Startup India Seed Fund Scheme

Easy access to funds is a crucial component for entrepreneurs looking to expand their businesses. Lack of funding prevents many potential business concepts from being realised. The Government of India has therefore introduced the Startup India Seed Fund Scheme to control this problem. The government will give entrepreneurs financial support through this program.

The Government of India’s Startup India project aims to create a strong startup ecosystem in the nation to foster innovation and give aspiring business owners opportunities.

On January 16, 2016, 19 action points were launched for the Startup India Action Plan. This Action Plan provided a plan for developing an ecosystem that is supportive of startups in India. Numerous initiatives have since been made to support startups. One such program, the Startup India Seed Fund Scheme (SISFS), aids enterprises in their early stages financially. Through this program, financial support for entrepreneurs in their early stages would be made available through incubators up to Rs. 50 lakh. A budget of Rs 945 crore has been set aside by the government for this program. This money will be used for market entrance, commercialization, product testing, and proof of concept. The government will give incubators money through this program. It will be the incubator’s responsibility to continue giving this money to the startups. In the following four years, the startup India seed money scheme will help 3600 entrepreneurs through 300 incubators.

INCUBATORS AND THEIR ROLE IN THE STARTUP INDIA SEED FUND SCHEME:

The organisations known as incubators work to encourage entrepreneurship and creativity among individuals. They essentially give entrepreneurs money and access to their infrastructure so they may conduct business activities like product development, market-entry, commercialization, etc. The government gives incubators incentives, and the incubators then give money to the entrepreneurs. 300 incubators will get grants from the government as part of the Startup India Seed Fund Scheme 2022. Under this program, a startup will receive up to Rs 50 lakh in funding. Through the official website, incubators can submit applications for the startup India seed fund program. The government would provide them with the seed money after reviewing their application. The portal is another place where startups can apply for this program and choose the incubators of their choosing based on their preferences.

THE OBJECTIVE OF THE STARTUP INDIA FUND SCHEME:

The seed and “Proof of Concept” development stages of the Indian startup ecosystem lack sufficient finance. For companies with solid business concepts, the required funding can make or break their startup.

Due to the lack of this crucial funding at an early stage needed for proof of concept, prototype development, product trials, market-entry, and commercialization, many innovative business concepts fail to take off.

Offering a seed fund to such promising situations might have a multiplier effect, validating the business plans of numerous firms and creating jobs. The Startup India Seed Fund’s major goal is to give entrepreneurs money for their startups so they can expand their businesses. Through this program, business owners are not required to visit banks and other financial institutions to obtain funding for their venture ideas. They only need to apply through this program to receive money from the government. The Startup India Seed Fund Scheme will provide the necessary funding when it is needed like at the time of product development, testing, market introduction, etc.

IMPLEMENTATION OF THE SCHEME AND MONITORING THROUGH EAC:

A startup India seed fund scheme implementation, execution, and monitoring committee called the Experts Advisory Committee (EAC) has been established by the department for the promotion of industry and internal trade. The lead organisation for putting this plan into action will be the Department for the Promotion of Industry and Internal Trade (DPIIT). To approve the seed fund, this committee will choose incubators and examine the information submitted by the incubators. Additionally, this group will keep an eye on the incubator’s development. The authority to take all necessary actions to ensure that the funds are used effectively belongs to the expert advisory group. Members of the expert advisory council include the following:

• Chairman
• Representative of the biotechnology department
• Additional, the joint, director, and deputy secretaries, DPIIT
• Department of Science and Technology representative
• DPIIT financial advisor
• A minister of electronics and information technology representative
• Indian Council of Agricultural Research representatives
• A minimum of three members are proposed by the secretary
• An official from NITI Aayog

The startup India seed fund’s relationship with the chosen incubators will be evaluated by the expert advisory group. Under this plan, the incubators are required to submit the report by the expert advisory committee’s instructions for objective evaluation. The expert advisory council has the complete right to stop providing seed fund support if the incubator is not operating up to standards. In some cases, even legal actions can be taken against the incubator if it is found to have used the money for something other than what it was intended.

PROCESS AND THE ELIGIBILITY CRITERIA FOR STARTUPS AND INCUBATORS:

For Startups:

The first question which comes to mind is who can apply for this scheme. Any startup which is recognised by DPIIT and incorporated not more than two years from the date of application can apply to this scheme.

The Startup India Seed Fund Scheme requires all incubators to form a committee that will be known as the incubator seed management committee. This committee will assess and decide which startup will receive seed funding. The members of this committee are as follows:

• Members of the startup India nodal team for the state government
• A nominee from the incubator’s side (chairman),
• Representative of an angel network or startup capital fund,
• Two seasoned entrepreneurs,
• Expert in the field from an academic background,
• Industry expert in this field, and
• Any further interested parties

The members of the incubator seed management committee are chosen by the expert advisory council. When this committee chooses the startup, an open, transparent, and fair approach is to be used. Startups are required to provide information such as their team profile, problem description, product or service summary, business model, etc. Startups can seek seed funding from three incubators of their liking.

The applicant may reapply after 3 months if their application is denied. In case they are rejected they will receive an email notifying them of their rejection. On the official webpage, applicants can also monitor the status of their applications.

Startups are required to present their ideas to the incubator seed management committee and based on this presentation, the incubator will shortlist applicants. Startups are required to provide their preference on the application form, and the incubator will select the startup by this preference.

The incubator seed management committee will review candidates based on their submission and presentation and choose qualified startups within 45 days of receiving the application.

For Incubators:

Through the official website or any other platform created especially for this purpose, all incubators located around the nation will be invited to take part in the startup India seed money plan.

When choosing an incubator, one needs to keep in mind the things like the amount of money used, the Plan of deployment, the number of businesses the incubator plans to sponsor, and mentoring offered throughout the past three years (number of mentors hired, average mentoring hour, etc.), funding assistance provided throughout the past three years (investment agreement, number of startups, total Corpus, total investment), the last three years of incubator support (number of startups, success rate, number of startups that cross revenue of 1 crore in 1 year, survival rate of startup), Constituency of ISMC, availability of infrastructure, level of the team, compliance with qualifying requirements, and added assistance (industry connects, stakeholder engagement).

The Expert Advisory Committee is empowered to periodically modify the requirements for choosing incubators. Additionally, the expert advisory group will keep track of the grant’s development. This program accepts applications from incubators throughout the year.

REQUIRED DOCUMENTS TO APPLY FOR SISFS:

The concerned parties will be required the following documents to apply under this scheme:

• Aadhar Card
• Bank account details
• GST number
• Detail of the project
• Passport-sized photograph
• Lease Agreement

AMOUNT OF SEED FUNDING THAT A STARTUP CAN AVAIL OF UNDER THIS SCHEME:

For the validation of Proof of Concept, prototype development, or product trials, grants of up to Rs. 20 Lakhs may be made by the incubator. The amount will be paid out in stages based on reached milestones. These benchmarks may be connected to prototype creation, product testing, creating a product ready for market release, etc.

Investments up to Rs. 50 lakhs may be made via convertible debentures, debt, or debt-linked instruments for market entry, commercialisation, or scaling up. According to the rules of the program, a startup applicant may receive seed funding once in the form of a grant and once in the form of debt or convertible debentures.

The application process is completely online and the government charges no fees from the applicants under this scheme. The entire process of evaluation and selection takes around 45 days and once the startups are selected by the incubators, the first installment of money is released within 60 days from the date of application.

Author: Ajay Kacher-Legal Associate, and Co-Author- Anand Shankar and Lakshya Anant, in case of any queries please contact/write back to us at support@ipandlegalfilings.com or   IP & Legal Filing.