Startup India Seed Funding Scheme (SISFS)

The scheme is launched by the government in the year 2016.

Under the scheme, the government provides some financial assistance to the eligible startups for proof of concept, prototype development, product trials, market-entry, and commercialization. Such financial assistance is known as Seed Fund which will be disbursed to selected startups through eligible incubators.

*For Detailed Eligibility Criteria for Startups and Incubators, please refer the guidelines.

ASSISTANCE TO BE PROVIDED IN THE FORM OF SEED FUNDING:

1.  Upto Rs. 20 lacs as grant for your prototype development stage which you don’t want to repay to the government.

2. Upto Rs. 50 lacs for market entry, commercialization, or scaling up through convertible debentures or debt or debt-linked instruments, which you have to repay to the government after 1 year with a 4% interest rate and should complete in 5 years as EMI.

The above-mentioned seed support can be availed only once each.

 ELIGIBILITY CRITERIA FOR THE SCHEME:

1.  A startup, recognized by DPIIT, incorporated not more than 2 years ago at the time of application.

2. The entity must have a business idea to develop a product or a service with a market fit, viable commercialization, and scope of scaling.

3. It should use 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.

5. Startup should not have received more than Rs 10 lakh of monetary support under any other Government scheme.

6. Shareholding by Indian promoters in the startup should be at least 51% at the time of application.

* There are no exemptions to any of the eligibility criteria.

DOCUMENTS REQUIRED FOR APPLICATION UNDER SISFS:

1.  Certificate of Incorporation

2. PAN

3. Startup Certificate

HOW TO APPLY TO SISFS?

The application submission is completely online without any fee, and no physical submission of documents is required.

The application form allows a startup to apply to 3 incubators according to its own preferences. 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.

SELECTION OF STARTUPS BY INCUBATORS FOR GRANTING SEED FUND:

Each of the incubators applying for the Startup India Seed Fund Scheme will constitute a committee called the Incubator Seed Management Committee (ISMC), consisting of experts who can evaluate and select startups for seed support.

After the receipt of the application, the incubators shall shortlist the applicants as per the eligibility criteria provided in the guidelines. ISMC shall evaluate applicants based on their submissions and presentations and select startups for Seed Fund within 45 days.

REPORTING REQUIREMENTS BY STARTUPS AFTER GETTING THE SEED FUND:

The startup shall submit the interim progress update and utilization certificate to initiate the release of subsequent installment of grant.

Startup shall submit final report and audited utilization certificate at the end of the project duration. For failed ventures, the entrepreneur will share his/her learning and the reasons for failure in the report and submit this along with the utilization certificate for the fund amount.

SOME IMPORTANT FREQUENTLY ASKED QUESTIONS:

 1. 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.

2. Does the scheme support startups from specific sectors?

Startups from any sector can apply for the scheme. 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.

3. 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.

4. What all can the seed fund be used 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.

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

A startup can apply to the SISFS again after 3 months of receiving a rejection.

6. 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.

7. 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.

8. 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

9. 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.

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

The legal agreement that you sign with the incubator will have provisions related to failure of startups supported under the scheme.

* The scheme guidelines in detail are available at

https://www.startupindia.gov.in/content/dam/invest-india/Templates/public/Guidelines%20for%20Startup%20India%20Seed%20Fund%20Scheme.pdf