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:
  
  • Business Reform Action Plan (BRAP) ranking of states,
  • Industrial Corridors,
  • Invest India,
  • Make in India initiative, etc.

Source: PIB