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26 Jun, 2025
By Online Legal India
Published On 25 Jun 2025
Category Startup
In India, many startups struggle to raise money during the early stages of their journey. They often need funds to develop ideas, build prototypes, or enter the market. The government launched the Startup India Seed Fund Scheme (SISFS) in 2021 to solve this issue. This scheme is an initiative of the Department for Promotion of Industry and Internal Trade (DPIIT). It helps startups get the financial support they need to grow and innovate. In this blog, you will learn the details about the Startup India Seed Fund Scheme (SISFS).
The Startup India Seed Fund Scheme (SISFS) was introduced in 2021 by DPIIT under the Ministry of Commerce and Industry. It aims to support young and innovative startups in India by providing early-stage funding through selected incubators which helps them grow and succeed.
The government has allocated Rs. 945 crore under the Startup India Seed Fund Scheme to help around 3,600 startups through 300 incubators. Each selected startup can receive up to Rs. 20 lakh as a grant to develop prototypes or validate their ideas. Additionally, they can get up to Rs. 50 lakh in funding for market entry or business expansion. Only DPIIT-recognized startups, not older than two years, are eligible. Funds are released in stages based on the progress made.
Below are the key features of the Startup India Seed Fund Scheme (SISFS):
The scheme accepts applications throughout the year. There is no deadline or fixed cycle. Any eligible startup can apply at any time. It does not limit support to any particular industry or sector. Startups from agriculture, technology, healthcare, education, and other fields can apply.
The government approved a fund of Rs. 945 crore for a period of four years, starting in 2021. The aim is to support around 3,600 startups. The fund reaches startups through about 300 approved incubators across the country. This ensures wide and fair coverage of funding opportunities.
The scheme provides two types of financial support:
This structure ensures that the startup receives the right support at the right stage.
Only government-approved incubators manage the entire selection process. Each incubator sets up a Seed Fund Approval Committee (SFAC). This committee evaluates the startup based on the product idea, innovation, market potential, team strength, and business model. Once selected, the incubator releases the funds in stages, based on the progress made against set goals.
The scheme promotes startups from smaller towns and rural areas. It gives priority to those that operate from Tier II and Tier III cities. This helps in bridging the funding gap between metro cities and less-developed regions. It also encourages entrepreneurship across India, not just in urban areas.
In addition to funding, incubators offer guidance, mentorship, and infrastructure support. Startups get access to workspaces, testing labs, expert advice, and industry connections. These non-financial services help the startup grow faster and make better business decisions.
The following eligibility criteria for Startups under the Startup India Seed Fund Scheme (SISFS):
A startup must have recognition from the Department for Promotion of Industry and Internal Trade (DPIIT). It must be registered as a private limited company, a limited liability partnership (LLP), or a partnership firm. The date of incorporation must not exceed two years from the date of application. This ensures that the startup is at an early stage of development.
The startup must work on a product or service that uses technology or has a unique approach. The idea must offer a solution to a real problem. It should show the ability to grow in the market and attract customers. The business must aim for commercial success and must not copy existing solutions without improvement.
The startup must not receive more than Rs. 10 lakh from any central or state government scheme. This rule excludes support such as subsidized workspace, prize money from competitions, or founder salary support. The purpose is to give funding to those who have not yet received substantial government help.
At least 51% of the shareholding in the startup must remain with Indian citizens. This rule ensures that Indian entrepreneurs benefit from the scheme. The shareholding must meet the rules under the Companies Act and SEBI regulations. The ownership check takes place at the time of application.
A startup can receive financial assistance under this scheme only once. It can get up to Rs. 20 lakh as a grant for product development. It can also receive up to Rs. 50 lakh as debt or convertible debentures for market entry and growth. The startup cannot apply again after receiving full assistance.
The scheme allows startups from all sectors to apply. However, preference goes to those who work in key areas. These include healthcare, education, agriculture, water and waste management, energy, defense, space, fintech, mobility, and social impact. Startups in these sectors often address urgent national needs.
Here are the eligibility criteria for Incubators under the Startup India Seed Fund Scheme (SISFS):
An incubator must be a legally registered organization in India. It can be a society, trust, private limited company, or a government body created through law. This ensures legal accountability and operational transparency.
The incubator must run for at least two years before applying. If it does not receive any support from a state or central government, it must complete at least three years of operation. This rule ensures the incubator has enough experience to guide startups.
The incubator must have the capacity to seat at least 25 people. This confirms that it can provide working space to multiple startups at the same time. It shows readiness to offer basic physical support.
The incubator must have at least five startups under physical incubation at the time of application. If it does not have any prior government support, it must incubate at least ten startups. This requirement proves the incubator actively works with real startups.
The incubator must appoint a full-time CEO. The CEO must have experience in entrepreneurship, business management, or startup development. The CEO must lead a team that handles support areas like finance, mentoring, and legal assistance.
The incubator must not use private or third-party funds to distribute seed support under SISFS. It must only use the funds approved under this scheme. This ensures fund usage stays within government guidelines.
If the incubator does not receive any assistance from central or state government bodies, it must meet higher eligibility standards. These include three years of operation and ten active startups. This rule filters incubators with proven independent capacity.
The Expert Advisory Committee (EAC) under DPIIT reviews each incubator’s application. The committee may set extra conditions based on the incubator’s track record, impact, and facilities.
Here are the application procedures for the Startup India Seed Fund Scheme (SISFS) for Startups and Incubators:
Here is an application Procedure for Startups:
Step 1: Visit the Official Website
Go to the official Startup India Seed Fund Scheme portal. This portal serves as the single platform to apply under the scheme.
Step 2: Register on Startup India
If you do not have an account, visit the Startup India portal. Click on the Login/Register option. Create a new account with your name, email, mobile number, and password. After registration, verify your mobile number through the OTP sent to your phone.
Step 3: Get DPIIT Recognition
Only DPIIT-recognized startups can apply. To get recognized, fill out the DPIIT recognition form on the Startup India portal. Upload the incorporation certificate, business description, and other required documents. After approval, you receive a unique DPIIT number.
Step 4: Open the Application Form
Return to the SISFS portal. Click the Apply Now button under the For Startups section. Log in using your Startup India account credentials. The application form appears after successful login.
Step 5: Fill in the Application Details
Enter details about your startup. Mention the team background, product or service, problem addressed, business model, market opportunity, and customer segment. State the fund requirement and proposed utilization. Choose up to three incubators from the dropdown menu.
Step 6: Upload Documents
Attach the necessary documents. These include the certificate of incorporation, DPIIT recognition letter, pitch deck, and any other relevant files that support your application.
Step 7: Submit the Application
After entering all the information and uploading the documents, click the Submit button. The portal sends your application to the incubators you select.
Step 8: Initial Screening by Incubators
The incubators review the application. They assess the product feasibility, innovation, team capability, and market potential. Shortlisted startups may receive a request to present their idea before the selection panel.
Step 9: Evaluation by ISMC
Each incubator forms an Incubator Seed Management Committee (ISMC). The ISMC evaluates shortlisted startups based on innovation, scalability, business model, and financial planning. The final decision takes place within 45 days of receiving the application.
Step 10: Funding and Agreement
Selected startups sign an agreement with the incubator. The startup receives the fund in parts, based on milestone achievement.
Step 11: Track Application Status
Startups can log in to the SISFS portal at any time to check the application status. The system updates the status at each stage of screening and approval.
The following application procedure for Incubator:
Step 1: Apply Through the SISFS Portal
To begin the application, the incubator must visit the official Startup India Seed Fund Scheme portal and click on the "Apply Now" option under the “For Incubators” section. After logging in with its Startup India credentials or registering a new account, the incubator fills out an online form. This form collects essential information such as the incubator’s registration details, governance structure, physical and technical infrastructure, incubation facilities, and the types of services offered to startups. This step marks the official submission of intent to participate in the scheme.
Step 2: Submit Required Information
During the application process, the incubator must provide the following details:
This data helps the government evaluate the incubator’s track record, credibility, and capacity to support new startups effectively under the SISFS.
Step 3: Quarterly Review by Expert Advisory Committee (EAC)
The Expert Advisory Committee (EAC), formed by DPIIT, meets at least four times a year to review incubator applications. It evaluates each submission based on various parameters such as the incubator’s team qualifications, past results, quality of physical and virtual infrastructure, governance model, and the effectiveness of its incubation process. After reviewing all submissions in a cycle, the committee selects deserving incubators, approves the grant amount, and finalizes the number of funding installments along with the measurable milestones that must be achieved before each disbursal. This ensures only capable incubators receive and manage public funds.
Step 4: Agreement and Fund Release
Once the EAC approves an incubator’s application, the incubator signs a formal agreement with DPIIT under the Seed Fund Scheme. After this agreement is executed, the approved funds are released to the incubator in stages. The incubator receives the funds in a dedicated Trust and Retention Account, ensuring transparency and restricted use. The release of funds follows a milestone-based approach, where the incubator must achieve specific targets to qualify for the next installment. This process ensures proper fund usage and aligns payments with actual progress.
Step 5: Incubator Responsibilities
After receiving approval, the incubator must take responsibility for running the scheme at its level. It must create an Incubator Seed Management Committee (ISMC), which includes experienced professionals such as incubator officials, state representatives, investors, academics, and entrepreneurs. The incubator must launch a continuous call for startup applications on the SISFS portal, ensuring open access to all eligible startups. It must share submitted applications with the ISMC and conduct fair and transparent evaluations. The ISMC must finalize the selection of startups within 45 days of receiving each application. These tasks make sure that the selection process remains efficient and accountable.
Step 6: Monitoring and Reporting
The incubator must regularly update the SISFS portal with the latest information about startup evaluations, fund disbursements, and milestones. It must submit detailed quarterly progress reports to the Expert Advisory Committee. These reports include fund utilization records, startup development updates, and any challenges faced. The incubator also needs to maintain clear financial records to ensure that the funds are used strictly for startup-related purposes, as specified in the agreement. This constant monitoring helps maintain transparency and allows DPIIT to track outcomes effectively.
Step 7: Reapplication and Review
An incubator can apply for fresh funding under the SISFS only after it fully commits or uses the previously approved fund. The EAC regularly reviews the performance of all participating incubators. If an incubator fails to meet expectations or shows poor performance in terms of fund management or startup support, the committee holds the authority to pause future fund disbursements or remove the incubator from the scheme. This ensures that only well-performing incubators continue to benefit from government support, which maintains the scheme's quality and integrity.
Here is a detailed explanation of Seed Fund by Incubators to Startups:
The incubator provides up to Rs. 20 lakhs in financial support for crucial tasks like product creation, testing, and establishing a proof of concept. It also offers up to Rs. 50 lakhs as debt or convertible debenture for market launch, commercialization, or scaling.
The incubator signs a formal agreement with the startup. The agreement defines clear technical or financial milestones and links each fund tranche to milestone achievement.
The grant amount is split into multiple installments. A maximum of 40% of the approved amount is disbursed in the initial installment. The debt component is disbursed only after proof-of-concept is complete. Funds cannot be used for infrastructure creation.
The incubator must release the initial grant installment within 60 days from the date the startup receives approval from the Incubator Seed Management Committee (ISMC).
Each additional tranche is released after the startup submits a utilization certificate and progress report. Debt comes with a maximum five-year term, 12-month moratorium, and interest up to the repo rate. No collateral is required.
Funds are transferred to the startup's bank account. The incubator must update the SISFS portal with all fund disbursal and milestone details.
Startups must submit final audited reports. In case the project does not succeed, a short exit report must be submitted.
Incubators may claim 5% of their fund as a management fee. They must not charge any fees to startups for fund processing or support.
Conclusion
The Startup India Seed Fund Scheme (SISFS) serves as a powerful boost for early-stage startups with innovative ideas but limited access to capital. It enables entrepreneurs to build prototypes, test products, and enter the market with confidence. By supporting ventures from diverse regions, including smaller towns, the scheme promotes inclusive growth. Eligible founders with promising ideas and clear potential can benefit greatly from this initiative and should consider applying for meaningful support.
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