What is the Startup India Seed Fund Scheme?
The Startup India Seed Fund Scheme (SISFS) is a flagship funding initiative launched by the Department for Promotion of Industry and Internal Trade (DPIIT) under the Ministry of Commerce and Industry, Government of India, in January 2021. The scheme aims to provide financial support to early-stage startups for activities including proof of concept, prototype development, product trials, market entry, and commercialization.
With a budget of ₹945 Crore for a four-year period from 2021 to 2025, SISFS is expected to assist approximately 3,600 entrepreneurs through the involvement of around 300 incubators over the next four years. Recognizing that many startups struggle with securing early-stage capital, SISFS addresses this critical funding gap and helps transform innovative ideas into scalable businesses.
As part of the broader Startup India initiative, the SISFS has become an essential resource for emerging entrepreneurs across various sectors and geographies. As of March 2025, the scheme is still valid, and DPIIT-recognized startups can apply for funding.
Need for the Seed Fund Scheme
Early-stage startups often face significant challenges in raising the initial capital needed to develop prototypes, conduct product trials, or successfully launch into the market. Unfortunately, many promising business ideas fail to gain traction due to a lack of financial support at these critical stages.
Traditional funding sources such as angel investors, venture capitalists, and banks generally prefer startups that have already demonstrated traction or market readiness. This creates a substantial gap for nascent businesses that are still in their early stages but have the potential for growth.
To address this challenge, the Government of India launched the SISFS. The scheme aims to provide crucial financial backing and institutional support to startups during their most vulnerable phases, enabling them to bring their innovative ideas to life and scale up.
Objectives of Startup India Seed Fund Scheme
SISFS has the following key objectives:
- Provide Financial Assistance: To support DPIIT-recognized startups with crucial funding for activities such as proof of concept, prototype development, product trials, market entry, and commercialization.
- Encourage Innovation-Driven Entrepreneurship: To foster innovation across all sectors and regions, promoting entrepreneurship that is driven by creative ideas and cutting-edge technology.
- Decentralize Funding Access: To extend financial support to startups in Tier II and Tier III cities, ensuring that entrepreneurs from regions outside major metro hubs also benefit from this initiative, promoting balanced growth across the country.
- Strengthen Incubators: To empower incubators as key enablers of early-stage startup growth, enabling them to disburse funds and provide essential mentorship to entrepreneurs.
- Boost Support for Key Sectors: The scheme places special emphasis on sectors like social impact, waste management, and financial inclusion, encouraging startups working on innovative and impactful solutions in these areas.
How the Startup India Seed Fund Scheme Works
The SISFS operates through eligible incubators, which act as intermediaries between the government and startups. The process is as follows:
- Startup Application: DPIIT-recognized startups apply to incubators through the Startup India Seed Fund portal.
- Evaluation and Selection: A Seed Fund Approval Committee (SFAC) at the incubator level evaluates and selects startups based on factors such as innovation potential, team strength, scalability, and impact.
- Funding Disbursement: Once selected, approved startups receive funding through the incubator in a milestone-based disbursement model. This ensures that funds are provided in phases based on the achievement of specific development milestones.
- Additional Support: Incubators offer a range of additional services to startups, including mentorship, access to labs, co-working spaces, and other support services to help startups grow and scale efficiently.
Key Features of SISFS
- Corpus Allocation: The scheme has an allocated corpus of ₹945 crore for a four-year period (2021–2025) to support early-stage startups across India.
- Funding Type:
- Grants: Startups can receive grants of up to ₹20 lakh for activities such as proof of concept, prototype development, and product trials.
- Convertible Debentures / Debt/Equity-Linked Instruments: Startups can also receive funding of up to ₹50 lakh through convertible debentures or debt/equity-linked instruments, aimed at supporting market entry and commercialization efforts.
- Disbursement Channel: Funds are routed exclusively through empanelled incubators, ensuring that financial support is provided by trusted intermediaries who can monitor progress and facilitate growth.
- Focus on Decentralization: The scheme places significant emphasis on supporting startups in underserved regions, particularly in Tier II and Tier III cities, thereby promoting inclusive growth and enabling entrepreneurs outside major metro hubs to benefit from government funding.
- Supportive Infrastructure: Beyond financial backing, the scheme also provides startups with access to essential resources, including incubation facilities, mentorship, investor connections, and various ecosystem enablers to help scale operations and improve business outcomes.
Eligibility Criteria for Startup India Seed Fund Scheme
For Startups:
- Recognition and Incorporation: Must be recognized by the Department for Promotion of Industry and Internal Trade (DPIIT) and incorporated not more than 2 years ago at the time of application.
- Business Idea and Scalability: Should have a business idea aimed at developing a product or service with clear market fit, viable commercialization potential, and scalability.
- Technology Integration: Must utilize technology in its core product or service, business model, distribution model, or methodology to address the targeted problem.
- Sector Preference: Preference will be given to startups offering innovative solutions in sectors such as social impact, waste management, water management, financial inclusion, education, agriculture, food processing, biotechnology, healthcare, energy, mobility, defense, space, railways, oil and gas, textiles, etc.
- Previous Government Funding: Should not have received more than ₹10 lakh of monetary support under any other Central or State Government scheme for the same purpose. This excludes prize money from competitions, subsidized workspace, founder monthly allowance, access to labs, or prototyping facilities.
- Promoter Shareholding: At least 51% shareholding by Indian promoters at the time of application, in accordance with the Companies Act, 2013, and SEBI (ICDR) Regulations, 2018.
- Seed Support Limit: A startup is eligible to receive seed support only once under the scheme, either as a grant or as debt/convertible debentures.
For Incubators:
- Legal Entity: Must be a legal entity, such as:
- A society registered under the Societies Registration Act, 1860.
- A trust registered under the Indian Trusts Act, 1882
- A private limited company registered under the Companies Act, 1956 or 2013
- A statutory body created through an Act of legislature.
- Operational History: Should have been operational for at least 2 years prior to the application date.
- Infrastructure: Must have facilities to seat at least 25 individuals.
- Active Incubation: Should have at least 5 startups undergoing physical incubation at the time of application.
- Management Team: Must have a full-time Chief Executive Officer (CEO) with experience in business development and entrepreneurship, supported by a capable team responsible for mentoring startups, including assistance in testing and validating ideas, as well as support in finance, legal, and human resources functions.
- Funding Source: Should not be disbursing seed funds to incubatees using funding from any third-party private entity.
- Government Assistance: Must have been assisted by Central or State Government(s).
- Alternative Criteria: If not assisted by the government, the incubator must have been operational for at least 3 years, have at least 10 startups undergoing physical incubation, and provide audited annual reports for the last 2 years.
- Additional Criteria: Any other criteria as may be decided by the Experts Advisory Committee (EAC).
An Experts Advisory Committee
The Experts Advisory Committee (EAC) plays a pivotal role in the execution and oversight of the SISFS. Established by the DPIIT, the EAC ensures that the objectives of the SISFS are met effectively and that the allocated funds are utilized efficiently.
Composition of the Experts Advisory Committee:
The EAC comprises a diverse group of members, including:
- Chairperson: An individual of eminence in the field.
- Government Representatives:
- Financial Advisor, DPIIT, or their representative.
- Additional Secretary, Joint Secretary, Director, or Deputy Secretary from DPIIT (serving as the Convener).
- Representatives from key government departments such as the Department of Biotechnology (DBT), Department of Science & Technology (DST), Ministry of Electronics and Information Technology (MeitY), and the Indian Council of Agricultural Research (ICAR).
- Expert Members: At least three experts nominated by the Secretary of DPIIT, selected from domains including the startup ecosystem, research and development, technology commercialization, and entrepreneurship.
Roles and Responsibilities:
The EAC is entrusted with several critical functions, including:
- Incubator Selection: Evaluating and selecting eligible incubators to receive seed funding under the SISFS.
- Fund Allocation: Approving grants of up to ₹5 crore for selected incubators, disbursed in milestone-based installments.
- Monitoring and Evaluation: Overseeing the progress of funded incubators and ensuring that funds are utilized effectively to achieve the objectives of the SISFS.
- Strategic Guidance: Providing strategic direction and recommendations to enhance the impact of the SISFS on the Indian startup ecosystem.
By fulfilling these roles, the EAC significantly contributes to fostering innovation and supporting early-stage startups across India.
Conclusion
The SISFS is a timely and strategic intervention that addresses one of the biggest pain points in India’s startup ecosystem—early-stage funding access. By empowering incubators to support startups not just financially, but also with mentorship and infrastructure, the scheme is laying a strong foundation for inclusive, innovation-led economic growth. For aspiring entrepreneurs, SISFS serves as a launchpad to convert ideas into viable businesses, while contributing to India’s journey toward becoming a global startup powerhouse.
If you are an aspiring founder with a disruptive idea, SISFS could be your launchpad toward building a high-impact business.