STARTUP INDIA SEED FUND SCHEME- APPLY ONLINE, HOW TO GET SEED FUNDING

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What is Startup India Seed Fund Scheme?

Capital plays the same role in the business similar to blood in the body. No business could survive in absence of adequate capital. But getting easy capital and funding in the initial stages of a venture is a difficult task. Even angel investors or venture capitalists will provide funds to a venture only after the proof of concept has been provided. Getting a bank or institutional financing is even more difficult as most of the startups lack asset backing. As a result, a majority of startups fail due to the paucity of funds. Therefore, it is essential to provide seed (initial) funding to startups with an innovative idea to conduct proof of concept trials.

Looking into the problems faced by the startups, DPIIT has created Startup India Seed Fund Scheme (SISFS) with an outlay of INR 945 Crores to provide financial assistance to startups for proof of concept, prototype development, product trials, market-entry, and commercialization. It is expected to support an estimated 3,600 entrepreneurs through 300 incubators in the next 4 years. The Scheme has been notified on 21.01.2021. This scheme would enable the startups to scale up to such a level where they will be able to raise investments from angel investors or venture capitalists or seek loans from commercial banks or financial institutions.

Objectives of Startup India Seed Fund Scheme

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 of 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.

Eligibility criteria for Seed fund for startups

Following are the eligibility criteria for a startup to apply under the Startup India Seed Fund Scheme:

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

To get DPIIT recognition, please visit: https://www.startupindia.gov.in/content/sih/en/startupgov/startup-recognition-page.html

• The startup must have a business idea to develop a product or a service with a market fit, viable commercialization, and scope of scaling.
• 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.
• 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.
• The startup should not have received more than INR 10 Lakhs of monetary support under any other Central or State Government scheme. This does not include prize money from competitions and grand challenges, subsidized working space, founder monthly allowance, access to labs, or access to prototyping facility.
• 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 the Companies Act, 2013 and SEBI (ICDR) Regulations, 2018.
• A startup applicant can avail of seed support in the form of grants and debt/ convertible debentures each once as per the guidelines of the scheme.

Quantum of seed fund to startups under SISFS

Seed fund to an eligible startup shall be disbursed in two modes:

Grant Mode:

• A grant of up to INR 20 Lakhs will be given to startups for validation of Proof of Concept, or prototype development, or product trials.
• The grant shall be disbursed in milestone-based installments.
• These milestones can be related to the development of prototypes, product testing, building a product ready for market launch, etc.

Investment Mode (Debt):

• Up to INR 50 Lakhs will be disbursed to eligible startups for the purpose of market entry, commercialization, or scaling up through convertible debentures or debt or debt-linked instruments.
• Such investments will be made at a concessional interest rate i.e. not more than the repo rate (4%).
• Seed fund shall be utilized strictly for the purpose it has been granted.

Documents required for applying for Startup India Seed Fund Scheme

Following important documents should be kept ready by the startup intending to avail the benefits under Startup India Seed Fund Scheme:

• A copy of the Aadhar Card of the owner (partner/director) for the purpose of verification of ownership of the startup.
• A copy of registration of startup with the State Government or the Central Government like Incorporation Certificate, Partnership Deed.
• Address Proof of the startup where the company or entrepreneurship is located
• Residential Address Proof of the owner (partner/ director) of the business

How to apply online for Startup India Seed Fund Scheme

Step-by-Step Guide for Startup India Seed Fund Scheme

Firstly, you will have to register as a ‘Startup’ on the Startup India Portal then only you can apply online for Startup India Seed Fund Scheme. Steps to register as ‘startup’ are below:

Step-1: Navigate to Startup India Portal and Click on REGISTER

Note: You should skip these steps if you are already registered as a startup with Startup India.

Step-2: Fill in the required details to create an account on Startup India Portal and Click on REGISTER

Step-3: An OTP will be sent on your registered email-id. Enter the OTP and click on SUBMIT, it will redirect you to Startup India Portal

Step-4: Enter your username and password. Click on LOGIN after robot verification. It will redirect you to Startup India Personal Page

Step-5: Select Country and then Click on the STARTUP box. Click the NEXT button and then fill the fields given in the form

Following these steps, you are registered as a startup on the Startup India Portal. If you are already registered, skip these steps.

Account Creation for Social Media Login

Now, it comes time to know about how to apply online for Startup India Seed Fund Scheme. Read Carefully!

Step-1: Navigate to Startup India Seed Fund Portal and Click on LOGIN

Step-2: Click on Incubator/Startup credentials and enter your username and password and click on LOGIN. Username and password are the same as of ‘Startup India login credentials’.

Step-3: On login, User Dashboard will open before you on your screen. Go to the ‘Apply Now’ tab and the application form will open in front of you.

Step-4: Fill in the details of the Authorized representative acting on your behalf for the seed fund scheme. Attach a copy of Board Resolution/ Power of Attorney in support

Step-5: Fill/ Recheck the data in the ‘Entity Details’. You need to fill in Company Incorporation Number, Incorporation date, PAN, and address

Step-6: Fill in the ‘Startup Details’. Following details are to be filled namely:

• Is it a technology startup?
• Detailed description on the problem which startup is working on
• What is the value proposition for this problem?
• What is the unique selling point of the startup?
• Target customer segment

Step-7: Fill in the details of Startup team details

Step-8: Fill ‘Funding Details’ stating the quantum of fund requirement and the manner and timing in which funds shall be deployed by the startup

Step-9: The eligible startup has an option to choose 3 incubators out of the list available in the dropdown. Select Incubator preference and Click on SAVE AND NEXT

Step-10: Next step is ‘Upload Document’. You can upload a video URL explaining your product or business model. You may also upload any other document which might be helpful in explaining the product or business model in a better manner. Then Check the Self Declaration Box and Click on SUBMIT. On Clicking ‘Submit’, your application is submitted successfully.

Note: The details regarding the progress of your application can be tracked anytime on the Dashboard under ‘My Applications’.

Image Source: https://seedfundapi.startupindia.gov.in/Downloads/SeedFund-Guide_28.04.2021.pdf

Important points about SISFS

• The eligible startup has an option to apply to 3 different incubators according to its preference (See Step-9 above).
• After the receipt of the application, each incubator shall evaluate applicants based on their submissions and presentations and select startups for Seed Fund within 45 days.
• The startup will receive the funds in their company bank accounts. The first installment shall be released within 60 days.
• The tenure of the concessional debt/ loan shall be for 5 years with a moratorium period of up to 12 months. Because of the early stage of the startups, the loan shall be unsecured and no guarantee from promoter or third party will be needed.

For further information, you may contact at 09660930417, 7891704141

Disclaimer: The above article is based upon the opinion of the author and is meant for informational purposes only. Readers are requested to act diligently and under the consultation of a professional before applying the above information.