‘₹70 lakh promise, fancy paperwork, no output’: Founders rip into Startup India’s seed fund scheme

The Startup India Seed Fund Scheme, launched to empower entrepreneurs with early-stage capital, is drawing fire from founders who say it’s bogged down by red tape.

In a LinkedIn post, Sunil Kumar Poonia, Co-Founder and CMO at WictroniX, spotlighted the growing disconnect between policy promises and on-ground execution.

“On paper, it sounds revolutionary: ₹20 lakhs as a grant + ₹50 lakhs as a loan. But here’s the reality most founders are facing,” he wrote, pointing to hurdles like delays in fund disbursal, rigid eligibility rules, and a lack of transparency in incubator operations.

He alleged that some incubators and middlemen demand equity or favours, and that startups in Tier-II and Tier-III cities often get overlooked in favour of those from metros. “Instead of funding innovation, the system often ends up rewarding paperwork & fresh incorporations,” he added.

Poonia also questioned the logic of disqualifying startups older than two years, arguing that evaluation should be based on innovation, execution, and impact — not the date of incorporation. “Why should a genuine founder with traction be rejected while a re-registered shell entity with the same directors gets through?”

His post resonated widely, with other founders sharing similar experiences. One entrepreneur described some incubation centres as hubs of “favouritism and lethargy,” citing a case at AIC NITTE Incubation Centre where family-run ventures allegedly got preference.

Another founder noted that funds were often allocated to ventures with “fancy paperwork but no real output,” while stronger startups were left behind.

A third user proposed creating a **“Startup Bank of India”**—a founder-led financing body offering loans against equity without traditional credit constraints.

Unless Startup India ensures transparency, efficiency, and genuine access for non-metro founders, Poonia warned, it risks becoming “more about noise than nurturing real Atmanirbhar Bharat.”