Government-backed grant of ₹20 lakh plus ₹50 lakh in debt secured through incubators—sounds like the relief every early startup needs. Yet, many founders are discovering that this seemingly generous fund often gets tangled in red tape, bias, and unnecessary hurdles.
A Startling Reality Check from Founders
Take the case of a Chandigarh-based entrepreneur: despite having strong traction, his startup was dismissed just because it was two years and one day old. Meanwhile, freshly incorporated shell companies breeze through the eligibility filters purely by virtue of their formality.
Where Promise Meets Paperwork
According to scheme guidelines:
- Eligible startups must apply through incubators.
- Incubators ought to shortlist within 45 days, with grants disbursed within 60 days.
- Disbursements should be milestone-based and transparent.
But what’s happening on the ground?
- Startups report delays stretching to 4–5 months before funds arrive.
- Some incubators are unprofessional, slow in response—or worse, remain silent long after promising contact sessions.
When Support Comes with Strings Attached
Despite being categorized as grants, many beneficiaries say incubators subtly demand equity stakes, workspace charges, or other hidden fees. These ‘side deals’ often transform grants into compromised partnerships, contrary to the scheme’s original spirit.
Metro Bias Still Looms Large
Startups in cities like Bengaluru, Mumbai, and Delhi naturally attract more attention, leaving others from Tier-II or Tier-III cities facing the struggle to even get noticed. Unequal visibility creates a skewed ecosystem—one where startup promise takes a backseat to geography.
Paperwork Wins, Innovation Loses
Startups with clean incorporation and pristine documentation often get prioritized—even when their substance falls short. Meanwhile, game-changing founders with imperfect records or more mature setups find themselves sidelined.
What Needs to Change—Fast
To truly empower Startup India’s seed funding mission, here’s what must be done:
- Transparent Process: All stages—application, selection, disbursement—must be visible and trackable on a public portal. If timelines slip, those delays need highlighting.
- Merit Over Age: Allow startups past the two-year threshold to qualify if they demonstrate traction or innovation. The focus should be on substance, not just startup age.
- Swift, Stage-Based Payments: Funds should be released based on predefined milestones. Delays beyond 60 days should carry penalties for incubators.
- Zero Hidden Costs: Incubators must be barred from charging equity or fees. Any violations should be flagged and penalized.
- Fairness for Smaller Cities: Expand incubator reach into underrepresented regions. Lower the entry barrier by building awareness and partnerships across India.
The Final Word
This isn’t just a fight over forms and timelines—it’s about building a startup ecosystem that values innovation and drive. When a startup with solid traction gets turned away for being just a day over the age limit, while newcomers with nothing but fresh documents glide in—something has to change.
Startup India Seed Fund has potential—but unless we move from paperwork to purpose, it risks remaining a promise unfulfilled.
