Startup India Seed Fund Scheme - Key Features

The Central Government on 21st January 2021 vide its notification no. S.O 414(E) has announced the Startup India Seed Fund Scheme (“Scheme”) with the primary objective of providing financial assistance to startups pertaining to proof of concept, prototype development, product trials, market entry and commercialization.

The Scheme will be implemented by the Department for Promotion and Industry and Internal Trade (“DPIIT”) which shall provide financial assistance to startups that have been recognised by the DPIIT and incorporation of the startup should not more than 2 (two) years ago at the time of application, via corpus of Rs. 945 Crore and the same will be disbursed through selected incubators across India.

I. Capturing Diverse Sectors and the Significance of Technology

In order to support startups across all the sectors, the Scheme has been introduced as sector-agnostic, the Scheme will have a central common application on Startup India portal for startups and incubators on an ongoing basis.

The startups applying in the Scheme must possess a business idea for the development of a product or service which is fit for the market and has the scope of viable commercialization and scaling. Additionally, it is necessary for a startup to use technology in their core product and/or service, or their distribution model, business model and methodology.

The preference under this Scheme would be given to those startups that are creating innovative solutions in sectors such as social impact, water management, waste management, education, financial inclusion, biotechnology, food processing, agriculture, healthcare, energy, space, mobility, defence, railways, oil, gas, textiles etc.

II. Encouraging Indian Promoters

The startups which have at least 51% (fifty-one) shareholding by Indian promoters at the time of their application to a startup incubator for the Scheme, will be eligible for a financial award under the Scheme.

Further, in order to apply under the Scheme, startups shall make sure that they have not received more than Rs 10 lakh of monetary support under any central or state government’s scheme.

III. Superintendence of the Experts Advisory

An Experts Advisory Committee (EAC) will be constituted by DPIIT, which will be responsible for the overall execution and monitoring of the Scheme. Incubators, on the other hand, will be selected on the basis of the number and performance of startups they have incubated so far, quality of the team of incubator, available infrastructure and testing labs facilities which they possess.

The EAC will evaluate and select incubators for allotment of seed funds, monitor progress, and take all necessary measures for efficient utilization of funds towards the fulfilment of objectives of the Scheme.

The implementation of this Scheme as discussed above would bring a paramount transition in the financial footing of startups in India.