Start-up India Seed Fund Scheme

The Central Government has approved the ‘Start-up India Seed Fund Scheme (SISFS)’ to provide financial assistance to start-ups for proof of concept, prototype development, product trials, market entry and commercialization. SISFS shall provide financial assistance to start-ups via corpus of Rs. 945 Crore that will be disbursed through selected incubators across India in 2021-25.

The scheme is sector-agnostic and will support start-ups across all sectors. The scheme shall have a central common application on Start-up India portal for startups and incubators on an ongoing basis.

SISFS will be implemented by the Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry, Government of India.

The secretary said that establishment of Credit Guarantee Fund for providing portfolio guarantees under CGSS is expected to provide an incentive to financial intermediaries to lend to Start-ups, thus resulting in increased availability of funding for Start-ups. This would go a long way in encouraging innovation and entrepreneurship, apart from fulfilling the country’s agenda for development and inclusive goals in the long run.

Eligibility Criteria for Start-ups:

1) Incorporated not more than 2 years ago at the time of application.
2) Start-up must have a business idea to develop a product or a service with market fit.
3) Start-up should be using technology in its core product or service, or business model.
4) Preference would be given to start-ups 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.

5) Start-up 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.

6) Shareholding by Indian promoters in the start-up should be Min 51% at the time of application to incubator for the scheme.

7) Any start-up will not receive seed support more than once each as per provisions of guidelines.

What is Incubator means?

Incubator must be a legal entity:

a) A society registered under the Societies Registration Act 1860, or
b) A Trust registered under the Indian Trusts Act 1882, or
c) A Private Limited company registered under the Companies Act 1956 or the Companies Act 2013, or
d) A statutory body created through an Act of legislature

  1. Incubator should be operational for at least two years on the date of application to the scheme
  2. Incubator must have facilities to seat at least 25 individuals
  3. Incubator must have at least 5 start-ups undergoing incubation physically on the date of application
  4. Incubator must have a full-time Chief Executive Officer, experienced in business development and entrepreneurship, supported by a capable team responsible for mentoring start-ups in testing and validating ideas, as well as in finance, legal and human resources functions
  5. Incubator should not be disbursing seed fund to incubatees using funding from any third-party private entity
  6. Incubator must have been assisted by Central/State Government(s)
  7. In case the incubator has not been assisted by Central or State

✓ Incubator must be operational for at least three years.
✓ Must have at least 10 separate start-ups undergoing incubation in the incubator physically on the date of application.
✓ Must present audited annual reports for the last 2 years.

  1. Any additional criteria as may be decided by the Experts Advisory Committee (EAC)
  2. EAC shall evaluate incubators for grant assistance. A Grant of up to Rs. 5Cr would be provided to a selected incubator in milestone-based three or more instalments. The exact quantum of grant and instalments for each incubator will be decided by the EAC based on its evaluation.

Disbursement of Seed Fund to Start-ups by Incubators

  1. 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 instalments. These milestones can be related to development of prototype, product testing, building a product ready for market launch, etc.
  2. Up to Rs. 50 Lakhs of investment for market entry, commercialization, or scaling up through convertible debentures or debt or debt-linked instruments.
  3. Seed fund shall strictly not be used by start-ups for creation of any facilities and shall be utilized for the purpose it has been granted for.

EAC will be constituted by DPIIT, which will be responsible for the overall execution and monitoring of the Start-up India Seed Fund Scheme. The EAC will evaluate and select incubators for allotment of Seed Funds, monitor progress, and take all necessary measures for efficient utilization of funds towards fulfilment of objectives of Start-up India Seed Fund Scheme

Online Applications will be invited from incubators across India to participate in the scheme on

How Incubators shall be elected

• Fulfilment of eligibility criteria
• Quality of the team of Incubator
• Available infrastructure, testing labs etc.
• Composition of ISMC (as defined in para 7)
• Incubation support provided by incubator in last three years:

➢ No. of start-ups incubated
➢ No. of start-ups graduated, i.e., progressed from one stage of business development cycle to the next
➢ No. of start-ups that raised follow on investments
➢ No. of start-ups that crossed a revenue of Rs 1 Cr in last 1 year
➢ 2-year survival rate of start-ups from the date of joining incubator

• Funding support extended to incubatees in last three years

➢ Investment agreements signed between incubator and start-ups
➢ No. of start-ups invested in
➢ Total corpus allocated to incubatees
➢ Total investments raised by incubatees from external sources

• Mentoring provided to incubatees in last three years:

➢ No. of mentors hired
➢ Average mentoring hours allocated per start up per month
➢ No. of IP (patents, copyrights, designs, and trademarks) registered by incubatees

• Other support extended to incubatees in last three years:

➢ Industry/Corporate connects
➢ Events held for stakeholder engagements
➢ Participation in other events

• Number of start-ups that the incubator intends to support
• Quantum of funds applied for, along with fund deployment plan with timelines
• Any other relevant parameters that decided by the EAC

Each of the incubators applying for the Start-up India Seed Fund Scheme will constitute a committee called the Incubator Seed Management Committee (ISMC), consisting of experts who can evaluate and select start-ups for seed support. The final composition and members of ISMC of each incubator shall be approved by EAC and will be a critical parameter in selection of incubators. The start-ups shall be selected through an open, transparent and fair process.

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