Startup India Seed Fund (Complete Detail)

Startup India seed fund scheme is an initiative to provide seed funding to growing startups or startups in their early stages to help them grow. 

Startup India seed fund provides initial capital to entrepreneurs needed to establish their business model well in the early stages. It takes care of essential initial costs for early stage growth of the startup.

How do startups get seed funding in India?

The appropriate startups get their funding after careful distribution via eligible incubators in India. DPIIT, or Department for Promotion of Industry and internal trade, acts as a nodal department and takes advice from the expert’s advisory committee consisting of government representatives and industry experts to identify potential and eligible incubators. These incubators may or may not be government-assisted and are operational for at least 2 to 3 years. These incubators will directly provide funding to DPIIT-recognised startups incorporated less than two years ago.

Features of startup India seed funding scheme

• The application period had no deadline and runs all year round for incubators and startups.
• It is sector agnostic and open to every startup.
• There is no need for physical incubation, and online application makes it easier.
• Associated with PAN-India startup programme
• Startups are only eligible to apply for 3 incubators at a time and not more to allow as many startups as they can

Meeting seed investors may occasionally appear nerve-wracking to you because, at this early stage, not everyone will understand your idea. Your goal is to keep your finances in place and a precise business strategy you will follow, just like any other investment round. Here is some advice on how to obtain seed funding.

Have a clear, profitable strategy

Setting a simple and clear picture of your company’s path to profitability at this point is crucial. You can secure the financing if you have a well-thought-out business strategy that acts as a long-term roadmap for your startup.

You can gain the confidence and funding of the investor if you maintain your financial projections realistically and succinctly, emphasize the business model and transparency, and establish your trustworthiness.

Be prepared with your business proofs.

The key to convincing investors to invest in your business idea during a pitch is to present evidence of your venture’s success. You can receive seed capital for your startup by testing your business plan in the market, clearly communicating your premises, and sharing your business plan with investors transparently.

Secure your intellectual property rights

Even without cash or capital resources for your company, you can still convince investors of your credibility. Making people believe in your intellectual property is one of the most effective ways to accomplish this.

Your company’s credibility will be shown to the investors, and your pitch will be more appealing if you can convincingly explain your business idea and assure them that you will work to build your brand and defend it from violation by other business entities.

Establish your credibility

Being honest and assured about your prior successes is one of the best strategies to demonstrate your deservingness. You must list every funding source you may have obtained previously (if any) and every accomplishment you have achieved in the past. Be careful to provide concrete, measurable data to support your success story while explaining it to investors.

Do incubators provide seed funding?

Incubators often offer modest funding, yet they are usually passionate about delivering startup capital at each step. Incubators assist you in making connections with various prospective investors so you may present your startup business idea and obtain new seed money. The incubator centre offers services like legal advice, HR support, incorporation assistance, tax consulting, and many more, in addition to assisting with funding.

Startup India Seed Fund Scheme

It is for financing for proof-of-concept, pilot testing, product trials, market access, and startup commercialization.

Startup India Seed Funding Program’s Need

Easy access to funds is crucial for entrepreneurs in the initial stages of an enterprise’s growth.

Startups can only obtain funds from angel investors and venture capital firms if a proof of concept has been shown. Similarly, banks only lend money to applicants who can vouch for their assets. It is to enable firms with creative ideas to undergo proof of concept tests; early capital is crucial.

Purpose of the Scheme

The Startup India Seed Fund Scheme (SISFS) intends to support entrepreneurs in market entry, product testing, prototype creation, proof of concept, and commercialization.

This would allow these firms to advance to a stage where they may find funding from venture capitalists or angel investors or apply for loans from conventional banks or other financial institutions.

How much is the startup India seed fund?

A qualifying startup will receive Seed Funds in the following ways from the incubator:

• Grants worth up to Rs. 20 Lakhs could be given for verifying a Proof of Concept, pilot testing, or product trials. The funds will be released in stages based on reached targets. These benchmarks may be connected to prototype creation, product testing, creating a product fit for market release, etc.
• Investments up to Rs. Fifty lakhs may be made via convertible debt securities, debt, or debt-linked instruments for market entry, commercialization, or scaling up.
• According to the programme’s rules, a startup applicant may receive seed funding once in the form of a grant and once in the form of debt or convertible debentures.

FAQ

Is seed funding the same as an angel investor?

Both seed funding and angel investors aim to finance new businesses. Although they differ in size, both sources of support are essentially the same. Both frequently lend money to entrepreneurs based on their connections to or knowledge of the business.

How much equity is required for seed funding in India?

Most founders typically sell 10% to 20% equity in seed rounds.

Do you need an MVP for seed funding?

Yes, for most seed funding rounds minimum viable product or MVP is a crucial requirement. 

Do you have to pay back seed funding?

This funding is typically considered a loan that must be repaid at future times, with or without interest.

How much return do seed investors get?

Typically, investors have an annualized internal return rate of 20–40% and aim to break even in 5-8 years. To balance their risk, angel investors and venture capitalists invest in various businesses because it depends on how the business develops.

Conclusion

There is no doubt that seed funding is extremely important to the growth of any company. However, don’t let large figures on a sheet of paper affect your choice. Your approach should be supported by a thorough analysis of the equity given up, payment conditions, returns, and other elements. As a startup, it is advisable to seek incubators for seed funding and support, as it will be a pioneering step towards the profitability of your startup business.

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