STARTUP INDIA SEED FUND SCHEME (Syllabus: GS Paper 3 – Economy)

Context: The Startup India Seed Fund Scheme (SISFS) provides financial assistance to startups for proof of concept, prototype development, product trials, market entry and commercialization through eligible incubators.

Startup India Seed Fund Scheme (SISFS)

• Launch: Flagship initiative introduced in April 2021 under the Startup India initiative.
• Objective: To provide financial assistance to startups for proof of concept, prototype development, product trials, market entry and commercialization.
• Operational Period: Implemented from April 1, 2021, with a 4-year span and a fund allocation of Rs. 945 crores.
• Implementation: Under the purview of the Department for Promotion of Industry and Internal Trade (DPIIT), part of the Ministry of Commerce & Industry.
• Funding Mechanism: DPIIT establishes an EAC responsible for executing and monitoring the Startup India Seed Fund Scheme (SISFS).
• Grant Allocation: Selected incubators are eligible for grants of up to Rs 5 Crores each.
• Startups' Funding: Incubators, in turn, provide startups with up to Rs 20 lakhs for proof of concept validation, prototype development, and product trials.
• Eligibility Criteria:

oStartup Recognition: DPIIT-recognized startups incorporated within the past 2 years are eligible.

oBusiness Idea Requirements: Startups must have a viable business idea with market fit, potential for commercialization, and scalability.

oTechnology Integration: Essential requirement for startups to incorporate technology in their core product, service, business model, or distribution methodology.

oMonetary Support Limit: Startups should not have received more than Rs 10 lakh from any other Central or State Government scheme.

oPromoter Shareholding: At the time of application, Indian promoters must hold a minimum of 51% shareholding in the startup applying for the scheme.

The Need For Startup India Seed Fund Scheme

• Easy availability of capital is essential for entrepreneurs at the early stages of growth of an enterprise.
• 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.

Startup India

• About: The Startup India initiative of the Government of India envisages building a robust Start-up ecosystem in the country for nurturing innovation and providing opportunities to budding entrepreneurs.