The early stages of launching a startup require easy access to funding, usually only available from angel investors or venture capital firms after a proof of concept is developed. Banks typically offer loans based on tangible assets, making seed funding crucial for testing innovative ideas.
Who Launched Startup India Seed Fund Scheme?
To address the need to provide funds for innovative ideas, the Indian government introduced the Startup India Seed Fund Scheme, announced by Prime Minister Modi in January 2021. The DPIIT established a Rs 945 crore fund to assist startups, benefiting 3,600 entrepreneurs through 300 incubators over four years. An Expert Advisory Committee oversees the initiative's implementation.
What is the purpose of this scheme?
The Startup India Seed Fund Scheme aims to provide financial assistance to startups for developing their proof of concept, including creating prototypes, testing products, entering the market, and commercializing their offerings. The goal is to help startups progress to a stage where they can easily secure funding from angel investors and venture capital firms, while also overcoming hurdles in obtaining loans from banks.
How does Money Reach Startups from Government?
Initially, the seed fund amount is sanctioned by DPIIT and subsequently routed through the Expert Advisory Committee. Subsequently, these funds are channeled towards incubators that have been operational for a minimum of 2-3 years. These incubators then distribute the funds to startups recognized by DPIIT, provided they are no more than 2 years old.
Who is Eligible For the Seed Fund Scheme?
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Eligibility for this fund is limited to startups recognized by DPIIT that are not older than 2 years at the time of applying. To attain DPIIT recognition, startups can click on the link.
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Startups must possess a viable business concept aimed at developing a market-fit product or service, which is primed for commercialization and holds substantial growth potential.
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It is imperative that startups employ technology within their product, service, business model, distribution method, or methodology to address problems effectively.
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Preference will be given to startups operating in sectors such as social impact, waste management, water management, financial inclusion, education, agriculture, food processing, biotechnology, healthcare, energy, mobility, defense, space, railways, oil and gas, and textiles.
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The startup should not have received more than Rs 10 lakh in financial aid from any Central or State Government scheme, excluding funds obtained through competition winnings or certain benefits like subsidized workspace, founder's monthly allowance, lab access, and prototyping facilities.
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Indian promoters must hold a minimum of 51 percent of the startup's shares.
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According to the scheme's guidelines, startups can receive one-time support in the form of grant funding, debt, or convertible debentures.
