India is home to the world’s third-largest startup ecosystem. There are beyond 41,000 startups in the nation. In 2014, there were just four startups in the unicorn club but in 2020 there are higher than 30. Moreover, 11 of these startups joined the unicorn club in 2020 itself.
The startups in India are not restricted to big cities. They are about 40% of such budding entrepreneurs are evolving from tier-II and -III cities.
Introduction – Startup India Seed Fund Scheme
Objective: Fund has been established to provide initial funds to the startups. After that start-ups will be presented with the Govt. Guarantees, to help them cultivate debt capital.
Coverage: The fund would allow financial assistance to startups. It can be for evidence of concept, model development, product tests, and commercialization of products or ideas.
Funding: The Scheme will allow startups up to Rs. 20 Lakhs as a reward for Proof of Concept. Upto Rs. 50 Lakhs can also be availed during convertible debentures or debt or debt-linked devices for commercialization.
Eligibility Criteria for Startups:
The eligibility criteria for a startup to apply below the Startup India Seed Fund Scheme shall be as follows:
- A startup, acknowledged by DPIIT, included not more than 2 years ago at the time of application
- A startup must have a business idea. It should generate a product or a service with a business fit, and a range of scaling
- A startup should be utilizing technology in its core product or service. Or Startup business model, or delivery model, or methodology to resolve the problem being targeted
- Preference would be provided to startups building innovative solutions
- A startup should not have collected more than Rs 10 lakh of financial support. It is under any other Central or State Government scheme. This does not involve prize money from contests and grand challenges.
- Shareholding by Indian promoters in the startup should be at least 51% for the project
- Any startup will not obtain seed support higher than once each as per terms of guidelines.
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Eligibility Criteria for Incubators:
The eligibility criteria for an incubator to apply in the Startup India Seed Fund project are as follows:
1. Incubator must be a constitutional entity:
a) A society enrolled under the Societies Registration Act 1860, or
b) A Trust enrolled under the Indian Trusts Act 1882, or
c) A Private Limited company enrolled under the Companies Act 1956 of the Companies Act 2013, or
d) A statutory body formed through an Act of the legislature
2. Incubator should be operational for at shortest two years on the day of application to the project
3. Incubator must have amenities to place at least 25 individuals
4. Incubator must have at least 5 startups experiencing incubation actually on the time of application
5. Incubator must have a full-time Chief Executive Officer, undergone in business development and entrepreneurship. It should be backed by a competent team capable for mentoring startups in testing. And it should be verifying ideas, aseach of well as in finance, legal, and human resources functions.
6. Incubator should not be spending seed fund to incubatees utilizing funding from any third-party private entity
7. Incubator must have been supported by Central/State Government(s)
8. In case the incubator has not been supported by Central or State Government(s):
a) Incubator must be operational for at shortest three years
b) Must have at shortest 10 separate startups experiencing incubation in the incubator actually on the time of application
c) Must present reviewed annual reports for the last 2 years
9. Any extra criteria as may be determined by the Experts Advisory Committee (EAC).
Assistance to Incubators:
Experts Advisory Committee (EAC) shall judge incubators for grant compensation. A Grant of up to Rs. 5 crores would be presented to a chosen incubator. It can be in milestone-based three (or) more payments. The definite quantum of grant and payments for each incubator will be determined by the Experts Advisory Committee (EAC).
Disbursement of Seed Fund to Startups by Incubators:
Seed Fund to an eligible startup by the incubator shall be distributed as follows:
1. Up to Rs. 20 Lakhs as a reward for validation of Proof of Concept, or prototype development, or product tests. The grant shall be distributed in milestone-based installments. These milestones can be associated with the startup idea development of a model, product testing, etc.
2. Up to Rs. 50 Lakhs of investment for business entry, commercialization, or balancing up
3. Seed fund shall strictly not be utilized by startups for production of any facilities or deployment. It shall be used for the purpose it has been awarded for.
Selection of Startups
- Each of the incubators practicing for the Startup India Seed Fund Scheme will form a committee. It is called the Incubator Seed Management Committee (ISMC). It will be consisting of specialists who can assess and choose startups for seed support. The composition of ISMC would be as regards
- Candidate of Incubator (Chairman)
- Representative from State Government’s Startup Nodal Team
- Representative of a Venture Capital Fund or Angel Investor
- A field expert from Industry
- A field expert from academia
- Two successful Entrepreneurs
- Any additional relevant Stakeholder
- The final composition and members of ISMC of every incubator shall be accepted by EAC. It will be a significant parameter in the determination of incubators.
- The final structure and members of ISMC of every incubator shall be accepted by EAC. The startups shall be chosen through an open, transparent, and clear method.
- The incubator may shortlist candidates based on their evaluation for a presentation before ISMC.
- ISMC shall assess candidates based on their submissions and presentations. It shall select a startup incubator for Seed Fund within 45 days of acceptance of an application.
- All incubators shall give knowledge about the process of evaluation of startups in real-time to the Startup India portal.
- Selected startups shall obtain seed funding. It should be done below the particular incubator that selects them as receivers during application.
All applicants will be able to follow the course of their application on the Startup India portal.
An applicant, if denied once, may apply again.
Selection of Incubators:
- Online Applications will be welcomed from incubators across India to engage in the project. It can be accessed on https://www.startupindia.gov.in or any other platform specifically chosen for the purpose.
- Incubators shall be decided on the basis of the following parameters:
- Achievement of eligibility criteria
- Quality of the team of Incubator
- Available infrastructure, testing labs, etc.
- Composition of ISMC
- The Call for Applications for incubators will be public online during the year
- Experts Advisory Committee (EAC) will gather at least quarterly to:
- Assess the applications received during the period
- Select incubators for funds below the Scheme
- Determine the total amount of fund and amount of installments in which it is to be designated to every incubator
- Specify milestones to be accomplished by each incubator for release of installments
- EAC shall also observe progress of incubators against authorized funds below the Scheme and take further steps as may be needed
- EAC may lay down revised guidelines for choice of incubators below the scheme from time to time
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