Startup India Seed Fund Scheme- For Startups

DBT (direct benefit transfer): No

Scheme open date: 2021-04-19

Categories: Business & Entrepreneurship

Sub-categories: Setting up / start-up / entrepreneurship

Target beneficiaries: Business Entity, Industries

Tags: Startup, Seed Fund, Financial Assistance, Incubator, Grant

• Seed Funds to an eligible startup by the incubator shall be disbursed as follows: 1. Up to ₹20 Lakhs as a grant for validation of Proof of Concept prototype development or product trials. The grant shall be disbursed in milestone-based installments. These milestones can be related to the development of prototypes product testing building a product ready for market launch etc. 1. Up to ₹50 Lakhs of investment for market entry commercialization or scaling up through convertible debentures or debt or debt-linked instruments. 1. Seed funds shall strictly not be used by startups for the creation of any facilities and shall be utilized for the purpose it has been granted for. Note 01: Not more than 20% of the total grant to an incubator shall be given as grants to start-ups by the incubator. The rate of interest (as defined under GFR) on unutilized funds available with the incubator would also be taken into account and adjusted at the time of the next release by DPIIT. Note 02: For startups being supported through convertible debentures or debt or debt-linked instruments funds shall be provided at a rate of interest of not more than the prevailing repo rate. The tenure should be fixed at the time of sanctioning the loan by the incubator which shall be not more than 60 months (5 years). A moratorium of up to 12 months may be provided for the startups. Because of the early stage of the startups this shall be unsecured and no guarantee from the promoter or third party will be required. Note 03: The incubator shall execute a legal agreement with the selected startups before the release of the first installment. The incubators shall ensure that the necessary terms and conditions

What is Startup India Seed Fund Scheme?

Startup India Seed Fund Scheme (SISFS) provides financial assistance to startups for proof of concept, prototype development, product trials, market-entry, and commercialization. Eligible startups can apply for the scheme on the Startup India portal. The Seed Fund will be disbursed to selected startups through eligible incubators across India.

Who can apply to SISFS?

A startup, recognized by DPIIT, incorporated not more than 2 years ago at the time of application is invited to apply for the scheme.

How much seed funding can a startup receive under the scheme?

Seed Funds to an eligible startup by the incubator shall be disbursed as follows: 1. Up to ₹20 Lakhs as a 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 the development of prototypes, product testing, building a product ready for market launch, etc. 2. Up to ₹50 Lakhs of investment for market entry, commercialization, or scaling up through convertible debentures or debt or debt-linked instruments 3. A startup applicant can avail seed support in the form of grants and debt/convertible debentures each once as per the guidelines of the scheme

Can I apply for the scheme as an individual entrepreneur, or do I need a team?

No, individual entrepreneurs are not eligible to apply for support under the scheme. Only DPIIT recognized startups can apply for the SISFS.

Does the scheme support startups from specific sectors?

SISFS is a sector agnostic scheme, which means that startups from any sector can apply for the scheme. However, 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, defense, space, railways, oil and gas, textiles, etc. This list of sectors is indicative and not exhaustive.

Are there any minimum education qualification criteria for founders to apply for SISFS?

There is no minimum education qualification required for founders to apply for SISFS.

Are there any exemptions to any of the eligibility criteria?

No, there are no exemptions to any of the eligibility criteria. All the criteria must be met on the date of application submission.

What is a DPIIT-recognized startup?

An entity shall be considered a "Startup" - 1. If it's incorporated as either Private Limited Company or Registered Partnership Firm or Limited Liability Partnership. A sole proprietorship or a public limited company is not eligible as startup. 2. If it is up to 10 years from the date of its incorporation/ registration. 3. If its turnover for any of the financial years has not exceeded INR 100 crore. 4. If it is working towards innovation, development or improvement of products or processes or services, or if it is a scalable business model with a high potential of employment generation or wealth creation. 5. Should not have been formed by splitting up or reconstruction of a business already in existence.

What all can I use the seed fund for?

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. A grant can be used for validation of Proof of Concept, or prototype development, or product trials. A debt/ convertible debenture can be used for Market entry, Commercialization, or Scaling up.

How can I apply to SISFS?

An online call for applications is hosted on an ongoing basis on the Startup India portal will be opened soon. DPIIT-recognized startups can login using the credentials used during the startup recognition process to apply for the scheme.

Is the SISFS application process completely online?

The application submission is completely online, and no physical submission of documents is required.

Is there a fee for applying to this scheme?

There are no application fees for the scheme. Even after the selection of a startup by an incubator for assistance under this scheme, the startup shall not be charged any fees. The incubator or any of its staff members shall not charge any fee in cash or in kind from applicants or beneficiaries under the scheme for any process of selection, disbursement, incubation, or monitoring.

Why is the application form allowing me to apply to 3 incubators?

The scheme aims to maximize the chances of each startup applicant getting supported through seed funds. It also aims to give startups an opportunity to get supported by a relevant incubator that can give the necessary guidance to them. Thus, we give startups an option to apply to 3 different incubators according to their preference. For example, if incubators at Preference 1 and Preference 2 both select a startup, the funding shall be given by Preference 1 incubator. If Preference 1 incubator rejects and Preference 2 incubator selects, the funding shall be given by incubator at Preference 2, and so on.

How do I choose the incubators to apply to?

The incubator preference should be filled at the startup applicants' discretion. Applicants can choose incubators basis their sector, stage, business needs, and strategic goals. Details of the incubators which are part of the scheme will be available on Seed Fund Portal soon.

Is the information provided by me in the application form kept confidential?

We maintain confidentiality of all the proposals we receive under the scheme. Your application is only shared with the incubators you apply to for the purpose of evaluation, and with the EAC for the purpose of monitoring.

Do I need to be physically present at an incubator’s’ premises to avail seed funds under this scheme?

To apply for the scheme, it is not mandatory to be physically present at the incubator's location. For startups being monitored virtually by the incubator, it is required for both parties to touch base every 30 days. This is to ensure that an incubator will be able to keep a check on the progress of the startup and a startup will be able to take guidance for their business from the incubator.

Can I apply to the Startup India Seed Fund Scheme again after receiving a rejection?

Yes, you can apply to the SISFS again after 3 months of receiving a rejection. This buffer time is given to ensure that you have worked on the feedback received from incubators and are ready to be considered again.

Who is going to review my application?

Application of each startup will be reviewed by an Incubator Seed Management Committee (ISMC) formed by the incubators you apply to. The committee will also be responsible for future assessment of the performance of the startup and disbursement of further tranches. Each ISMC constitutes of the following members: 1. Nominee of Incubator (Chairman) 2. A representative from the State Government's Startup Nodal Team 3. A representative of a Venture Capital Fund or Angel Network 4. A domain expert from Industry 5. A domain expert from academia 6. Two successful Entrepreneurs 7. Any other relevant Stakeholder

How much time will it take for my application to get processed?

After the receipt of the application, each Incubator shall evaluate applicants based on their submissions and presentations and select startups for Seed Fund within 45 days.

How can I track the status of my application?

Once the startup has submitted its seed fund scheme application, a dashboard can be accessed using their login credential to check the real-time application status.

I had filled an order of preference for incubators while applying. Can I change this preference order after application?

Applications once filled and submitted are final. The preference order of the incubator cannot be changed at a later stage.

I need to hire a legal or financial consultant for my seed fund discussions with the incubator. Who will bear the cost of these services?

The startup shall bear the cost of any consultants required to guide them through documentation, negotiations with incubator, signing of agreement with incubator, reporting progress after approval of seed fund, etc. Hiring such an external consultant is not mandatory at all, and shall be at the discretion of the startup.

I have been selected for seed fund. Is it mandatory to sign a legal agreement with the incubator?

Yes, it is mandatory to sign a legal agreement with the incubator to avail the seed fund you have been granted.

I had applied for a certain amount of seed fund, but the approved amount is lower/higher. Can I negotiate this?

The applicant can discuss the quantum of seed fund and the milestones associated with the tranches to be disbursed with the Incubator Seed Management Committee. The decision of the Committee shall be final.

Will my living expenses be borne if I want to be physically incubated at the incubator that is funding me?

The selected incubator shall provide physical infrastructure to the selected startups for regular functioning, support for testing and validating ideas, mentoring for prototype or product development or commercialization, and developing capacities in finance, human resources, legal compliances, and other functions. They are also expected to provide networking with investors and opportunities for showcasing in various national and international events. Any other expenses, including living expenses, shall be borne by the startup.

How much time will it take for the first installment of the seed fund to be released to me?

For grants, the first installment to any selected startup shall be released not more than 60 days from receipt of application from the startup. The startup shall submit the interim progress update and utilization certificate to initiate the release of subsequent installment of grant. For debt or convertible debentures, a similar timeline will be aimed but it is understood that due diligence and documentation in these cases can be sometimes time-consuming.

Where can I receive the seed funds?

Startups will receive the funds in their company bank accounts.

How often do I have to report back my progress after receiving seed fund?

Each startup will be required to touch base with the incubator team and share updates with them at least once in 15 days via videoconferences or physical meetings. These updates should be shared on the scheme dashboard at least on a monthly basis. In case of milestone-based disbursements, startup shall submit the interim progress update and utilisation certificate to initiate the release of subsequent installment of grant. Startup shall also submit final report and audited utilisation certificate at the end of the project duration.

I have been selected for seed fund, but I would not like to take the process forward. What do I do?

A startup can choose to not avail the support being offered to them under the scheme. The procedure for the same depends on the stage of the startup in the application process. 1. If the startup has been selected and the seed funding has been approved, they will be required to write a short letter mentioning the reason to pull out of the process. Post the acknowledgment of the letter, they will find a cancel application button on the application tracker tab of their dashboard which will allow them to cancel their application. 2. If the startup has already received any seed fund, it will be required to write a short letter mentioning the reason to pull out of the process. Post acknowledgment of the letter, they will be required to return the fund within 15 days. Post the acknowledgment of refund, they will find a cancel application button on the application tracker tab of their dashboard.

What if my startup fails after receiving the seed fund? Will there be any liability on me or my company?

It is understood that every startup cannot be successful. The legal agreement that you sign with the incubator will have provisions related to failure of startups supported under the scheme. For failed ventures, the entrepreneur shall share his/her learnings and the reasons for failure in the report and submit this along with the utilization certificate for the fund amount.

• https://www.myscheme.gov.in/schemes/sisfs-fs
• https://seedfund.startupindia.gov.in/
• https://www.startupindia.gov.in/
• https://seedfund.startupindia.gov.in/about

Official Website

https://seedfund.startupindia.gov.in/

Startup India Portal

https://www.startupindia.gov.in/

Scheme Details

https://seedfund.startupindia.gov.in/about