Nearly three months after the Centre launched the project, Union Commerce Minister Piyush Goyal officially unveiled the Startup India Seed Fund Scheme (SISFS) to financially support early-stage startups through 300 incubation centres. The project is expected to support about 3,600 startups and improve the startup economy, especially in tier-2 and tier-3 cities, according to the commerce ministry. The Rs 945 crore fund will be distributed across the next four years to eligible startups by incubators throughout India. The government has established an Experts Advisory Committee (EAC), which will be in charge of the scheme's overall implementation and oversight. Every year, over 7,500 new startups are established, and it is important to provide financial backing to startups with creative solutions so that they can execute their 'Proof of Concept.' DPIIT (Department for Promotion of Industry and Internal Trade) has unveiled a scheme to encourage early-stage startup funding.
It will support Proof of Concept, prototype development, product trials, market entry, and commercialization for startups. Incubators will be able to apply for funds through the DPIIT-created online portal for the scheme. Eligible incubators chosen by the EAC will receive grants of up to Rs 5 crore. Startups will be eligible for grants of up to Rs 20 lakh from the chosen incubators to validate their proof of concept, prototype development, or product trials. Additionally, convertible debentures or debt-linked products can be used to provide up to Rs 50 lakh in support to startups for market entry, commercialization, or scaling up. Commerce and Industry Minister Piyush Goyal said the SISFS will "secure seed funding, inspire innovation, support transformative ideas, facilitate implementation and start a startup revolution". According to him, the scheme will help to build a strong startup ecosystem, especially in non-metros, which are often underfunded. Goyal stated that the scheme was launched on April 1, 2021 within three months of Prime Minister Narendra Modi's announcement, and further added that "times are tough, but our resolve is strong, and never before has it become more important for us to empower our startups".
Eligibility criteria required for startups
- DPIIT recognises a startup that has been in existence for less than two years at the time of application.
- The startup must have a business plan for a product or service that is market suited, commercially viable, and reliable.
- To address the challenge being targeted, the startup should use technology in its main product or service, business model, distribution model, or strategy.
- Startups developing creative technologies in areas such as social impact, waste management, water management, financial inclusion, education, agriculture, food processing, biotechnology, healthcare, energy, transportation, defence, space, railways, oil and gas, textiles, and other areas will be prioritised.
- Under any other Central or State Government scheme, a startup should not have offered more than Rs 10 lakh of financial support. Prize money from competitions and grand challenges, subsidised working space, a monthly allowance for the founder, access to labs, and to a prototyping facility are not included.
- According to the Companies Act of 2013 and the SEBI (ICDR) Regulations, 2018, Indian promoters must own at least 51 percent of the startup at the time of application to the incubator for the scheme.
- According to the scheme's guidelines, a startup applicant will receive seed funding in the form of a grant and debt/convertible debentures once.
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