an open door, open arms and open minds, encouraging the participation of young people on a large scale to innovate and bring out the best creations.

Features and Benefits of SISFS

1. It will support approximately 3,600 entrepreneurs through 300 incubators over the next four years.

2. Grants up to Rs. 5 crores will be made available to eligible incubators selected by the committee.

 3. Selected incubators will offer grants of up to Rs 20 lakhs for proof of concept, or prototype development or product testing for startups.

 4. Investments up to Rs 50 lakh will be made available to startups; to market, commercialize or scale through convertible debt or debt-related instruments.

5. The Department of Promotion for Internal Trade and Industry Promotion has established an Expert Advisory Committee (EAC) responsible for the implementation and oversight of the Indian Seed Fund program. The Department for Promotion of Industry and Internal Trade (DPIIT) will be the focal point to implement this mechanism. The committee will verify the details provided by the incubators and select them to allow seed funds. This committee will also oversee the progress of the incubator. The Expert Advisory Committee (EAC) reserves the right to take any action necessary to ensure that funds can be used effectively. The committee consists of the following members :-

•Chairman

•Representative of the department of biotechnology

•Additional secretary/joint secretary/director/deputy secretary, DPIIT

•Representative of Department of science and technology

•Financial advisor, DPIIT

•Representative of the ministry of electronics and information technology

•Representatives of Indian council of agricultural research

•At least three members nominated by the secretary

•Representative of NITI Aayog

What is Seed Funding?

• It usually represents the first official money a business has raised.

• Help businesses finance their first steps, including market research and product development.

• In a seed fundraising situation, there are many prospective investors: entrepreneurs, friends, family, incubators, venture capitalists, and others.

• One of the most common types of investors involved in seed funding is the so-called “angel investor”.

• Angel investors tend to appreciate riskier companies (such as startups with little proven experience to date) and expect equity participation in the company in return for their investment.

Eligibility for the startups:

• A start-up company, recognized by the DPIIT, formed less than 2 years ago at the time of application.

• Startup must have a business idea to develop a product or service that is suitable for the market, commercialization and scalability.

• The startup must use technology in its core product or service, business model, delivery model or methodology to solve the targeted problem.

• Prioritize startups that create innovative solutions in areas such as social impact, waste management, water management, including finance, education, agriculture, food processing, biotechnology, medical, energy, mobility, defence, space, railway, petroleum, textiles, etc.

• Startups cannot receive more than Rs 10 lakh in support under any other central or state government scheme. This does not include competitive prizes and major challenges, subsidized workspaces, monthly founders' allowances, lab access or access to prototyping facilities.

• Indian promoters' participation in the startup must be at least 51% at the time of incubator registration for the program, in line with the Companies Act 2013 and SEBI Regulations (ICDR) 2018.

• Startup applicants may receive seed assistance in the form of grants and debt/convertible bonds one at a time, consistent with program guidelines.

Eligibility for incubators :

1. The incubator must be a legal entity:

- A society registered under the Societies Registration Act 1860, or

- A Trust registered under the Indian Trusts Act 1882, or

- A Private Limited company registered under the Companies Act 1956 or the Companies Act 2013, or

- A statutory body created through an Act of the legislature.

2. The incubator should be operational for at least two years on the date of application to the scheme.

3. Incubators must have facilities that can accommodate at least 25 people and, have at least 5 startups' actual incubation on the day of candidacy.

4. The incubator must have a full-time CEO with experience in business development and startups, supported by a competent team responsible for mentoring startups in testing and endorsement of ideas, as well as financial, legal and human resource functions.

5. Incubators may not disburse seed funds for incubation using funds from any private entity.

6. Incubators must be supported by central/state government(s)

• If an incubator is not supported by central or state(s):

 ✓ Incubators must operate at least three year

✓ Must have at least 10 distinct startups incubated in an actual incubator by the date of application

 ✓ Must submit annual audit reports for the last 2 years

Required Documents To Apply For Startup India Seed Fund Scheme

• Aadhar card

• GST number

• Bank account details

• Lease agreement

• Detail report of the project

• Passport size photograph

• Mobile number

What will be the outcome? 

With the motto Connect, Collaborate & Catalyse, the government has launched initiatives such as the Startup Innovation Challenge, National Startup Awards, Country Ranking, SCO Startup Forum, Prarambh, etc. Startups that promise early-stage support will create huge job opportunities for everyone. The Seed Fund Scheme also plans to promote virtual incubators for startups by enabling 300 incubators to support startups from around the country. The impact of this will be visible through the impetus of innovations in India's Tier 2 and Tier 3 regions.This will show a shift in approach, a shift in mindset from job seekers to job providers, helping startups become the backbone of New India. The India Startup Seed Fund Scheme will serve as a link between ideas and their implementation. Independent thinking and ambition in the Startup Ecosystem will encourage entrepreneurship and create a culture that recognizes innovation.

For the nation as a whole, the scheme promotes huge job opportunities in a long run, thus eradicating unemployment on a large scale. This will automatically lead to a rise in GDP, making the country's economy stronger. A population with employment indicates a better standard of living and gradually the country will become free from poverty. As the scheme invites innovation, India will be represented on a global level with creation in its hands and standing up to the world.

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    Blog By ~ Sneha Pandey