The start-ups may get investment from the Startup India Funds of Fund and Angel Investors. We advise on regulatory approvals, valuation of start-ups and in filings for allotment of shares required for funding.
Startup India Seed Fund Scheme was launched by the Indian Government on February 16th, 2014. The main reason for its introduction was to provide financial support to Startups during their initial stages of operations. Startups usually face funding shortage during their initial stages as most private investors do not consider them credible enough. This is because, at this stage, Startups are usually unable to generate high revenues and promise high returns on investment.
To reach this point, startups have to formulate ideas, develop products and test them for commercial launch. This is a crucial phase where they require immense financial support. This is what the Government wants to achieve through the Startup India Seed Fund Scheme. Startups can apply for Startup India Seed Fund through an online process on the Seed Fund Website
Incubators nominated by the DPIIT select Startups for the disbursal of Startup India Seed Fund. However, the basic eligibility criteria for selection is defined under the Seed Fund Scheme. These criterias are based on multiple factors like DPIIT Recognition, age of the startup, nature of products, and shareholding. Let’s go through each of them one by one.
Only incorporated entities are eligible to be recognized as Startups, and are therefore permitted to apply for Startup India Seed Funds. These include Private Limited Companies, One Person Companies, Limited Liability Partnerships, and Registered Partnership Firms.
To apply for Startup India Seed Fund, a Startup must be recognized by the DPIIT. To obtain such recognition, an application must be filed online on the Startup India Portal. We assist in the complete application process for DPIIT Recognition of Startups
Seed Funds can be applied for only within 2 years from the date of a Startup’s incorporation. The objective of granting Startup India Seed fund is to support startups financially during the initial stages of operations.
The allocation of Seed Funds are based on the concept and product prototype. So, startups must ensure that they atleast have their Proof of Concept and a sample product ready for testing. This has to be done before applying for Startup India Seed Fund.
This is the most basic criteria for obtaining the Startup India Seed Funds. The concerned Startup must deal in innovative products, services or processes all ways and means.
For allocation of seed funds, preference must be given to startups developing innovative solutions in certain sectors. These include sustainable development, financial inclusion, education, and agriculture. Also, biotechnology, healthcare, energy, mobility, defence, space, and railways are some of the other preferred sectors.
A startup which has already received more than Rs.10 Lakhs as funds from the Government before, it shall be ineligible for Startup India Seed Fund.
Foreign business entities are not eligible for Startup India Seed Fund. So, before applying for seed funds, make sure your startup has at least 51% Indian Shareholding.
A Startup can receive seed funds in the form of grants, debts, and convertible debentures. However, each of these types can only be applied once.
Startup India Seed Fund Application can only be filed after all the minimum requirements are met. These include incorporating the business, obtaining DPIIT Recognition, and having active contact information. Additionally, since the application is filed online, all necessary documents have to be uploaded with it in their digital formats. The table below provides a complete list of minimum requirements as well as documents to apply for Startup India Seed Fund.
Register on Startup India Portal
This is one of the major prerequisites of the application process. The applicant is required to register on the Startup India Portal using an active mobile number and email address. After the registration process is complete, the applicant receives login credentials on his registered email.
Get DPIIT Recognition Certificate
Use the login credentials to sign into the Startup India portal. Apply for Startup Recognition by the DPIIT. Make sure the Recognition is obtained within 2 years from the date of incorporation. This is because Seed Fund cannot be applied for after 2 years from incorporation.
Apply for Startup India Seed Fund
After you’ve received the DPIIT Recognition Certificate, you’re ready to file the Startup India Seed Fund Application. The same can be done on the Seed Fund Website. Login using your Startup India Account credentials. Access the application, fill in the details online and upload the necessary documents.
Evaluation & Shortlisting By Incubators
After the application is submitted on the Startup India Seed Fund website, it will reach your preferred incubators. These incubators will evaluate your application, and if convinced, will shortlist it for further examination.
Selection & Shortlisting By ISMC
The shortlisted application will be sent to the Incubator Seed Management Committee or ISMC, constituted individually by each incubator. The ISMC will be the final authority for selecting startups and approving the disbursal of seed funds.
Disbursal of Seed Funds to Startups
After selection by the ISMC, a startup becomes eligible for receiving seed funds from the concerned incubator. The funds will be disbursed in instalments. Soon after the application is approved and the Startup is selected, the incubator will release the first instalment. Subsequent instalments will be released after the Startup submits its progress report to the incubator.
The Startup India Seed Fund Scheme benefits startups right from their initial stages of prototype development and product testing. Throughout this crucial time period, the initiative provides financial support to startups, ensuring that they achieve all their targeted milestones. Here are a few prominent benefits of Startup India Seed Fund Scheme to help you understand better.
Your startup could receive Rs.20 Lakhs worth of funds for proof of concept validation, prototype development, and product trials.
Your Startup could receive Rs.50 Lakhs worth of funds for commercial launch of products, and scaling up the business.
Incubators are legally bound to disburse the first instalment of seed funds within 60 days from the date of application.
All subsequent instalments are released by incubators only after the startup submits its progress report.
There are absolutely no application charges or hidden expenses that Startups have to bear while applying for Seed Funds.
The process of selecting startups is extremely transparent. It involves multiple committees representing different stakeholders.
No, individual entrepreneurs cannot apply for Seed Fund. In fact, while filling the application for Seed Fund, Startups must mandatorily provide the list of their organisational teams and employees. So, only startups which have a team can apply for Seed Fund.
A Startup can receive a total of Rs.70 lakhs of funds. Rs. 20 lakhs, for validation of proof of concept, prototype development, and product trials. Rs.50 lakhs as convertible debentures and debt-linked instruments for commercialisation and scaling of business. According to the guidelines, a startup can avail each of these types of funds only once.
No, there is no minimum educational qualification for the founders of Startups under the Startup India Seed Fund Scheme.
Seed Funds can be utilized only for the purposes it has been granted for. These include validation of proof of concept, prototype development, product trials, market launch of products, and upscaling. Startups cannot utilise the seed funds for purposes like building infrastructure.
The eligibility criteria for an incubator to apply in the Startup India Seed Fund scheme are as follows:
— Incubator must be a legal entity
— Incubator should be operational for at least two years on the date of application
— Incubator must have facilities to seat at least 25 individuals
— Incubator must have at least 5 startups undergoing incubation physically on the date of application
— Incubators must have a full-time Chief Executive Officer, experienced in business development and entrepreneurship. He must be supported by a capable team responsible for mentoring startups in testing and validating ideas.
— Incubator should not be disbursing seed fund to incubatees using funding from any third-party private entity
— Incubator must have been assisted by Central/State Government(s)
— In case the incubator has not been assisted by Central or State Government(s):
— — a. Incubator must be operational for at least three years
— — b. Must have at least 10 separate startups undergoing incubation in the incubator physically on the date of application
— — c. Must present audited annual reports for the last 2 years
— Any additional criteria as may be decided by the Experts Advisory Committee (EAC)
After incubators receive applications for seed funds from Startups, they carry out a strict process of evaluation and selection. This takes almost 40-45 days from the date of filing of application.
After submitting the application for seed fund, startups can track its real time status. This can be done on the Startup Seed Fund Website. For this, the applicant will have to login to the website first, using his login credentials.
The great explorer of the truth, the master-builder of human happiness no one rejects dislikes avoids pleasure itself because it is pleasure but because know who do not those how to pursue pleasures rationally encounter consequences that are extremely painful desires to obtain.
Read More
