Tech-based SMEs rely on scientific or technological knowledge and innovation. They face several risks including a lack of collateralizable assets, long gestation periods, dependence on niche markets, and high costs of R&D and skilled labor. Their financing needs are greatest during the seed and startup stages as they develop prototypes and work to gain market acceptance, though risk decreases as they grow and expand. Financial institutions can help support tech-based SMEs through priority lending, loan schemes, expertise in valuation, and assistance with supply chains and marketing.

1. TECHNOLOGY-BASED SMEs SMEs whose products or services depend largely on the application of scientific or technological knowledge. Or SMEs whose activities embrace a significant technology component as a major source of competitive advantage. Tech-based SMEs are the growth drivers of the economy

2. Characteristics 1.Uniquely positioned as pioneers, strong entry barrier 2.Require substantial capital exceeding the internally generated cash flows. 3.Have long gestation period 4.Growth requires customer adoption, scalability through systems and process standardization. 5.Growth potential linked to value/ difficult to apprise viz. scientific knowledge and intellectual property. 6.Requirement of highly skilled, professional manpower

3. Risk Types in Tech based SMEs Asset Risk Lack of collateralizable assets , intangible assets with a high proportion of human capital, which is difficult to retain and prone to moral hazard. Other assets may be highly specific. Technology Risk Focus as certain set of technologies and processes that are interested in market. Market/Concentration Risk Acceptance/Development of customer market ,focus on small/niche market segment raises vulnerability concerns.

4. Duration Risk Long gestation period raises period for which funding is needed. Operation Risk Operations subject to stringent process controls. FINANCIAL TECH-BASED SMEs Specific financing needs and risks in different phases of SME life cycle. SEED STAGE 1.Modest financial requirements (assessing feasibility,etc) 2.High degree of risk STARTUP STAGE 1.Substantial financial requirements for prototypes 2.Marketing and promotion costs 3.High degree of risk

5. EMERGING GROWTH 1.Sizeable financial requirements 2.Less risk EXPANSION 1.Low financial requirements 2.Less risk Role of Business in Supporting Tech based SME needs Priority sector lending Loan schemes for innovations, follow up finance for VC backed SMEs Provide expertise in evaluating economic benefits of new technology Valuation of intangible assets (R&D expenses , patents , marketing , brand building expenses) Enable formation of supply side linkages (dealers/agents of vendors), long term service contracts. Marketing and promotion for creating a critical user mass for self sustenance. Standards for price transparency & information disclosure to the customer.