The Startup India initiative fosters entrepreneurship and promotes innovation through a conducive ecosystem playing an important role in the growth of budding entrepreneurs. The Prime Minister of India started The Startup India Seed Fund Scheme (SISFS) in April 2021. It has provided financial aid to the startups at various stages that include-
- Proof of concept
- Prototype development
- Product trials
- Market entry
The startups face peculiar problems at the early stage of their business when the startup demands capital that is not readily available to all the entrepreneurs. The government has arranged for easy availability of capital at the early stages of the growth of an enterprise under the start up India seed fund scheme.
The angel investors and venture capital firms do not provide capital to the startups without proof of concept. The government undertaking and private sector banks provide loans to asset-backed applicants and do not focus on the startups without any asset back up.
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Startup India Seed Fund Scheme (SISFS) provides financial assistance to the startups to help them attain growth without lack or insufficiency of funds in the early stage of their business cycle. This fund provides capital at every stage of the product cycle without any kind of inconvenient backup requirements.
The startups graduate to a level where they are able to fulfill the conditions and attain capital from angel investors or venture capitalists or fulfill the parameters of loan application in any commercial bank or financial institution.
Features Of Startup India Seed Fund Scheme
The Indian startup ecosystem needs sufficient capital in the seed and ‘proof of concept’ development stage. Many business ideas have collapsed in one or the other stages of the business cycle for lack of funds. These funds can have a multiplier effect in the validation of the enterprises leading to employment generation. Its features are as under-
- ‘Call for Applications’ for Incubators and Startups all the year-round
- No mandatory physical incubation
- PAN-India startup program
- Facility to apply to 3 incubators for funds simultaneously
The Start up India seed fund scheme initiative is open for applications in the early phase of their business. They get funds in the early stage of their development so that they may survive the initial phase and do not extinguish due to lack of funds. The Government has made an allocation for all kinds of businesses in need of financial assistance.
The eligibility criteria to attain capital from the Startup India seed fund scheme is as follows-
- The startup must be recognized by DPIIT and should not be incorporated more than 2 years ago at the time of application.
- The business idea must be to develop a product or service according to market requirements.
- Technology must be a core part of the product or service in the business model or in the distribution model of the business cycle.
- The Entrepreneurs applying for start up India seed fund scheme must not have received any previous monetary support of more than Rs 10 Lakh under any other Central or State Government scheme.
- Indian promoter must have at least a 51% stake in the Startup at the time of application.
- An applicant can get funds from the SEED initiative once in the form of grant and debt / convertible debentures each.
Amount of seed funding can a startup receive under the Startup India seed fund scheme
The startups can attain grants up to Rs 20 Lakh in milestone-based installments for validation of proof of concept, prototype development, or product trials. The startups looking for market entry, commercialization, or seeking business expansion can attain a grant of up to rs 50 Lakh through convertible debentures or debt or debt-linked instruments.
A start-up can get the benefits only once in the form of grants and debt/convertible debentures. Entrepreneurs cannot use the start up India seed fund scheme for the creation of any other facility. There is no exemption for any clause of eligibility criteria and all the criteria must be met on the date of submission of the application.
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