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Startup India Seed Funding Scheme (SISFS)- Explained
For startups and small-scale businesses, the ease of availability of ample capital is crucial -especially during early stages of growth of the organization. Funding out of venture capital firms and angel investors is available to startups only after the approval of proof of concept. At the same time, banks also provide loans only to applications that are asset-backed. It is crucial to offer seed funding to startup organizations having an innovative idea to conduct trials for proof of concept. In this aspect, the SISFS or Startup India Seed Funding Schemes comes into play.
What is SISFS or Startup India Seed Funding Scheme?
SISFS is regarded as the flagship scheme under the initiative of Startup India by the Indian Government. The scheme was introduced on 1st April in 2021. The primary objective of the government-backed scheme is to offer financial assistance to startups in the form of proof of concept. The financial assistance to startup organizations can also be leveraged towards promoting prototype development, commercialization, market entry, and product trials.
SISFS is committed to allowing startups in India to graduate to a higher level wherein they are able to raise ample investments out of venture capitalists or angel investors while seeking loans from financial institutions or commercial banks.
Some important pointers that help in understanding the government-supported startup scheme are:
- The scheme aims at providing financial assistance to startups during the initial stage of the ongoing project
- The scheme has been approved for a period of 4 years -starting from 2021
- A massive corpus of INR 945 Crores will be divided across the period of four years to deliver access to seed funding to eligible applicants or startups via eligible incubators across the nation
- It is estimated that the SISFS will be offering financial assistance to more than 3600 startups across the nation
- The scheme remains aligned to the Atmanirbhar Bharat Campaign. This campaign was introduced in May 2020.
- Seed funding to an eligible startup by the respective incubator will be distributed in the following manner:
- Around INR 20 Lakhs will be available as the grant for validating proof of concept, product trials, or prototype development
- Around INR 50 lakhs will be available in the form of investment for ensuring market entry, scaling up with the help of convertible debentures, commercialization, or debt-centric tools
Understanding Seed Funding
Seed-stage funding or seed funding is a crucial form of investment -especially for startups. Usually, investors primarily obtain access to equity stake in exchange for the amount that has been invested. When founders might be leveraging their own savings for starting up a business, it is referred to as bootstrapping.
What is the Importance of SISFS or Startup India Seed Funding Scheme?
The startup ecosystem in India is struggling with inadequacies in capital during the seed as well as proof of concept development stages. At this stage, the requirement of capital will either be making or breaking the entire situation for startups -even those with great business ideas.
Most innovative ideas by budding startups tend to fail because of the absence of this immensely crucial capital needed at the earliest stage of development. When seed funding is provided to such assured cases, then it can have a multiplier effect towards validating business ideas of multiple startups. Eventually, it leads to employment generation within the country.
In India, the Startup Ranking Framework of a particular state is set up towards strengthening the overall support of both Union Territories and States in building up the respective startup ecosystems holistically.
Eligibility for SISFS
- The startup organization must be recognized by the DPIIT or Department for Promotion of Industry & Internal Trade
- Preference is imparted to startups delivering innovative solutions in domains like social impact, water management, waste management, agriculture, education, healthcare, mobility, energy, and so more.
- The startup must have been incorporated not more than two years at the application’s time
- The startup should not have received more than INR 10 Lakhs in terms of monetary support under any other State or Central Government schemes.
If you are a startup and deal with issues related to funding, you can consider revenue-based financing. Unlike other forms of funding opportunities, revenue-based funding takes away the overall pressure by doing away with holding the equity of the company.
