Startup India Seed Fund Scheme (SISFS)

Recent Updates On Progress of SISFS
According to Press Information Bureau (PIB), 

  • Allotted funds for SISFS: Rs.945 crore
  • Funds allotted to 102 incubators under SISFS: Rs.375.25 crore
  • Funds allotted to 378 DPIIT recognised startups: Rs.81.45 crore (allotted through approved incubators)

North Eastern States - Startups & Incubators:

  • Funds allotted to a Sikkim Incubator: Rs.5 Crore
  • Funds allotted to a Assam Incubator: Rs.5 Crore
  • Funds allotted to 9 DPIIT recognised startups from North Eastern States: Rs.1.15 crore (allotted through approved incubators)

The above information related to progress of SISFS scheme is given by the  Minister of State in the Ministry of Commerce and Industry.

Startup India Seed Fund Scheme (SISFS) is amongst the several measures taken by the government of India to build a robust startup ecosystem across the country. It is done to encourage innovation across sectors and provide opportunities for all budding entrepreneurs to set up businesses in the country. 

In January 2016, the Government of India laid out 19 action points for the Startup India Initiative - Action Plan. SISFS is one such initiative to create a conducive ecosystem for startups by providing financial assistance for early-stage startups. 

In this article, let’s explore Startup India Seed Fund Scheme (SISFS) in detail. 

If you want to incorporate your business and register your business under the Startup India initiative to get DPIIT recognition for your business, reach out to our professional team at eAuditor Office now. 

Let’s understand SISFS now.

Startup India Seed Fund Scheme: Introduction

The Prime Minster announced the SISFS scheme during Prarambh: Startup India International Summit on 16th January 2021.

Every initial stage startup demands a steady stream of capital to build their business without any significant financial roadblocks. But, access to startup funding is not that easy. 

Only with ready Proof of Concept (POC) can an entrepreneur access funding from angel investors and venture capitalists. Similarly, if you are looking for business loans, you need to have some substantial assets as collateral for banks.
By understanding the critical need for funding for an innovative business idea to transform into a product or service for the market, the Department for Promotion of Industry and Internal Trade (DPIIT) has launched a new initiative - Startup India Seed Funding Scheme (SISFS). It is to provide the much-required financial assistance to startups. 

The SISFS scheme is created with an outlay of Rs.945 Crore to assist startups with Proof of Concept, market-ready product, development of a prototype, and commercialization. The scheme intended to support around 3,600 startups through 300 incubators across the country in the next four years. 

The scheme said to disburse seed funds to all selected startups through eligible incubators across India. 

Objectives of SISFS:
As India has grown exponentially to become the third largest startup ecosystem in the world in the last few years, startups still find it difficult to access seed funding at the transformative stage of idea to Proof Of Concept (POC). 

As the availability of capital flow can make or break the startup with good business ideas, SISFS presents itself as a boon for entrepreneurs with innovative ideas to develop Proof of Concept. 

These seed funds have a force-mulitplier effect in validating innovative ideas, leading to increased employment generation.

Expert Advisory Committee for SISFS:
The DPI has constituted the expert advisory committee (EAC) to look after the overall execution and management of the Startup India Seed Fund Scheme (SISFS). 

The EAC committee plays a vital role in evaluating, selecting, and monitoring the allotment of seed funds to startups chosen through incubators. Along with that, they also take all necessary measures to make the best use of allotted funds towards the fulfillment of the core objective of the Startup India-SISFS scheme.

Eligibility Criteria:
Under Startup India Seed Fund Scheme (SISFS), one can register and avail of the benefits of this scheme either as a Startup or as an incubator. 

Eligibility Criteria For Startups:

  • Participating as a Startup should have a legally registered business and DPIIT startup recognition. (You can reach out to the eAuditor Office team for DPIIT startup recognition)
  • Startups should not be incorporated more than two years ago when applying for SISFS. 
  • It would help if you had a business idea that can be a scalable product or service, market fit and viable for commercialization.
  • Technology should be at the core of the startup’s product or service, its distribution model, or its methodology to solve its intended problems.
  • SISFS will give preference to innovative startups with solutions across sectors such as waste management, financial inclusions, education, agriculture, food processing, healthcare, mobility, energy, biotechs, defense, oil and gas, textiles, railways, water management, space, etc., 
  • Startups applying for SISFS funding should not have received monetary support of more than INR 10 lakhs under any state or central government scheme. However, this doesn’t include prize money, winning startup challenges, availing workspace at a subsidized cost, monthly allowance for founders, or access to labs or another prototyping facility across the country. 
  • Indian promoters should have more than 51% shareholding, per the Companies Act, 2013, when applying for the SISFS scheme and SEBI (ICDR) regulations, 2018.
  • The startups can avail of funding support for a startup through grants and debt/convertible debentures per the guidelines established under this scheme. 

Eligibility Criteria For Incubators:

The incubator must be a legal entity that should be registered as 

  • A registered society as per Societies Registration Act 1860 (or)
  • A registered trust under the Indian Trust Act, 1882 (or)
  • A Private limited company registered under the Companies Act of 2013, or it can be
  • A Statutory body formed through an Act of the legislature.
  • As an incubator, it should be operational for a minimum of 2 years before the date of application under the SISFS scheme. 
  • As an incubator, it should be able to seat a facility to a minimum of 25 individuals on the incubation campus.
  • The applying incubator should have a minimum of 5 startups undergoing incubation when submitting the SISFS application. 
  • The incubator should have a full-time CEO with prior experience in entrepreneurship and business development. They should also have a capable team for mentoring startups in testing and validating ideas and dealing with finance, legal and HR functions.
  • The incubator shouldn't disburse seed funds to startups under incubation using third-party private entity funding sources. 

The central and state governments should assist the SISFS incubator applicant. If the incubator is not assisted either by the central or state government, then they should satisfy the following conditions:

  • The incubator should be actively operational for a minimum period of three years. 
  • A minimum of 10 startups should be physically incubated under the incubator when applying for SISFS. 
  • The incubator should have its annual accounts audited for the last two years and must furnish those audited annual business reports.

Author : Dharani

Date     : 28-Oct-2022