Startup India Seed Fund Scheme (SISFS) has been implemented from April 1, 2021 which gives financial help to early-stage start-ups in the form of simple access to funds, which is critical for entrepreneurs at the start of their business’s growth.
You can think of the “seed” funding as part of an analogy for planting a tree. This early financial support is ideally the “seed” which will help to grow the business. Given enough revenue and a successful business strategy, as well as the perseverance and dedication of investors, the company will hopefully eventually grow into a “tree.”
It is the first official equity funding stage. It helps start-ups to finance through potential investors like angel investors venture capital firm only after the proof of concept has been provided. Similarly, banks provide loans only to asset-backed applicants. It is essential to provide seed funding to start-ups with an innovative idea to conduct proof of concept trials.
Under this scheme, a corpus of Rs 945 crore will be spent over the next four years for providing seed funding to eligible start-ups through eligible incubators across India.
Eligibility Criteria for SISFS:
A startup, recognized by DPIIT, incorporated not more than 2 years ago at the time of application.
To get DPIIT-recognized, please visit https://www.startupindia.gov.in/
- The startup must have a business idea to develop a product or a service with a market fit, viable commercialization, and scope of scaling.
- The startup should be using technology in its core product or service, or business model, or distribution model, or methodology to solve the problem being targeted.
- Preference would be given to startups creating innovative solutions in sectors such as social impact, waste management, water management, financial inclusion, education, agriculture, food processing, biotechnology, healthcare, energy, mobility, defence, space, railways, oil and gas, textiles, and such others.
- Startup should not have received more than Rs 10 lakh of monetary support under any other Central or State Government scheme. This does not include prize money from competitions and grand challenges, subsidized working space, founder monthly allowance, access to labs, or access to prototyping facility.
- Shareholding by Indian promoters in the startup should be at least 51% at the time of application to the incubator for the scheme, as per Companies Act, 2013 and SEBI (ICDR) Regulations, 2018.
- A startup applicant can avail seed support in the form of grant and debt/convertible debentures each once as per the guidelines of the scheme.
Procedure To Apply for SISFS:
- Go to the official website of startup India seed fund scheme
- The home page will open before you
- On the homepage, you have to click on apply now.
- After that, you have to click on apply now under the startup section
- After that application form will appear before you
- In this application form must enter all the required details like your name, email address, mobile number, etc
- After that, you have to upload all the required documents
- Now you have to click on submit
- By following this procedure you can apply as a startup under the startup India seed fund scheme
Seed Fund Disbursement to Startups
All the eligible startups will receive the seed fund : –
- Up to Rs 20 lakh as grant in the case for validation of proof of concept, prototype development or product trial.
- Up to Rs 50 lakh of investment for market entry, commercialization, and scaling up through convertible debentures of debt or debt linked instruments.
- Before the release of the first instalment, the incubator is required to execute a legal agreement with the startup in which all the necessary terms and conditions, milestones, etc should be mentioned.
- The first instalment to the startup will be provided within 60 days of receipt of the application form
- For receiving the first instalment the startup must submit the interim progress update and utilization certificate.
- The startup will receive the funds into their business bank account.
- The second instalment will be provided to the startup after achieving the previously specified milestone.
- The incubator can only provide 20% of the total grant received by them to the startups.
- The startup is not allowed to use this fund for the creation of any facilities but for the purpose it has been granted for.
- At the end of the project duration, the startup is required to submit a final report and audited utilization certificate of funds.
- If the venture is failed, then the entrepreneur is required to share his learnings and reasons for failure in the report. The report must be submitted along with a utilization certificate of the fund amount.
Disclaimer: This Article is only a knowledge sharing initiative and is based on the Relevant Provisions as applicable and as per the information existing at the time of the preparation. In no event RMPS & Co. or the Author or any other persons be liable for any direct and indirect result from this Article or any inadvertent omission of the provisions, update etc if any.
