Startup India Seed Fund Scheme 2021: A Blanket Overview

The growth of an enterprise is mainly concerned with the easy availability of sufficient capital. Lack of financial resources is the significant reason behind the failure of implementation of business ideas. Taking this point into consideration, the Indian Government has introduced Startup India Seed Fund Scheme 2021 to curb this condition. Through this finance-based Scheme, the Government is all set to provide financial assistance to budding entrepreneurs.

In order to construct a robust startup ecosystem in India, the Government of India commenced Startup India Seed Fund Scheme on January 16, 2016, so that numerous opportunities will be provided to emerging Indian entrepreneurs so that they can work on the development of their enterprise. The announcement to bring this Yojana into existence was made by our honourable PM Mr. Narendra Modi. Under this scheme, financial assistance of about Rs. 50 lakh will be delivered to the startups at an initial level via incubators.

The Central Government has moved ahead and allocated a budget of Rs 945 crore for this Yojana. This fund will be utilized for proof of concept, product trial, Market entry, prototype development, and commercialization. Through this Startup India Seed Fund Scheme 2021, the Government is striving to provide ample funds to incubators. The incubator will be coming forward to provide these necessary funds to the startups further. In the next four years, about 3600 entrepreneurs via 300 incubators will reap benefit from the startup India seed fund scheme 2021.

Benefits & Unique Features of Startup India Seed Fund Scheme 2021

• Indian Government has initiated Startup India Seed Fund Schemeto fabricate a Startup ecosystem in India. 
• This scheme came into existence on 16 January 2016, intending to provide loads of opportunities to entrepreneurs to boost the growth of their enterprise.
• Our prime minister, Narendra Modi Ji, announced to bring this scheme into the light. 
• Through this scheme, financial aid up to Rs. 50 lakh will be provided to startups at an early stage through incubators.
• The Central Government has allocated a fine budget of Rs 945 crore for this Yojana.
• This fund will be utilized for product trial, market-entry, proof of concept, prototype development, commercialization, etc.
• The Government will be providing funds to concerned incubators, and the incubators will be taking the responsibility of providing this fund to young and shining startups.
• 3600 entrepreneurs via 300 incubators will attain the benefits associated with this scheme in the forthcoming four years.

The objective of the Scheme

• The core objective of the Startup India Seed Fund Scheme 2021 is to lend funds to the budding entrepreneurs for their startups with a mission of giving wings to their enterprises.
• Through this Yojana, now entrepreneurs would have to visit banks as well as financial institutions to acquire sufficient funds for their business idea.
• Through this Yojana, they will be able to apply and manage to get funds directly from the government.
• This scheme will fulfil the initial requirement of finance at an appropriate time so that product development, market entry, trials, etc., may take place at the right time.
• Startup India Seed Fund Scheme 2021 will also create a lot of employment opportunities, and also the scheme will validate the business ideas of startups.

About Incubators

• Incubators are active organizations that work in the direction of promoting innovation as well as entrepreneurship among citizens.
• They are responsible for providing funds as well as their infrastructure to the growing startups so that they can proceed ahead with their business operations of market entry, commercialization, development, product trial, etc.
• These incubators receive incentives from the government end, and in return, they will further provide funds and financial assistance to the startups.
• Through this scheme, the government is aiming to render a grant to about 300 incubators.
• The funds delivered to the startup via Startup India Seed Fund Scheme 2021 will be under the mark of Rs. 50 lakh.
• The incubators can visit the official portal in order to apply under the startup India seed fund scheme 2021.
• Before granting them the seed fund, the government will continue with their application verification process.
• The startups can also apply for this Yojana directly from the official portal, and from there, they may opt for the incubators of their preference.

Effective Monitoring of Startup India Seed Fund Scheme 2021

The expert advisory committee will take a step ahead and review the overall progress of the startup India seed fund Yojana with the picked incubators. Under this Yojana, for the purpose of goal evaluation, the incubators would have to provide the report as indicated by the expert advisory committee. In case if the incubator is not fulfilling its responsibilities as per the prescribed standards, then the expert advisory committee will utilize its power to discontinue the seed fund aid. If the incubator is utilizing the fund for various purposes, then quick legal steps will be taken against such an incubator.

Have a look at the Implementation of Startup India Seed Fund Scheme

The department for the promotion of industry & internal trade has composed an expert advisory committee (EAC) liable for implementation, execution as well as monitoring of startup India seed fund scheme 2021. Department for promotion of industry & internal trade will be the prime agency for the implementation of the Yojana. This committee will check the details furnished by the incubators and go ahead with picking the best incubators to allow the seed fund. This committee will be accountable for monitoring the advancement of the incubator. The expert advisory committee has got the power to take all the essential actions so that the funds can be employed efficiently. The expert advisory committee comprises the following members:-

• Chairman
• Financial advisor, DPIIT
• Additional secretary /director/ joint secretary/deputy secretary, DPIIT
• Representative of the department of biotechnology
• Representative of the ministry of electronics & information technology
• At least three members nominated by the secretary
• Representative of Department of science and technology
• Representatives of Indian council of agricultural research
• Representative of NITI Aayog

Factors Ascertaining the Successful Implementation of the Yojana

All the startups that are decided to get the advantage of this scheme are expected to present details on the above parameter to the respective incubators. The incubator is needed to give the information conveyed by the startup via the online dashboard and also display this information to the expert advisory committee on a quarterly basis. Other than that, the incubator is also expected to publish the return on investment of the startup.

Utilization of Finance & Accounting through Startup India Seed Fund Scheme 2021

• Through startup India seed fund scheme 2021, effective and timely utilization of funds must be maintained by the incubator.
• In addition to this, the incubator holds the responsibility of maintaining the accounting records concerning the obtained fund.
• This record needs to be kept in a complete project-specific trust & relation account with one of the nationalized banks.
• Under the startup India seed fund scheme, the funds will be dispensed into the bank account of the incubator as per the scheme guidelines in three or more instalments.
• If any net return is collected from the startup, then it may get used for further funding.
• In case there is no considerable funding, then this money may get returned to DPIIT.
• Each financial year, all the incubators should report the sanctioned funds, secured funds, as well as disbursed funds.
• Also, the incubator is required to present a comprehensive report on the state of utilization of funds & audited expenses.

Seed Fund Disbursement to Eligible Startups

Through Startup India Seed Fund Scheme, all the eligible startups will enjoy the benefits of the seed fund as follows:-

• Investment of a figure close to Rs 50 lakh for market entry, the purpose of commercialization, as well as scaling up via debt linked instruments or convertible debentures of debt
• Up to Rs 20 lakh as present in the matter for validation of proof of concept, product trial or prototype development
• The startup is not authorised to use this fund for the production of any facility.
• In order to approach the concerns of the applicant, a complaint cell will be established
• At the completion of the project span, the startup is expected to submit a final report along with the audited utilization certificate of funds
• If the venture fails, then the entrepreneur would have to share his learnings and grounds for failure in the statement. The report statement has to be submitted together with a utilization certificate of the capital amount
• In the time limit of 60 days of receipt of the application form, the first instalment to the startup will be provided
• For winning the first instalment, the startup would have to submit the interim growth update as well as utilization certificate
• The startup will get the funds in their company bank account
• The startup will receive the second instalment amount after completing the previously defined milestone
• Before the announcement of the first instalment, the incubator would have to produce a legal agreement with the startup wherein all the essential terms and conditions, pillars, etc. must be mentioned
• The incubator can only render 20% of the entire grant obtained by them to the startups.

Startup Selection Procedure under Startup India Seed Fund Scheme 2021

Incubators all over India will receive an invitation to engage in the startup India seed funds scheme 2021 either through the official portal or through any other stage which will be particularly created for this purpose.

The following points are to be noted down while choosing the incubator-

• Deployment plan
• Quantum of fund employed
• Total number of startups that the incubator aims to help
• Mentoring rendered in last three years (number of mentors selected, standard mentoring hour, No of IP)
• Funding assistance prolonged during the previous three years (number of startups, total Corpus, investment agreement, total investment)
• Incubation backer in last three years (success rate, number of startups, number of startups that pass revenue of 1 crore in about one year, survival pace of startup)
• Availability of infrastructure
• Constitution of ISMC
• Quality of team
• Eligibility criteria fulfilment
• Stakeholder engagement and industry connect

Expert Advisory Committee has the right to make modifications in the guidelines of the election of incubators on a timely basis. The expert advisory committee will also observe the development of the grant. Incubators can go ahead and apply for Startup India Seed Fund Scheme 2021 anytime in the year.

Plan of Action

• Incubators willing to apply under the startup India seed fund scheme 2021 must form a committee known as the incubator seed management committee.
• This committee will assess and choose a startup for a seed fund.
• The responsibility for selecting all the members of the incubator seed management committee is in the hand of the expert advisory committee.
• A clear, transparent, and straightforward process must be followed while choosing the startup.
• Startups would have to submit specific details such as product overview, service overview, team profile, problem statement, business model, etc.
• Startups are entitled to apply for seed fund on the basis of preference in any three incubators.
• The selection of all the startups will take place on the basis of eligibility criteria.
• In case of an application is rejected, then, in that case, the applicant can apply afresh.
• Through email, all the rejected applicants will come to know about the rejection.
• Applicants can also trace the advancement of their application on the standard portal.
• The incubator will pick the startup and render seed funding.
• While filling the form, the startup would have to render the preference, and on the basis of this preference, the startup will be chosen.
• The startups are expected to furnish an exhibition of their plan before the incubator seed management committee, and based on this presentation incubator will take a step further and shortlist applicants.
• The incubator seed management committee will assess applicants on the basis of their servility as well as presentation and choose eligible startups within the time frame of 45 days of receipt of the application form.

The incubator seed management committee consists of the following members:-

• Nominee of the incubator (chairman)
• Domain specialist from the academy
• Representatives from state government startup nodal unit
• Two prosperous entrepreneurs
• Delegate of venture capital fund or Angel network
• Field expert from industry
• Any other relevant stakeholder

Guidelines for Assistance to Incubators

• The expert advisory committee will dispense the grant of around Rs 5 crore to the incubator in three or above three instalments.
• The incubator can utilise the grant only for distributing it to eligible start-ups.
• The expert advisory committee will be accountable for distributing the grant to the incubators.
• The expert Advisory Committee has the power to determine the amount of grant support.
• 5% of seed fund grant will also be afforded to the incubator for administration fees.
• The incubator can’t use the grant for managing the expenses.
• The incubator is not entitled to utilise the management fees for any other expenditures such as facility production or administrative charges. This has to be employed only for the management plan.
• The initial first instalment of a grant presented to the incubator will be no more than 40% of the overall approved amount.
• The next instalment will be collected by the incubator when the cash in control runs below 10% of the total engagement.
• The expert advisory committee will deliver the amount of the next instalment in the time range of 30 days after the proof submission.
• From the day of receipt of the initial instalment, the support amount must be used by the incubator in the span of three years.
• In case if the incubator hasn’t used 50% of the grant in the time limit of 2 years, then no additional cost will be presented to the incubator, and the incubator is asked to return the fund that is left unutilized along with interest.
• The startup picked under this Yojana is not expected to pay any form of fees.
• The incubator would have to maintain a transparent method of adoption of startups.
• The incubator is also liable for rendering networking with investors.
• The incubator has to render physical support to the startup in order to keep natural functioning, maintenance, development, etc.

Startup India Seed Fund Scheme 2021: Eligibility Criteria for Startups

• The startup must be acknowledged by DPIIT.
• The startup should have business ideas to produce a product or service that will match pace with the market’s requirements, has the chance of scaling, and possible commercialization.
• During the application time, the startup must be integrated not more than two years ago.
• The shareholding by the Indian promoter in the emerging startup must be at least 51% or even more than that at the time of application to the incubator for the Yojana as prescribed in the companies act 2013 & SEBI regulation 2018.
• The startup must not have received any assistance of Rs. 10 lakh or more amount under any Central or state government scheme.
• Those startups that are formulating an innovation-based solution in education, agriculture, food processing, water management, waste management, and more will be getting preference.
• The startup must be utilizing technology in its requisite product or service to sort out the problem, which is often targeted.

Startup India Seed Fund Scheme 2021: Eligibility Criteria for Incubators

• An incubator should be backed by central or state government.
• The incubator should be a legal entity.
• The incubator should be operational for about two years during the application time.
• The incubator needs to have the facility to render seating facility to about 25 individuals.
• The incubator must have up to 5 startups that should be experiencing incubation physically on the date of application.
• A full-time CEO who must have gained experience, as well as knowledge in business development & entrepreneurship, must be exhibited in the incubator, which must receive support from a capable team.
• If the incubator is lending funds from any third private body to the incubatees, then, in that case, the incubator is ineligible.
• In case if the incubator is not backed or supported by the central or State Government, then the incubator should be operational for near about ten years, should have presented audited annual reports for not more than two years, and at the time of application should have around ten separate startups which are enduring incubation physically.

Mandatory Documents

The necessary documents are showcased below-

Startup India Seed Fund Scheme 2021: How to Apply?

For Incubators

• Firstly, move to the Startup India Seed Fund Scheme official website.
• The home page will emerge on the screen before you.

• Click on apply now on the homepage.
• After that, you would have to hit apply now under for incubator section.
• Thereafter, you would have to click on create an account option.
• On the screen, a new page will appear.
• Enter your email id, name, mobile number, as well as password on the new page.
• After that, you would have to click on the register option.
• You will receive an OTP on your registered number.
• Now, you must enter this OTP into the OTP Box.
• After that, you can click on submit option.
• Click on the login option.
• Thereafter, you would have to pick your country & click on the input letterbox.
• Click on the next option.
• On the screen, the form will be out.
• In the application form, you would have to enter your contact info, point of contact info, basic info, as well as success stories.
• In the next step, you can click on save the profile.
• Your profile will be sent to a moderator for the purpose of approval.
• Now, you need to log in again to the portal.
• Under the seed fund scheme, you would have to click on apply now.
• You will witness the application form on the screen.
• You would have to provide all the crucial details in the application form, such as general detail, incubator support detail, incubator team detail, fund requirement details, etc
• Then, you would have to upload all the vital documents.
• Click on submit.
• You can apply under this Yojana by following the procedure.

How to Apply For Startups?

• Visit the Startup India Seed Fund Scheme official website.
• Then, the home page will be present before you.
• Click on apply now on the home page.
• Thereafter, hit apply now option under the startup section.
• Then, you will find that the application form will emerge before you.
• Enter all the crucial details such as your name, active email address, mobile number, etc., in the application form.
• Upload all the required documents.
• Click on submit option.
• You can apply as a startup through the Startup India Seed Fund Scheme 2021 by following the process.

How to Login On the Portal?

• Reach the official website of Startup India Seed Fund Scheme^[1].
• In this step, the home page will be out.

• You have to tick on the login option.
• After that, log in to the portal.

Then, you would have to opt for your category, which is as follows:-

1- DPIIT/EAC

2- Incubator/Startup      

• Then, you would have to enter your username as well as password.
• Then, you need to click on the login option.
• You will be able to log in to the portal by following the stepwise guideline.

To Wrap Up

Startup India Seed Fund Scheme is one of the finest moves by the Indian Government in modern time where the unemployment rate is high in the country, and people are planning to dive into the sea of startups. At Aatmnirbhar Sena, we are raising awareness concerning the startup India Seed Fund Scheme so that young and growing entrepreneurs can gain financial benefits via this Yojana.

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