What is Startup India Seed Fund Scheme?
The Startup India Seed Fund Scheme (SISFS) was announced by the Hon'ble Prime Minister on 16th January 2021 and launched on 19th April 2021. It is a flagship scheme under the Startup India initiative aimed at providing financial assistance to startups for proof of concept, prototype development, product trials, market entry, and commercialization.
With a total corpus of ₹945 crore allocated for the period 2021-2025, SISFS addresses the critical early-stage funding gap that many Indian startups face. The scheme is implemented through selected incubators across the country who act as intermediaries between the government and startups.
Key Objectives of SISFS
- • Enable startups to develop proof of concept, prototype, or product trials
- • Support startups for market entry and commercialization
- • Bridge the gap between ideation and funding from angel investors/VCs
- • Reduce dependency on traditional funding sources for early-stage startups
- • Promote innovation and entrepreneurship across sectors
Why SISFS is Important
Early Stage Gap
Most startups fail due to lack of early-stage funding. Banks don't fund unproven ideas, and angels/VCs come in later stages.
Grant Component
Unlike most funding options, SISFS provides grant (non-dilutive) funding up to ₹20 lakhs, preserving founder equity.
Sector Agnostic
The scheme covers startups across all sectors including agriculture, healthcare, education, technology, and manufacturing.
Nationwide Access
With incubators across Tier 1, 2, and 3 cities, startups from anywhere in India can access the scheme.
Eligibility Criteria
To be eligible for funding under SISFS, startups must meet the following criteria:
Startup Requirements
DPIIT Recognition
The startup must be recognized by the Department for Promotion of Industry and Internal Trade (DPIIT) under the Startup India initiative. This is the primary requirement.
Age Limit
The startup should not be more than 2 years old from the date of incorporation/registration at the time of application to the incubator.
Prior Funding Limit
The startup should not have received more than ₹10 lakhs from any other Central or State Government scheme specifically for proof of concept/prototype development.
Exclusions
The following are not eligible for SISFS:
- • Startups not recognized by DPIIT
- • Startups older than 2 years
- • Startups that have already raised significant funding from angel/VC investors
- • Shell companies or non-operational entities
- • Startups with criminal proceedings against founders
Funding Structure
SISFS provides funding in two distinct categories based on the stage and requirement of the startup:
Grant Component
Non-dilutive funding for early-stage requirements
Purpose:
- • Proof of concept development
- • Prototype development
- • Product trials and testing
- • Initial market validation
- • IP filing and protection
Debt/Convertible Debenture
For market entry and scaling operations
Purpose:
- • Market entry activities
- • Commercialization
- • Working capital needs
- • Early scaling operations
- • Marketing and customer acquisition
Fund Utilization Guidelines
| Category | Permitted Use | Not Permitted |
|---|---|---|
| Grant (₹20L) | R&D, prototyping, testing, IP | Salary, rent, routine expenses |
| Debt (₹50L) | Marketing, inventory, operations | Founder withdrawals, other companies |
Application Process
The application process for SISFS is routed through selected incubators. Here's the step-by-step process:
Step 1: Get DPIIT Recognition
Before applying for SISFS, ensure your startup is recognized by DPIIT under Startup India. This is mandatory.
Step 2: Find an Approved Incubator
Identify and connect with a SISFS-approved incubator near you. Check the official Startup India portal for the list of approved incubators.
Step 3: Prepare Your Proposal
Develop a comprehensive project proposal including problem statement, solution, market opportunity, team credentials, financial projections, and fund utilization plan.
Step 4: Submit to Incubator
Submit your application to the selected incubator. Each incubator may have its own format and additional requirements.
Step 5: Incubator Screening
The incubator conducts initial due diligence, evaluates the proposal, and may interview the founding team.
Step 6: Expert Committee Review
Selected applications are reviewed by an Advisory Committee comprising industry experts, investors, and domain specialists.
Step 7: Approval and Disbursement
Upon approval, sign the funding agreement and receive the first tranche of funds. Subsequent tranches are released based on milestones.
Incubators and Implementation
SISFS is implemented through a network of selected incubators who act as the interface between the government and startups:
Types of Approved Incubators
Academic Incubators
Hosted by IITs, IIMs, NITs, and other educational institutions
Corporate Incubators
Run by large corporations for their startup programs
Standalone Incubators
Independent incubators and accelerators
Role of Incubators
- • Screen and shortlist startup applications
- • Conduct due diligence on shortlisted startups
- • Provide mentoring and handholding support
- • Monitor fund utilization by startups
- • Report progress to DPIIT
- • Help startups with compliance and documentation