The Ministry of Commerce and Industry issued the guidelines for Startup India Seed Fund Scheme (SISFS).
The SISFS aims to provide financial assistance to startups for proof of concept, prototype development, product trials, market entry and commercialization. This would enable these startups to graduate to a level where they will be able to raise investments from angel investors or venture capitalists, or seek loans from commercial banks or financial institutions.
The Seed Fund will be disbursed to eligible startups through eligible incubators across India.
The Indian startup ecosystem suffers from capital inadequacy in the seed and ‘Proof of Concept’ development stage. The capital required at this stage often presents a make or break situation for startups with good business ideas.
Many innovative business ideas fail to take off due to the absence of this critical capital required at an early stage for proof of concept, prototype development, product trials, market entry and commercialization. Seed Fund offered to such promising cases can have a multiplier effect in validation of business ideas of many startups, leading to employment generation.
The government has prescribed eligibility criteria for a startup to apply under the Startup India Seed Fund Scheme.
Firstly, a startup,recognized by DPIIT, incorporated not more than 2 years ago at the time of application.
Secondly, a startup must have a business idea to develop a product or a service with market fit, viable commercialization, and scope of scaling.
Thirdly, a 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.
Fourthly, 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, etc.
Fifthly, startups 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
Sixthly, shareholding by Indian promoters in the startup should be at least 51% at the time of application to incubator for the scheme, as per Companies Act, 2013 and SEBI (ICDR) Regulations, 2018
Lastly, any startup will not receive seed support more than once.
The Seed Fund to an eligible startup by the incubator shall be disbursed up to Rs. 20 Lakhs as grant for validation of Proof of Concept, or prototype development, or product trials. The grant shall be disbursed in milestone- based installments. These milestones can be related to development of prototype, product testing, building a product ready for market launch, etc, and Up to Rs. 50 Lakhs of investment for market entry, commercialization, or scaling up through convertible debentures or debt or debt-linked instruments.
Seed fund shall strictly not be used by startups for creation of any facilities and shall be utilized for the purpose it has been granted for.
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