Startup India Seed Fund Scheme (SISFS) 2021

      HEADLINES:

Shri Piyush Goyal launches the Startup India Seed Fund Scheme

      WHY IN NEWS:

Minister says the scheme will Secure seed funding, Inspire innovation, Support transformative ideas, Facilitate implementation, and Start startup revolution ; 3,600 startups are expected to benefit from the scheme.

MINISTRY? :- Ministry of Commerce & Industry
SYLLABUS COVERED: GS 3:Scheme

      ISSUE: 

STARTUP INDIA SEED FUND SCHEME (SISFS) 2021

  • The Hon’ble Prime Minister of India announced the scheme in his Grand Plenary address of Prarambh: Startup India International Summit on 16th January 2021.
  • After approval of EFC and Hon’ble Finance Minister, the scheme has been notified on 21.01.2021.
  • The Seed Fund will be disbursed to eligible startups through eligible incubators across India.

OVERVIEW

  • Funding from angel investors and venture capital firms becomes available to startups 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 startups with an innovative idea to conduct proof of concept trials.
  • DPIIT has created Startup India Seed Fund Scheme (SISFS) with an outlay of INR 945 Crore to provide financial assistance to startups for Proof of Concept, prototype development, product trials, market entry, and commercialization.
  • It will support an estimated 3,600 entrepreneurs through 300 incubators in the next 4 years.

OBJECTIVES OF SISFS

  • 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.

Startup India Seed Fund Scheme (SISFS) 2021

Startup India Seed Fund Scheme (SISFS) 2021

AN EXPERTS ADVISORY COMMITTEE

  • An Experts Advisory Committee (EAC) has been constituted by Department for Promotion of Industry and Internal Trade (DPIIT).
  • It will be responsible for the overall execution and monitoring of the Startup India Seed Fund Scheme.

  • It will also monitor efficient utilization of funds towards fulfilment of objectives of Startup India Seed Fund Scheme.

ELIGIBILITY CRITERIA

STARTUPS

  1. A startup, recognized by DPIIT, incorporated not more than 2 years ago at the time of application.
  2. The startup must have a business idea to develop a product or a service with a market fit, viable commercialization, and scope of scaling.
  3. 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.
  4. 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.
  5. Startup should not have received more than Rs 10 lakh of monetary support under any other Central or State Government scheme.
  6. 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.
  7. 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.

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. The incubator must have facilities to seat at least 25 individuals
  4. The incubator must have at least 5 startups undergoing incubation physically on the date of application
  5. The incubator must have a full-time Chief Executive Officer, experienced in business development and entrepreneurship, supported by a capable team responsible for mentoring startups in testing and validating ideas, as well as in finance, legal, and human resources functions
  6. The incubator should not be disbursing seed fund to incubatees using funding from any third-party private entity
  7. The incubator must have been assisted by the Central/State Government(s)
  8. In case the incubator has not been assisted by the Central or State Government(s):
    – The incubator must be operational for at least three years
    – Must have at least 10 separate startups undergoing incubation in the incubator physically on the date of application
    – Must present audited annual reports for the last 2 years
  9. Any additional criteria as may be decided by the Experts Advisory Committee (EAC)

FUNDING

  • Rs. 945 Crore corpus will be divided over the next 4 years for providing seed funding to eligible startups through eligible incubators across India.
  • The scheme is expected to support an estimated 3,600 startups through 300 incubators.
  • The online portal created by DPIIT, for the scheme, will allow incubators to apply for funds under it. An Experts Advisory Committee (EAC) has been created by DPIIT to execute and monitor the Startup India Seed Fund Scheme.

  • The selected incubators shall provide grants of up to Rs 20 lakhs for validation of Proof of Concept, or prototype development, or product trials to startups.
  • Furthermore, investments of up to Rs 50 lakhs shall be provided to the startups for market entry, commercialization, or scaling up through convertible debentures or debt-linked instruments.

      IASbhai WINDUP: 

SISFS will Secure seed funding, Inspire innovation, Support transformative ideas, Facilitate implementation, and Start startup revolution.

SUGGESTED READING :  www.startupindia.gov.in 

     SOURCES:   PIB | Startup India Seed Fund Scheme (SISFS) 2021

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