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How to Raise Startup Seed Fund Scheme in India

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Introduction: Startup India Seed Fund Scheme

The Startup Company's ability to easily get finance is crucial to its power to expand. There are numerous venture capital firms and angel investors in the market who offer capital following simple due diligence and concept proof. Banks are also lending money to applicants with assets backing them. For entrepreneurs to bring evidence from the experiment about the product, seed capital is necessary. So that they may demonstrate the viability and simplicity of their business plans. The Startup India Seed Fund Scheme (SISFS) was created for the intention of giving entrepreneurs the opportunity to provide the same support so they could demonstrate the evidence of their company ventures through empirical studies such as commercialization, product trials, market entry, product development, etc. Startups with excellent business concepts struggle to establish themselves in the market early on owing to a lack of funding. This program makes it simpler for entrepreneurs to obtain financing from banks and investors, helping them to improve and create jobs in the process.

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What is Seed Funding?

Seed funding is the funding process for a business at the very beginning of its life cycle. It is the process of the developing stage, as during the trial phase when there is no customer, a venture capital seed investor invests money after determining the potential of the Startup/Company. The Investor makes a lot of investigations into whether the startup can make a profit or not in the coming days. The very first investment at seed stage is called seed money or seed-stage funding. In general, investors frequently receive an equity stake in return for their investment. Bootstrapping refers to the process of starting a firm with the founders' own money.

Who are Incubators

Incubators are the institution of Startups that work together in their development process, Incubators are Institutions intended to work with new Businesses/Startups, and they encourage the entrepreneur in the development of their business. They provide financial support as well to the new organization.

Expert Advisory Committee (EAC)

EAC shall be constituted by DPIIT, which shall be responsible for the allotment of Seed Funds, monitor the Progress of the same, and take measures to fulfill the objectives of the Scheme. The Committee shall be constituted with the member including:

  • Chairman;
  • Financial  Advisor (from DPIIT)
  • A representative from the Department of Biotechnology (DBT)
  • Additional Secretary (Convener)
  • Representative from ICAR
  • Representative from  NITI Aayog
  • Representative from MeiTY
  • Representatives from the Department of Science and Technology (DST)
  • The Secretary, DPIIT, and at least three experts from the startup ecosystem, investors, R&D, technology development and commercialization, entrepreneurship, and other related fields.

Eligibility for SISFS

Startups must meet the following requirements in order to file an application under SISFS:

  • When submitting the application with approval from the Department of Promotion of Industry and Internal Trade, the startup must be less than two years old (DPIIT).
  • The business startup must be the result of a business concept and startup scope strategy.
  • The business idea should be planned in order to address the issue in the company.
  • Startups with novel ideas, such as those in the fields of energy, defense, textile, waste management, oil and gas, financial inclusion, agriculture, food processing, healthcare, mobility, trains, and space exploration, will be given preference in the selection process.
  • Any further financial assistance from the federal or state governments cannot be worth more than 10 lakh rupees. There are certain exceptions, including those involving awards from allowances, access to facilities for prototyping, competitions, subcontracted labor, and major challenges.
  • A Startup will only ever benefit from the program once.
  • According to the Companies Act of 2013 and the SEBI Regulation of 2018, at the time the application is filed, Indian investors and promoters must possess more than 51% of the shares.
  • According to the program's rules, a startup applicant may receive seed funding once each in the form of a grant and in the form of debt or convertible debentures.

The Following Guidelines Must Be Followed By Incubators.

  • One of the following is required:
  1. A Private Limited Company as per the Companies Act, 1956 or 2013; or 
  2. A Trust registered under the Indian Trust Act, 1882; or 
  3. A statutory Body created under through the legislature; or 
  4. A Society registered under the Societies Registration Act, 1860
  • At the time the application is submitted, it must have been in operation for at least two years.
  • It must have a minimum of 25 people who can sit there.
  • The incubator must have physically incubated at least five startups at the time the application was submitted.
  • It must have a full-time CEO, an experienced business developer, and an entrepreneurial spirit, as well as a capable staff, to support startups in their efforts to be validated and in their dealings with money, people, and the law.
  • The Authorized entity must distribute cash to the Incubators on behalf of the Incubates.
  • It must have been employed by the Central or State Government, or it must have been in existence for at least three years, and at the time the application was submitted, it had to have ten unique startups that were being incubated in the Incubator. Annual reports for at least two years must have been presented.

Application Procedure for Startups under Startup India Seed Fund Scheme (SISFS)

  • First, go to the official website of SISFS.
  • Click on the Login button, and create an account through the registration page of the website by entering your Name, Email-id, Mobile Number, and Password.
  • Make the confirmation by entering OTP from the linked mobile number.
  • Go to the Home page, Click on the “apply now” button, under the Startup option and login using your username and password.
  • Fill out the application form, upload the required documents and submit.

Application Procedure for Incubators under Startup India Seed Fund Scheme (SISFS)

  • First, go to the official website of SISFS.
  • Click on the Login button, and create an account through the registration page of the website by entering your Name, Email-id, Mobile Number, and Password.
  • Make the confirmation through entering OTP from the linked mobile number.
  • Go to the Home page, Click on the “apply now” button, under the “For Incubators” option and login using your username and password.
  • Select the Country you belong to, put the letterbox input and go to next button;
  • Fill the application form, and save through the profile button.
  • After few moment, The Moderator will approve the application; 
  • Click on the apply button.
  • Enter general information in the application form, support details, and team details, fund requirements etc.
  • Attach necessary documents and submit the application.

Required Documents

  • GST Registration
  • Bank details
  • Mobile number 
  • Passport size photograph
  • Aadhaar Card

The documents required for contracting with the Private Investor and the founder should have these documents on a mandatory basis, (for suggestive purposes) these are: 

  • Terms of Agreement (MoU)
  • Company MoA and AoA (including changes)
  • Share allotment documents
  • Rights and obligations relating to documents 

Conclusion

EAC is in charge of SISFS under DPIIT. The EAC oversees and implements effective measures to achieve the SISFS's goals. The EAC chooses the incubators, distributes seed money, and keeps track of development. The EAC awards the chosen Incubators installment-based funding of up to five crore rupees. The SISFS will be made up of the Incubator Seed Fund Committee, which will shortlist startup proposals and present them to the ISMC in order to choose startups for seed funding. Within 45 days of receiving applications, ISMC evaluates and selects the Startups. Following this, the Startups receive funding under the appropriate Incubator as beneficiaries in accordance with the preferences they indicated in the application.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not corpseed, and have not been evaluated by corpseed for accuracy, completeness, or changes in the law.

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Author
Sagar Sharma
I have over 8 years of experience working in product regulatory compliance. Currently, I work as the operations head at Corpseed Ites Pvt Ltd, where my Job role is providing best in class consulting in the field of product compliance.

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