Startup India Seed Fund Scheme

Budget 2025 Updates:

• Revision of classification of MSMEs to include more businesses and companies under the purview of MSMEs.
• Micro-enterprises on the Udyam portal will get credit cards with a Rs. 5 lakh limit; 10 lakh cards will be issued in the first year.
• A new Rs. 10,000 crore Fund of Funds will be launched with an expanded scope.
• A scheme for 5 lakh women and SC/ST first-time entrepreneurs will offer term loans up to ₹2 crore over five years, along with online capacity building.

The DPIIT launched the Startup India Seed Fund Scheme (SISFS) with a ₹945 crore outlay to support startups in prototype development, proof of concept, market entry, product trials, and commercialization.

Announced by PM Narendra Modi on 16th January 2021, the scheme was approved by the Finance Minister and EFC, then notified on 21st January 2021.

Since venture capital and bank loans require proof of concept or asset backing, seed funding is crucial for early-stage startups with innovative ideas.

SISFS funds eligible startups through incubators, supporting 3,600 entrepreneurs via 300 incubators from 2021-2025. This helps startups secure loans or attract investors.

Objectives of SISFS

India’s startup ecosystem often struggles with capital shortages during the proof of concept stage, which can determine a startup’s success.

Many innovative ideas fail due to a lack of early-stage funding for prototype development, market entry, and commercialization. Seed funding can validate these ideas, driving growth and job creation.

Eligibility Criteria for SISFS

The eligibility criteria for a startup and incubator to apply for the Startup India Seed Fund Scheme are mentioned below.

Eligibility Criteria for Startups Under SISFS

• A startup recognised by the DPIIT and incorporated or registered not older than two years at the time of filing an application.
• Startups should have a business idea to develop a service or product with viable commercialisation, market fit and scope of scaling. 
• Startups must use technology in their core service, product, distribution model, business model or methodology to solve the targeted problem. 
• Preference is given to startups inventing innovative solutions in sectors like waste management, social impact, water management, education, financial inclusion, food processing, agriculture, healthcare, biotechnology, mobility, energy, space, defence, oil and gas, textiles, railways, etc. 
• Startups that have received more than Rs.10 lakh of monetary support under any Central or State Government scheme are not eligible under this scheme. This amount does not include subsidised working space, prize money from competitions and grand challenges, access to labs, founder monthly allowance or access to prototyping facility. 
• The shareholding of an Indian promoter in a startup must be at least 51% at the time of application to the incubator as per the Companies Act, 2013 and SEBI (ICDR) Regulations, 2018. 
• A startup can obtain seed support in the form of grants and convertible/debt debentures, each one according to the scheme guidelines. 

Eligibility Criteria for Incubators Under SISFS

• The incubator should be a legal entity, i.e. either of the following entity:
  • Society registered or incorporated under the Societies Registration Act, 1860.
  • Private Limited Company registered or incorporated under the applicable provisions of the Companies Act, 2013, or Companies Act, 1956.
  • Trust registered or incorporated under the Indian Trusts Act, 1882.
  • The statutory body created through an Act of the legislature. 
• Incubators must be operational for at least two years prior to the date of filing the application. 
• Incubators should have seating facilities of at least 25 individuals. 
• Incubators should have at least five startups undergoing incubation physically prior to the date of filing the application. 
• Incubators need to have a full-time Chief Executive Officer, experienced in entrepreneurship and business development and supported by a team capable and responsible for mentoring startups in validating and testing, legal, finance, and human resources functions. 
• Incubators must not be disbursing seed funds to incubatees using funding from any third-party private entity. 
• The Central or State Governments should have assisted incubators.
• In case the Central or State Governments have not assisted the incubators, they must satisfy the following conditions to be eligible:
  • Must be operational for a minimum of three years. 
  • Must have at least ten separate startups undergoing incubation physically on the date of application. 
  • Must give the audited annual reports for the last two years. 
• Any additional criteria decided by the Experts Advisory Committee (EAC).

Application for Startup India Seed Fund Scheme

Application Procedure for Startups

The application procedure for availing the seed fund from the incubators by the startups under the SISFS are as follows:

• Go to the official Startup India Seed Fund Scheme website.
• Click on the ‘Login’ button on the top right-hand side of the homepage.
• The ‘Login’ tab will open. Click on the ‘Create an Account’ option at the bottom of the tab.
• The registration page of the ‘Startup India’ website will open.
• Enter the name, email ID, mobile number, password, confirm the password and click on the ‘Register’ button.
• An OTP will be sent to the applicants’ registered mobile numbers. Enter the OTP and click on the ‘Submit’ button.
• Go to the official Startup India Seed Fund Scheme website and click on the ‘Apply Now’ button on the right-hand side of the homepage. 
• Select the ‘Apply Now’ button under the ‘For Startups’ option and log in using the username and password registered on the Startup India website.
• The application form will open. Enter all the details on the application form, upload the documents and click on the ‘Submit’ button.

Upon clicking on the ‘Submit’ button, the application will be submitted for selection of the startup for seed funding under the SISFS scheme.

Application Procedure for Incubators

The application procedure for incubators to apply for the SISFS are as follows:

• Go to the official Startup India Seed Fund Scheme website.
• Click on the ‘Login’ button on the top right-hand side of the homepage.
• The ‘Login’ tab will open. Click on the ‘Create an Account’ option at the bottom of the tab.
• The registration page of the ‘Startup India’ website will open.
• Enter the name, email ID, mobile number, password, confirm the password and click on the ‘Register’ button.
• An OTP will be sent to the applicant’s registered mobile number. Enter the OTP and click on the ‘Submit’ button.
• Go to the official Startup India Seed Fund Scheme website and click on the ‘Apply Now’ button on the right-hand side of the homepage. 
• Select the ‘Apply Now’ button under the ‘For Incubators’ option and log in using the username and password registered on the Startup India website.
• Select the country, click on the input letterbox and click on the ‘Next’ option. 
• The application form will open. Enter all the details in the application form and click on the ‘Save Profile’ button.
• The profile will be sent to a moderator for approval. After approval, log in to the Startup India Seed Fund Scheme website.
• Click on ‘Apply Now’ under the seed fund scheme. 
• Enter the details in the application form such as general detail, incubator support detail, incubator team detail, fund requirement details, etc.
• Upload the documents and click on the ‘Submit’ button.

On clicking the ‘Submit’ button, the incubator will have applied for the SISFS.

Disbursement of Seed Fund by Incubators to Startups

The incubator will disburse the seed fund to an eligible startup as follows: 

• Up to Rs.20 lakh as a grant for validation of prototype development, proof of concept or product trials. The incubator will dispose of the grant in milestone-based instalments related to the development of a prototype, building a product ready for market launch, product testing, etc. 
• Up to Rs.50 lakh of investment for commercialisation, market entry or scaling up through debt, convertible debentures or debt-linked instruments. 
• The startups cannot use the seed fund for the creation of any facilities and should utilise it for the purpose it has been granted. 
• The incubator cannot give more than 20% of its total grant as grants to startups.
• The funds will be given to startups at the rate of interest not more than the prevailing repo rate for startups supported through debt, convertible debentures or debt-linked instruments.
• The incubator should fix the tenure when sanctioning the loan; however, it cannot be more than five years. A moratorium of up to 12 months can be provided for the startups. 
• The loans sanctioned by the incubator will be unsecured due to the early stage of the startups. Thus, the promoter or third party need not give any guarantee. 
• The incubator will execute a legal agreement with the eligible startups before releasing the first instalment. 
• Subsequent disbursements of the instalments will be linked to the achievement of the previously specified milestones as per agreement between the incubator and startup. 
• The startups will receive the funds in their company bank accounts. 
• The first instalment to the eligible startup will be released within 60 days from receipt of application from the startup. 
• The eligible startup should submit the utilisation certificate and interim progress update to initiate the release of subsequent instalment of the grant. 

Implementation of SISFS

The DPIIT formed an Experts Advisory Committee (EAC) to oversee and implement SISFS. The EAC selects incubators, monitors progress, and ensures efficient fund utilization.

It provides grants of up to ₹5 crore to incubators in three or more milestone-based installments, determining the amount per incubator through evaluation.

Each incubator under SISFS will have an Incubator Seed Management Committee (ISMC) to assess and select startups for seed funding, with shortlisted startups presenting before the ISMC.

The ISMC will assess applicants based on presentations and submissions, selecting startups for seed funding within 45 days of application. Selected startups will receive funding through their chosen incubator.