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Government Funding for Startups in India

Government funding for startups in india

The growth of the Indian business ecosystem is quite evident from the fact that people are frequently talking about entrepreneurship, and promoting shows like Shark Tank India. As the business ecosystem is growing, the conditions for entrepreneurs have become more favorable.

While the favorable demographics undoubtedly contribute, the Indian government has also played a major role in nurturing this growth trajectory. The government of India, through several dedicated initiatives aimed at promoting startups and ensuring their success, has significantly eased the journey for new businesses.

Sustained government efforts to ease the journey for new enterprises have resulted in an increase in the number of recognized startups. There has been a massive increase in government-recognized startups-from 452 in 2016 to 84,012 in 2022.

In terms of government funding, a total sum of Rs. 7,527.95 crore has been approved (committed) as of 30 November 2022, under the Fund of Funds for Startups Scheme. 

To help new-age Indian entrepreneurs, The StartupLab has prepared a list of 21 government schemes that provide Indian entrepreneurs with the tools they require to grow.

Before discussing these schemes, we will talk about the ways by which the government allocates funding to startups.

Grants: Grants are like a financial gift from the government that startups can receive without the expectation of paying it back. 

Loans: If your business needs money to sustain, you can borrow it from the government and agree to pay it back over time, usually with some interest. Although it’s a bit more structured than grants, it can provide the funding you need to get things going.

Equity Investments: This is like having a supportive partner who invests money in your startup in exchange for a share of ownership.

Tax Breaks and Incentives: To boost the business ecosystem in the country, GoI offers tax breaks and incentives, thereby encouraging startups to grow and create more jobs. 

Government Funding Schemes

21 government Funding Scheme for startups:

1. Chunauti Scheme:

Chunauti is a Government of India (GoI) initiative under the Next Generation Incubation Scheme (NGIS). It aims to identify and support startups working towards building products/solutions in emerging tech. The selected startups would get incubation support, mentorship, and all relevant facilities.

Working with a vision to propel India as a Software Product Nation, the incubation scheme aims to make the nation a global player in offering innovative, efficient, and secure software products.

Selected startups under this will also get funding support such as cloud credits from leading third-party service providers, seed funding of up to INR 25 lakhs, as well as INR 10,000 in monthly monetary support to each intern (startup in pre-incubation) for a period of six months. This will help them evolve their business plan and solution around the proposed idea.

To learn more about the scheme, you can click Chunauti Scheme.

2. SAMRIDH scheme

SAMRIDH scheme aims to support existing and upcoming Accelerators to help potential IT-based startups and help these startups scale. Under this SAMRIDH scheme, not only accelerators will get support for helping startups, but the scheme will also provide startups with a first round of funding of up to ₹40 lakhs.

SAMRIDH scheme aims to act as an enabler for startups to take their products/solutions from the prototype stage to commercialization by providing customer connect, investor, connect, and internationalization connects services.

To learn more about the scheme, you can click SAMRIDH scheme,

3. Digital India Bhashini

The Digital India Bhashini scheme was announced by PM Narendra Modi with the aim of supporting Indian startups. It provides them with easy access to the internet and digital services in local Indian languages.

Digital India Bhashini initiative aims to bridge linguistic gaps in the digital sphere and make digital content accessible in various regional languages. 

To learn more about the scheme, you can click  Digital India Bhashini.

4. MSME Market Development Assistance (MDA)

This scheme aims to support MSMEs in entering the export market and provides them incentives for participation in overseas fairs/trade delegations. The scheme empowers MSMEs to showcase their products on a broader platform, promoting growth and visibility.

MSME Market Development Assistance (MDA) facilitates the participation of MSMEs in international exhibitions, fairs, conferences, seminars, and buyer-seller meets abroad and offers funding up to 75% in respect of to and fro airfare for participation in these events.

Specifically designed for MSMEs, this program includes funding provisions for creating promotional materials (covering up to 25% of expenses), conducting specialized studies related to sectors (up to Rs. 2 lakh), and supporting efforts to contest anti-dumping cases (with a 50% subsidy, up to Rs. 1 lakh) – both for individual MSMEs and associations.

To learn more about the scheme, you can click MSME Market Development Assistance (MDA).

5. NIDHI Scheme

NIDHI is an acronym for National Initiative for Developing and Harnessing Innovations.

This umbrella program supports Indian startups by driving innovation and creating a thriving entrepreneurial ecosystem in the country.

The scheme aims to support inventors and innovators in the country. If you are one, you can use various programs in the scheme to get the necessary resources, mentorship, and funding to bring your ideas to realization. 

To learn more about the scheme, you can click  NIDHI Scheme.

6. Credit Linked Capital Subsidy for Technology Upgradation (CLCSS)

CLCSS is a GoI-backed scheme for MSMEs that provides them subsidies to upgrade technology. Through this scheme, homegrown MSMEs can get upfront cash to upgrade their equipment or techniques. 

Under the Credit Linked Capital Subsidy for Technology Upgradation scheme, eligible firms can avail credit amounts up to ₹5 crores. And to ease the credit process, MSMEs can avail the capital from both traditional institutional lenders and NBFCs.

To learn more about the scheme, you can click CLCSS.

7. Digital India GENESIS

Propelling the Indian startup ecosystem to a new level of growth, PM Modi launched the Digital India GENESIS (Gen-next Support for Innovative Startup) scheme to empower national deep-tech startups. 

Emphasizing collaborative engagement among startups, government, and corporates, the scheme aims to discover, support, grow, and make successful startups in Tier-II and Tier-III cities. In the coming five to six years, GoI aims to promote more than 10,000 startups under the GENESIS initiative.

To learn more about the scheme, you can click Digital India GENESIS.

8. MSME Sustainable (ZED) Certification

GoI launched MSME Sustainable (ZED) Certification to create awareness amongst MSMEs about Zero Defect Zero Effect (ZED) practices. It incentivizes MSMEs for ZED Certification. 

Under this initiative, MSMEs get financial assistance/subsidy for obtaining a ZED Certification Level. The financial assistance is based on the size of the business and is as per the following structure, on the cost of certification:

  1. Micro Enterprises: 80%
  2. Small Enterprises: 60%

       iii. Medium Enterprises: 50%

MSME Sustainable (ZED) Certification encourages MSMEs to adopt sustainable practices for producing products while ensuring the quality of their products. 

To learn more about the scheme, you can click MSME Sustainable (ZED) Certification.

9. The Multiplier Grants Scheme (MGS)

Started by the Department of Electronics and Information Technology (DeitY), the Multiplier Grants Scheme (MGS) aims to fill the gaps that exist between the industry and academics/institutions for the development of goods.

MGS encourages businesses to provide industry-oriented R&D at institutes and under the scheme, GoI will provide financial support to the business if it provides R&D of products that can be commercialized at the institution level.

To learn more about the scheme, you can click Multiplier Grants Scheme (MGS).

10. Startup Leadership Program (SLP)

Startup Leadership Program aims to empower exceptional founders and innovators through its highly selective, world-class training program. Entrepreneurs who have gained experience from SLP have founded nearly 2000 successful startups. Additionally, more than $2.4B+ in funding has been allotted to entrepreneurs through this program.

Though this is specifically not a government program, under this program, selected entrepreneurs can apply to pitch at investor demo days on three continents. 

It also enables entrepreneurs to build relationships, boosting the growth of entrepreneurs in their respective sectors.

To learn more about the program, you can click Startup Leadership Program (SLP).

11. ASPIRE (A Scheme for Promotion of Innovation, Rural Industries and Entrepreneurship)

The GoI has chalked out several schemes and initiatives that aim to build a sustainable business culture in India. Not limited to just urban areas, but some of these schemes aim to improve the social and economic aspects of people in rural areas of India as well.

ASPIRE is a GoI initiative promoted by the Ministry of Micro, Small, and Medium Enterprises (MSME) to offer proper knowledge to entrepreneurs residing in rural areas, enabling them to start their businesses. 

To boost economic development at the grassroots level is the aim of the scheme. 

To learn more about the program, you can click ASPIRE.

12. Startup India Seed Fund Scheme 

During the initial stages, a startup can face significant challenges, especially related to producing a minimum viable product (MVP) or running a trial for its initial products.

Assisting startups in such issues, the government launched the SISF scheme so that they can seamlessly produce prototypes from the beginning of their market entry.

Launched by the honorable Shri Piyush Goyal on 19th April 2021, under this scheme, GoI provides financial assistance to startups for proof of concept, prototype development, product trials, market-entry, and commercialization.

According to the policy, startups can receive up to ₹20 lakh rupees for their research and development measures. To learn more about the scheme, you can click Startup India Seed Fund Scheme.

13. Startup India Initiative

To catalyze startup culture in the country, the Government of India started the flagship initiative. Startup India Initiative aims to make India a breeding ground for innovation and entrepreneurship that is on par with global standards.

Launched in 2016 and managed by a dedicated Startup India Team, this initiative has rolled out several programs aimed at supporting entrepreneurs.

The scheme primarily focuses on three key areas:

Simplification and handholding of startups: The scheme streamlines compliance processes, provides legal support, and facilitates patent applications; 

Funding and incentives for startups: It provides startups with financial incentives that include tax exemptions and a fund of funds to inject more capital into startups, along with a credit guarantee scheme; 

Incubation and industry-academia partnerships: The schemes enable incubation support for startups that involve the establishment of incubators, innovation labs, events, and grants to foster a supportive environment for startups to thrive.

To learn more about the initiative, you can click . Startup India Initiative.

15. Pradhan Mantri MUDRA Yojana (PMMY)

Launched by PM Modi in 2015, PMMY is working with a vision to be an integrated financial and support services provider. The scheme, through three products, namely ‘Shishu’, ‘Kishore’, and ‘Tarun,’ signifying the stage of growth/development and funding needs of the MSME, aims to create an inclusive, sustainable, and value-based entrepreneurial culture in the country.

Under the PMMY scheme, non-corporate, non-farm small/micro enterprise units can get loans of up to 10 lakh. Classified as MUDRA loans under PMMY, eligible MSMEs can avail of these loans from Small Finance Banks, Commercial Banks, RRBs, MFIs, and NBFCs. 

To learn more about the initiative, you can click Pradhan Mantri Mudra Yojana (PMMY).

15. Atal Innovation Mission 

GoI’s flagship initiative, Atal Innovation Mission (AIM) aims to build and facilitate an entrepreneurial culture across India. 

Building on the same, GoI has taken a broad approach to ensure the creation of a problem-solving innovative mindset in young school-going children. It also aims to create an ecosystem of entrepreneurship in universities, research institutions, and private and MSME sectors.

Since its inception, AIM has supported 2900+ startups and opened 69 Atal Incubation Centres and 10,000 Atal Tinkering Labs (ATL) that are actively engaging 75 lakh+ students.

To learn more about the initiative, you can click Atal Innovation Mission

16. Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE):

This initiative aims to catalyze the flow of institutional credit to Micro & Small Enterprises (MSEs). Launched to strengthen the Indian credit delivery system, the Credit Guarantee Scheme (CGS) aims to facilitate the flow of credit to the MSE sector.

Ministry of MSME, GoI, and the Small Industries Development Bank of India (SIDBI) have jointly set up the CGTMSE to provide capital access to people who earlier were unserved, under-served, and underprivileged. 

The GoI has made this possible by making the availability of funds from conventional lenders to new-generation entrepreneurs easy. During FY 2022-23, CGTMSE touched the milestone figure of approving guarantees worth 1 lakh crore.

To learn more about the initiative, you can click Credit Guarantee Fund Trust for Micro and Small Enterprises.

17. Venture Capital Assistance Scheme 

One of a few schemes for agriculture, this scheme provides agribusiness projects with interest-free venture capital. Through the Venture Capital Assistance scheme, financial support in the form of an interest-free loan is provided by SFAC (Small Farmers’ Agribusiness Consortium) to qualifying projects.

 Accelerating private investment in setting up agribusiness projects is the main objective of this scheme. Also, the Venture Capital Assistance scheme provides assured markets to producers thus aiding in increasing rural income & employment.

To learn more about the initiative, you can click Venture Capital Assistance Scheme.

18. Standup India Scheme 

The GoI has been making schemes and initiatives specifically for underserved sectors of people. The Standup India Scheme is one such scheme and provides financial support to women and Scheduled Castes (SC)/Scheduled Tribes (ST) entrepreneurs. It facilitates at least one woman borrower and at least one SC and ST borrower per bank branch to avail of loans between INR 10 lakh and INR 1 Crore.

Providing them with a tool to participate in the economic growth of the nation, the Standup India Scheme aims to leverage the institutional credit structure to reach out to this underserved sector of people.

To learn more about the initiative, you can click Standup India Scheme.

19. Design Clinic Scheme 

Not many businesses in India emphasize the process of designing in manufacturing. To bring forth a change, GoI launched the Design Clinic Scheme to bring the MSME sector and design expertise on a common platform. The scheme provides expert advice and solutions to design problems, which results in continuous improvement and value addition for existing products. 

Under this scheme, GoI facilitates and incentivizes MSMEs to develop new design strategies and or design-related products and services leveraging project interventions and consultancy.

To learn more about the initiative, you can click  Design Clinic Scheme.

20. Raw Material Assistance Scheme

As the name suggests, this scheme aims to support startups and MSMEs by helping them purchase raw materials (both indigenous & imported) through capital assistance. 

It facilitates the procurement of raw materials with credit support for up to 180 days. By getting raw material support, these MSEs can focus better on manufacturing quality products.  

To know about the scheme in detail, click Raw Material Assistance Scheme.

21. Single Point Registration Scheme

The Single Point Registration Scheme streamlines administrative hassles for small businesses and enables their participation in Government Procurement processes.

Under this scheme, small business and micro-business units having NSIC registration get an exemption from Earnest Money Deposit (EMD) in government tenders and purchases.

To learn about the scheme in detail, click Single Point Registration Scheme.

How to apply for government funding for a startup

Now that you are aware of the government schemes and initiatives, you must be wondering how to apply for the same. Although we have given the link to each scheme, here’s a quick guide for you to apply for these schemes.

1. Find the Program that suits you:

When the government designs new schemes, it takes a holistic approach, encompassing wide sectors and industries. This means not all government funding programs are made equal. And there are several government initiatives designed specifically for different industries. stages of development, and specific goals.

So, choose the schemes that suit your industry and requirements. Be specific in finding that one initiative that aligns with your startup’s needs and goals.

2. Complete the Application:

Each scheme has specific eligibility criteria and most often, government funding applications can be found online.

Just go through the link provided in each scheme mentioned above. You can click the link and navigate the website, check eligibility criteria and if your startup/ MSMEs fall in the criteria, submit the required details.

3. Provide the Required Documentation:

This step is important as the government wants to make sure you’re who you say you are. 

So, submit the required documents which might include your business plan, financial projections, legal structure details, and maybe even your birth certificate (just kidding about that last one).

Gather these documents, and make sure they’re all in tip-top shape. Neatness counts. And if you don’t have any of the required documents, you can surely get assistance from The StartupLab.

4. Be Prepared to Answer Questions:

Think of this step as your startup’s interview with the government’s hiring manager. The designated personnel will ask you questions or ask for clarifications on your application or documents. 

You have to be well-versed in explaining your startup’s mission, vision, and how you’re going to make a dent in the universe with your product/service.

If you are thinking of availing benefits of the above-mentioned schemes, make sure you have the necessary documents like a business plan, pitch deck, etc. Nevertheless, if you require assistance with the above-mentioned documents, feel free to contact us.

FAQ – 

1Q. How can I get government funding for my startup?

Ans: Just explore relevant government schemes and follow their application process to secure funding for your startup.

2Q. Does the Indian government provide startup funds? 

Ans: Yes, the Indian government offers funding schemes for startups to promote innovation and entrepreneurship. 

3Q. What’s a government scheme for startups? 

Ans: Government schemes are initiatives that provide financial aid, mentorship, and incentives to support startup growth.

4Q. Who qualifies for startup funding? 

Ans: Eligibility for funding varies by scheme but generally covers registered innovative startups contributing to economic growth.

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