Startup India's Bold Move to Foster Innovation and Investments

In an effort to foster a thriving startup ecosystem in the nation, the government published an action plan for entrepreneurs that includes incentives and programs. There are 19 action items in the action plan, covering topics including hand holding and simplification.

The Startup India launched by the government   initiative on January 16, 2016, with the goal of creating a robust ecosystem that would support innovation, companies, and investments in the nation's startup sector. To achieve these goals, the government released an Action Plan for Startups that includes programs and incentives designed to establish a thriving startup ecosystem in the nation. The Action Plan consists of 19 action items that cover a variety of topics, including "Industry-academia partnership and incubation," "Funding support and incentives," and "Simplification and hand holding."

The government runs a number of programs under the Startup India initiative to achieve certain goals. As of October 31, 2023, the government had recognized 1,14,902 entities as startups as a consequence of persistent efforts.  In order to help startups at different stages of their business cycle graduate to a point where they can raise investments or seek loans, the government is implementing flagship schemes under the Startup India initiative, namely the Fund of Funds for Startups (FFS), Startup India Seed Fund Scheme (SISFS), and Credit Guarantee Scheme for Startups (CGSS). This is done in recognition of the action items of the Startup India Action Plan. Annexure I contains the brief for each of these three schemes.

ANNEXURE-I

The brief of each of the three flagship Schemes implemented under Startup India initiative:

Startup India Seed Fund Scheme (SISFS): The Startup India Seed Fund Scheme has been approved for the period of 4 years starting from 2021-22 with a corpus of Rs. 945 crore. The Scheme aims to provide financial assistance to startups for proof of concept, prototype development, product trials, market entry and commercialization. The Scheme is implemented from 1stApril 2021. The Experts Advisory Committee (EAC), under SISFS, is responsible for the overall execution and monitoring of SISFS. The EAC evaluates and selects incubators for allocation of funds under the Scheme. As per provisions of the Scheme, the selected incubators shortlist startups based on parameters outlined in Scheme guidelines.

Fund of Funds for Startups (FFS) Scheme: The Fund of Funds for Startups Scheme was approved and established in June 2016 with a corpus of Rs 10,000 crore, with contribution spread over the 14th and 15th Finance Commission cycle based on progress of implementation, to provide much-needed boost to the Indian startup ecosystem and enable access to domestic capital. The Scheme is operationalized by Small Industries Development Bank of India (SIDBI). Under FFS, the Scheme does not directly invest in startups, instead provides capital to SEBI-registered Alternative Investment Funds (AIFs), known as daughter funds, who in turn invest money in growing Indian startups through equity and equity-linked instruments. SIDBI has been given the mandate of operating this Fund through selection of suitable daughter funds and overseeing the disbursal of committed capital. AIFs supported under FFS are required to invest at least 2 times of the amount committed under FFS in startups.

Credit Guarantee Scheme for Startups (CGSS): The Government has established the Credit Guarantee Scheme for Startups for providing credit guarantees to loans extended to DPIIT recognized startups by Scheduled Commercial Banks, Non-Banking Financial Companies (NBFCs) and Venture Debt Funds (VDFs) under SEBI registered Alternative Investment Funds. CGSS is aimed at providing credit guarantee up to a specified limit against loans extended by Member Institutions (MIs) to finance eligible borrowers viz. DPIIT recognised startups. CGSS is operationalized by the National Credit Guarantee Trustee Company Limited (NCGTC).