Startup India Seed Fund Scheme | 21 Apr 2021

Why in News

Recently, the Government has launched the Startup India Seed Fund Scheme (SISFS).

  • The Scheme was announced during the ‘Prarambh: StartupIndia International Summit’ which marked the five-year anniversary of the Startup India initiative.

Key Points

  • About the Startup India Seed Fund Scheme (SISFS):
    • Aim: To provide financial assistance to startups for proof of concept, prototype development, product trials, market entry, and commercialization.
    • Launched by: Department for Promotion of Industry and Internal Trade (DPIIT) with an outlay of Rs. 945 Crore.
    • Some Eligibility Conditions:
      • A startup, recognized by DPIIT, incorporated not more than 2 years ago at the time of application.
      • Startups should not have received more than Rs. 10 lakh of monetary support under any other Central or State Government scheme.
    • Features:
      • It will support an estimated 3,600 entrepreneurs through 300 incubators in the next 4 years.
      • An Experts Advisory Committee (EAC), constituted by DPIIT, will be responsible for the overall execution and monitoring of the Scheme.
      • Grants of upto Rs. 5 crore will be provided to the eligible incubators selected by the committee.
      • The selected incubators will provide grants of up to Rs. 20 lakh for validation of proof of concept, or prototype development, or product trials to startups.
      • Investments of up to Rs. 50 lakh will be provided to the startups for market entry, commercialization, or scaling up through convertible debentures or debt-linked instruments.
    • Expected Benefit:
      • It will help in creating a robust startup ecosystem in Tier 2 and 3 regions, as the smaller towns in India are often not provided with appropriate funding.
  • About Startup India Initiative:
    • 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 following three areas:
      • Simplification and Handholding.
      • Funding Support and Incentives.
      • Industry-Academia Partnership and Incubation.
  • Related Government Initiatives:
    • Startup Innovation Challenges: It is a fantastic opportunity for any startup to leverage their networking and fund-raising efforts.
    • National Startup Awards: It seeks to recognize and reward outstanding startups and ecosystem enablers that are contributing to economic dynamism by spurring innovation and injecting competition.
    • Ranking of States on Support to Startup Ecosystems: It is an evolved evaluation tool aimed to strengthen the support of States and UTs to holistically build their startup ecosystems.
    • SCO Startup Forum: The first-ever Shanghai Cooperation Organisation (SCO) Startup Forum was launched in October 2020 to develop and improve startup ecosystems collectively.
    • Prarambh: The ‘Prarambh’ Summit aims to provide a platform to the startups and young minds from around the world to come with new ideas, innovation and invention.

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 stake in the company in exchange for their investment.

Department for Promotion of Industry and Internal Trade

  • The department was earlier called Department of Industrial Policy & Promotion and was renamed as 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, welfare of traders and their employees and Startups.
  • The role of DPIIT is to promote/accelerate industrial development of the country by facilitating investment in new and upcoming technology, foreign direct investment and support balanced development of industries.
  • Major engagements of DPIIT:

Source: PIB