From UPSC perspective, the following things are important :
Prelims level : Seed Funding
Mains level : Startup promotions in India
Startup India Seed Fund Scheme (SISFS) has been approved for the period of next four years starting from 2021-22.
Seed Fund Scheme
- The scheme aims to provide financial assistance to startups for proof of concept, prototype development, product trials, market entry and commercialization.
- 945 Crore corpus will be divided over the next 4 years for providing seed funding to eligible startups through eligible incubators across India.
- The scheme is expected to support about 3600 startups.
Q.Discuss various inherent non-policy challenges to Start-ups in India.(150W)
What is Seed Funding?
- Seed funding or seed-stage funding is a very early investment which aims at helping a business grow and generating its own capital.
- Also referred to as seed money or seed capital, investors often get an equity stake in exchange for the capital invested.
- The investors can themselves be the founders and use their savings as seed money for their new company — also known as bootstrapping.
Why Seed Funding matters?
- It is a fact that starting a new business and lifting it up off the ground is a huge ask for most entrepreneurs and it only gets tougher with capital constraints.
- Seed funding helps get things started before the business earns any revenue.
- It is an effective solution for startups and growing businesses as it provides the much-needed early monetary support.
- It can cover everything from infrastructure costs, marketing and development costs as well as the cost of initial hiring. Investment is the fuel of any business and seed funding is the first drop of this fuel.
- As seed money becomes much-needed cash reserve or working capital, not having it is one of the main reasons for failure.
Various options for Seed Funding
- Corporate seed funds
- Incubators Accelerators
- Angel investors
- Personal Savings
- VC Funding
- Angel Funds or Angel Networks