Startup India Seed Fund Scheme

Union Minister of Commerce & Industry recently launched the Startup India Seed Fund Scheme (SISFS).

About Startup India Seed Fund Scheme (SISFS):

• The scheme was announced during the Prarambh: the ‘Startup India International Summit’. Which marks the 5-year anniversary of the Startup India initiative.

Objective:

• Startup India Seed Fund Scheme(SISFS) aims to provide financial assistance to startups.
• Assistance is provided for proof of concept, prototype development, product trials, market entry, and commercialization.
• Thus, it would help to grow startups to a beginner’s level. After that, startups will be able to raise investments from angel investors or venture capitalists or seek loans from commercial banks or financial institutions.

Implementation:

•  The Department for Promotion of Industry and Internal Trade (DPIIT) constituted an Experts Advisory Committee(EAC) which will be responsible for the overall execution and monitoring of the Startup India Seed Fund Scheme.

Funding:

1. Eligible incubators throughout India will hand out funding to eligible startups across India.
2. Grants of up to Rs 5 Crores shall be provided to the eligible incubators selected by the EAC.
3. The selected incubators shall provide grants of up to Rs 20 lakhs for validation of Proof of Concept, or prototype development, or product trials to startups.
4. After that, Startups will further receive investments of up to Rs 50 lakhs for market entry, commercialization, or scaling up through convertible debentures or debt-linked instruments.

Duration:

• The scheme will have a corpus of Rs. 945 Crore. This will be divided over the next 4 years.

Significance of the scheme:

• The SISFS scheme will help startups in:
  • Secure seed funding
  • Inspire innovation
  • Support transformative ideas
  • Facilitate implementation and
  • Start startup revolution.
• The Scheme will also create a robust startup ecosystem, particularly in Tier 2 and Tier 3 towns of India. These towns lack adequate funding facilities for startups.

About Startup India:

• It envisages building a robust Startup ecosystem in the country for nurturing innovation and providing opportunities to budding entrepreneurs.
• It was launched in 2016.
• The action plan of this initiative focuses on the following three areas:
  • Simplification and Handholding.
  • Funding Support and Incentives.
  • Industry-Academia Partnership and Incubation.

Seed Funding

• It typically represents the first official money that a business venture or enterprise raises.
• It helps a company to finance its first steps, including things like market research and product development.
• There are many potential investors in a seed funding situation: founders, friends, family, incubators, venture capital companies and more.
• One of the most common types of investors participating in seed funding is a so-called "angel investor."
  • Angel investors tend to appreciate riskier ventures (such as startups with little by way of a proven track record so far) and expect an equity/stock stake in the company in exchange for their investment.

Department for Promotion of Industry and Internal Trade

• The department was earlier called the Department of Industrial Policy & Promotion and was renamed DPIIT in January 2019.
• It comes under the Ministry of Commerce and Industry.
• In 2018, matters related to e-commerce were transferred to the Department and in 2019, the Department was given charge for matters related to Internal Trade, the welfare of traders and their employees and Startups.
• The role of DPIIT is to promote/accelerate the industrial development of the country by facilitating investment in new and upcoming technology, foreign direct investment and supporting the balanced development of industries.
• Major engagements of DPIIT:
  • Business Reform Action Plan (BRAP) ranking of states,
  • Industrial Corridors,
  • Invest India,
  • Make in India initiative, etc.