The Startup India Seed Fund—How Will It Help Your Startup?

Seema Banerjee Seema Banerjee
Apr 5, 2021 6 min read
The Startup India Seed Fund—How Will It Help Your Startup?

Indian Prime Minister Mr. Narendra Modi has from the start of his tenure emphasized the growth of India with the “Made in India” plan. Under his leadership, the central and state governments have been actively incentives for Indian Businesses.

He was addressing the Prarambh Startup India International summit and said in his address that the target for India’s startups over the next five years should be to become global giants in their respective service areas. And announced the launch of a new seed fund for startups for setting up and growing business subsequently.

Read on to learn how it can impact your startup.

When is a Business called a Startup?
What is Startup India?
What is Startup India Seed Fund?
What will the Startup Seed India Fund do for Startups?
What Advantages would Startups get with Startup Seed India Fund?
FAQ's
Conclusion

When is a Business called a Startup?

A business would usually be called a startup when it has been set up, so a young company. It is a venture by the aspiring entrepreneur to create a unique product or provide a service. These usually operate on a tight budget and are funded either by the founder or with association with friends, family, or maybe personal borrowing.

The very first challenge they face is validating their product or service. They have to convince the consumer that their product/service is worth believing and spending. And convince lenders and investors of the possibility of healthy returns.

What is Startup India?

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Startup India Benefits by Government

Startup India was introduced in 2016 by the Central government with intention of creating a positive environment to encourage innovation and growth of new companies in the country. This would ensure the sustained growth of the nation and provide a continued source of employment.

The government created the Startup India Action plan to:

  • Simplify establishing business and provide guidance
  • Provide funding schemes and other incentives
  • Be a common ground for industry and academia to work together

Definition of a Startup under Startup India:

  • Establishment: The company’s date of incorporation should not exceed 10 years
  • Type of Company: The business should be registered as either Private Limited Company; a Registered or Limited Liability Partnership
  • Turnover: The annual turnover should not exceed 100 crores in any year since incorporation
  • Formation: The business should not have been formed by splitting the company
  • Potential: The should a potential to improve existing product or service and creation of wealth and employment in the process
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What is Startup India Seed Fund?

The Fund of Funds for Startups was set up in 2016 so that new companies could get assistance in raising equity capital through the Fourteenth and fifteenth Finance commission cycles. The size of this corpus was a huge 10,000 crores and it was mainly designed towards raising equity capital.

With the announcement of the Startup India Seed Fund, the Government has taken its initiative a step further. Allocating 1,000 crores for gaining access to debt capital by providing the guarantee for these young companies.

What will the Startup Seed India Fund do for Startups?

Prime Minister Mr. Narendra Modi announced that the new Startup Seed India fund will assist companies source funds for their growth and operative costs. The main aim is to assist with gaining access to debt capital by providing a guarantee to potential investors and lenders.

Your undertaking gets a solid back in form of a government guarantee and securing the needed funding. On the other hand, while lenders and investors have peace of mind having secured the return of their money.

This follows a similar initiative by the Ministry of Electronics and Information Technology in 2020 to select up to 300 startups and provide them financial assistance. This would include funds up to rupees twenty-five lakhs and a host of other benefits.

The Startup seed India Fund is expected to be designed along similar lines and more details are expected in the forthcoming weeks as the structure is set in place for encouraging new enterprises by the Indian Government.

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What Advantages would Startups get with Startup Seed India Fund?

Startup India has a lot of in-store for the new enterprise. And as it sees a new dimension added to it, you can without doubt expect the advantages to be aligned with each other:

  • Simple Process: The government recognizes that setting up a new venture is exhausting; thus, the registration process is simple and straightforward. Most of it can be even completed online and the documentation required is easily accessible.
  • Inexpensive: The government can provide information about facilitators who help in completing expensive processes at lower costs. And the statutory and other fees may be borne by the government or kept very nominal.
  • Access to Funds: A 1000 crores corpus has been set aside by the government for the Startup Seed India Fund. This government will also provide a guarantee to lenders and other investors to help raise debt funding for the undertaking.
  • Simplified compliances: Many compliances and essential requirements have been simplified to save time and money. This makes the process more transparent, easily understandable, secure, and understood by the masses.
  • Tax Benefits: There are usually tax benefits offered to both new companies and investors. The new institution will get either be exempt from tax or reduced tax up to a certain turnover. The lender will have similar facilities for the money invested.
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FAQ's

What is Startup India scheme?

Startup India Scheme is an initiative by the Government of India for generation of employment and wealth creation. The goal of Startup India is the development and innovation of products and services and increasing the employment rate in India. Startup India was launched by Prime Minister Shri Narendra Modi.

Who are eligible for Startup India?

Being incorporated or registered in India for less than seven years and for biotechnology startups up to 10 years from its date of incorporation. Annual turnover not exceeding INR 25 crores in any of the preceding financial years.

How do I get funding for my Startup?

One of the most popular forms of startup funding is through venture capital. High-net-worth individuals, giant super funds, corporates and other groups invest in venture funds, which are managed by investors, who invest in startups on their behalf, taking equity stakes in the business.

How much Fund has the Indian Govt. announced for Startups?

The Indian Government has taken its initiative a step further by announcing the Startup India Seed Fund and allocated 1,000 crores for the startups.

Conclusion

Under the current Regime, India has seen a more robust environment conducive to the establishment and growth of startups. The Indian government has promoted new ventures not only to engage the youth. But also, to bring forth innovation, create employment, strengthen the economy and development of the nation. This new Startup India Seed Fund is another step to make the future brighter and make India self-sufficient.

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