In theory, the Startup India Seed Fund Scheme (SISFS) appears to be a game-changer: ₹20 lakh as a grant and ₹50 lakh as debt or convertible instruments, providing much-needed runway for early-stage startups. These are released through incubators, which are given upto ₹5 crore each by the government to facilitate the process.
Recently, a Chandigarh based startup founderSunil Kumar Poonia shareed his experiences after applying for this scheme.
Here’s what numerous founders are really going through:
If your business is just 2 years and 1 day old, you’re automatically out—no matter your traction or stage of execution. This hard and fast rule doesn’t consider strength of idea or market validation. At the same time, shell companies with new incorporation can fall through the cracks if they satisfy the minimum requirements—prioritizing paperwork over substance.
Long waits & uncertainty in disbursement
Theoretically, incubators have to shortlist applicants within 45 days of application, and the grants have to reach them within 60 days of application. But founders cite waits much longer than this. They say they had to wait 4–5 months from incorporation to disbursal of funds. They attribute some of this to incubators being slow or unprofessional, requiring long due diligence and paperwork before making payments.
Equity demands and middlemen
Though the scheme is supposed to be grant-based, incubators or intermediaries harass startups for equity, space charges, or quid-pro-quo arrangements for availing funds. This is contrary to the very essence of equitable support.
Tier II/III bias & lack of visibility
Startups from tier-II and tier-III cities find it hard to get discovered. For instance, startups in states such as Telangana got much less through central schemes than hubs such as Karnataka or Maharashtra. This is a reflection of a systemic bias towards metro cities, whereas Tier-II and Tier-III founders struggle to even get into incubator pipelines.
System rewards formality, not innovation
Instead of rewarding innovation thought or execution capacity, the system tends to reward new additions, clean documentation, and formalities. It penalizes true founders who might have great traction but are over two years old or do not have pristine documentation.
Check out his post on Linkedin:
What must change?
If India really wishes to create Atmanirbhar Bharat by enabling true startups, this is what must change:
Transparent selection criteria and monitoring
The whole selection and incubation process of Startup India should be transparent on the Startup India platform and have predetermined timelines. Delay beyond 60 days should be highlighted.
Merit-based, not age-based eligibility
Ease the incorporation age criterion or provide exceptions for high-concept-proof, traction, or impact-potential startups. Rather than applying company age as a filter, assess concept strength, execution, and validation.
Quick, responsive disbursement
Pay out grants in stages against milestones, with strict timelines. Hold incubators responsible for unwarranted delays—particularly beyond the guaranteed 45-day selection / 60-day grant disbursement window.
No hidden fees
Audit incubators for no requests for equity or other covert fees. The system has to be cost-free and founder-friendly.
Level the playing field for smaller cities
Actively onboard incubators at Tier-II and Tier-III cities. Develop focused outreach programs, visibility platforms, and awareness campaigns for non-metro startups.
Read this: Elevation Capital Launches $400M Late-Stage Fund for IPO-Bound Startups
Final Thoughts
It is not simply a matter of expanding company age limits—it’s a matter of moving away from paperwork-based gatekeeping to outcome-based support. Today, a legitimate founder with good traction can be rejected on the grounds that they incorporated earlier, while a newly registered shell entity takes priority. That’s a critical flaw.
