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GENERAL MANAGEMENT PROJECT ON
“ANALYSIS OF START-UP COMPANIES, FUNDING AND
CHALLENGES INVOLVED”
Submitted in partial fulfillment for the award of the degree of
Master of management
studies(Under University of
Mumbai)
Submitted by
Purujit Ganeshan
Nadar - 85
Under the guidance of
Dr Seema Ladha
SIES College of Management Studies

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CERTIFICATE
This is to certify that project titled “Analysis of Startup Companies, fundings and
challenges involved” during the IV semester,in partial fulfillment of the Master’s
degree in management studies recognized bythe University of Mumbai for the
academic year 2021-2023 through SIES Collegeof Management Studies.
This project work is original and not submitted earlier for the award of any degree
/diploma or any associateship of any other University/Institution.
Name: - Dr Seema Ladha
Date: - (Signature of the guide)

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DECLARATION
I hereby declare that this project report submitted by me to SIES College of
ManagementStudies isabonafide work undertaken by meanditis notsubmitted
to any other university or institution for the award of any
degree/diploma/certificate or published any time before.
Name: - Purujit Ganeshan Nadar
Roll No: - 85 Signature of the student

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Acknowledgements
I would like to express my profound gratitude to all those who have been
instrumental in the preparation of my project report including my family and
friends. I am immensely grateful to Dr. Seema Ladha for her constant support,
suggestions, and feedback for my project work. She has proved to be extremely
valuable and has given me an opportunity to constantly improve myself and my
work. Her encouragement has always boosted my confidence.
Signature
Purujit Nadar
Date: -

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GENERAL MANAGEMENT PROJECT ON
“ANALYSIS OF START-UP COMPANIES, FUNDING AND
CHALLENGES INVOLVED”
INDEX
SR NO. TITLE PAGE NO.
1. Executive Summary 5
2. Introduction 6
2.1 The Start-up Ecosystem in India 11
2.2 Reasons for Setting up a Start-up 12
2.3 Action Plan for Start-ups in India 13
2.4 Characteristics of a Start-up 14
2.5 Startup Development Stages 17
2.6 Different ways of raising funds for a Start-up 19
3. SWOT Analysis 30
4. Literature Review 42
5. Objective 43
6. Research Methodology 44
7. Limitations 45
8. Challenges 46
9. Recommendation and suggestions 48
10. Conclusion 49
11. Bibliography 50

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EXECUTIVE SUMMARY
India is a country with more than 1.3 billion people which makes it second most populous country
in the world. Because of the large population in India it also has a large potential market but this
leads to heavy unemployment. Because of this the self-employment among youngsters is
increasing. They tend to take initiative to look for new opportunities and chances for themselves.
This research aims to analyze the strength, weakness, opportunities, threats and also investigate
the challenges of financing start-ups in India. This study explores the main difficulties faced by
start-ups in India, and discusses the financing resources of start-ups.
When someone tries to start a new start-up or tries to get into entrepreneurship, they face a lot of
problems like finance, permissions, environmental clearance, investment proposals etc.
Government of India focuses on filling the gap between the economy and its development by
helping entrepreneurs of India. It has given a lot of confidence to initiate among the entrepreneurs
of India.
According to the Prime Minister, the start-ups technology and innovation is exciting and will be
effective instrument for India’s growth. An idea can be converted into a start-up. Sometimes the
crisis can be seen as an opportunity and it can give birth to the start-ups. Many a times we have
seen that we have an idea but we do not dare to initiate it or we do not find it worthy. On the other
hand, other people take that idea as an opportunity and mobilize into the reality. The main objective
of the government is to reduce the heavy load on the entrepreneurs thereby allowing them to
concentrate fully on their business.

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INTRODUCTION
A start-up is a new idea and newly established business. A company that is built from scratch but
designed to scale with an unnaturally high pace, a start-up is a “company designed to grow fast”.
A start-up is a structure of business created to solve a problem by delivering a new product or
service under conditions of extreme uncertainty.
Entrepreneurs define start-up as a mentality and a culture of building a business upon an innovative
idea to solve critical problems. Many other entrepreneurs have further simplified the definition of
the start-up and linked it with growth. A start-up is a company designed to innovate and grow.
Any company which is newly started is not a start-up nor is it compulsory for it to work on
technology, or take venture funding, or always have some sort of “exit.” The only essential things
are innovation and growth. Everything else that we associate with start-ups follows from growth.
Start-up is an incorporated or registered in India:
 Not prior to seven years, with an exception for Biotechnology Start-ups not prior to ten
years.
 With turnover not exceeding INR 25 Crores annual in any preceding financial year.
 Working towards improvement, development or innovation of products or services or
processes, or if business is a scalable business model having a high potential of generating
employment or wealth creation.
 The new entity should not be formed by reconstruction or splitting up of a business already
in existence.
 Provided also that a new entity shall cease as a Start-up if its turnover for the previous
financial years has exceeded INR 25 Crores or it has completed 7 years or for
biotechnology start-ups 10 years from the date of incorporation or registration.

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 A start-up should be eligible for tax benefits always after it has obtained certification from
the Inter-Ministerial Board, setup for such purpose.
All the above criteria should be met for certification from government and one of the initiatives by
government to bring the start-up ecosystem closer is start-up India.
The Start-up Scenario in India
The start-ups in India saw a 108 per cent growth in total funding from 2 billion USD in 2017 to 4
billion USD this year. More than 1,200 start-ups came up in 2018, including eight unicorns, taking
the total number to 7,200 start-ups.
Following table representsthe top Unicorn Companies of India:
Name of the
company
Valuation Industry CEO Details of the
company
Snapdeal 7 billion $ Ecommerce Kunal Bahl Snapdeal,
operated by Jasper
Infotech, is a daily
deal site featuring
a wide range of
products and
services from
thousands of
national,
international and
regional brands.
Oyo room 5 billion $ Travel tech Ritesh Agarwal Oyo Rooms,
operates a virtual
hospitality brand

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in India by
aggregating
hotels/guesthouses
in the economy
segment, making
inventory
discoverable and
bookable online,
and providing a
standardised and
trusted experience
to travelers.
Ola cabs 4.3 billion $ Travelling
Service
Bhavish
Aggarwal
Olacabs is a ride-
hailing taxi
service provider,
having its
headquarters in
Bengaluru. The
company has
recently started
services in
Australia and the
UK.
Hike 1.4 billion $ Social Kavin Bharati
Mittal
Hike is a mobile
messaging app
and simplifies
how people
connect and
interact with
content and

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services on
mobile.
Swiggy 1.3 billion $ On demand SriharshaMajety Bundl
Technologies,
Swiggy, is a
Bengaluru-based
food ordering app.
The company
partners with
restaurants to
offer users food
ordering and
delivery services.
The company has
its own fleet of
delivery personnel
who pick-up
orders from
restaurants and
deliver it to
customers.
Shopclues 1.1 billion $ Ecommerce Sanjay Sethi ShopClues.com,
operated by Clues
Network, is a fully
managed online
marketplace 9

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that connects
buyers and sellers
and offers a
trusted and safe
online shopping
experience.
Zomato media 1 billion $ Social Mohit Gupta Zomato Media is
an India-based
online food and
lifestyle portal
providing
advertising,
ratings, and
reviews for
restaurants. It has
an Uber booking
option built in to
the app, allowing
users to book cabs
to take them to the
restaurants they
wish to go to right
away.

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The Start-up Ecosystem in India
Along with government initiatives, there is a definite movement in start-up arena in India due to
penetration of IT and internet. Many start-ups are coming up in service sector including education,
legal, retail, insurance and health. With customers becoming aware of the benefits and
convenience, the popularity and viability of start-ups is no more a difficult proposition for an
entrepreneur. A number of venture capitalists and angel investors are aggressive and gung-ho on
Indian start-ups as they see lot of potential with few expected to become unicorns (high valued
companies) bringing in good returns.
On the contrary, there are examples of few start-ups that failed and eventually closed their
businesses due to various issues and challenges. India being a large country with over 130Cr
population, boasts of high demographic dividends due to large number of young people. According
to the latest UN report India with 356 million 10-24 year-olds have the largest concentration of
youth population who are going to be the driving force behind innovation and creation with
commensurate demand and consumption of goods and services (Mittal, 2014). India has a unique
set of problems due to multicultural and multilingual regions that need innovations to find
solutions to health, education, infrastructure, sanitation and for population at the ‘bottom-of-the-
pyramid’ space.
Each problem provides a unique opportunity for start-ups to create a business around it. India's
tele-density reached 76.55 percent with a subscriber base of 95.76Cr bringing in convenience and
reach to consumer segments including Tier-2 and 3 towns (TRAI,2017). This increased mobile
penetration has given a fillip to Indian economy with E-commerce garnering increased share.
Further, GoI’s digital push is going to improve connectivity and data to higher levels bringing in
more software applications to find solutions for day-to-day issues. The reduction in data charges
will also help start-ups to tap into new markets and even disrupt traditional businesses.
The entire start-up ecosystem has this entity in India which provides a single point of contact and
it also enables knowledge exchange as well as access to funding. It will be acting as a key stake
holder for start-ups in near future.

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The major functions of these Hubs are:
 Collaborate with the Central & State Government, Indian & Foreign investors, angel
networks, banks and other financial institutions.
 Specific focus through the lifecycle of start-up with some important aspects like feasibility
testing, obtaining financing, business structuring advisory, management evaluation and
enhancement of marketing skill.
Reasons for Setting up a Start-up
Few but the important reasons for setting the start-up are as follows:
 Monetary gains: Everyone wants more and more money. And the best way to get it is by
having your own business. In the job one gets the fixed amount of salary but in own
business one can get monetary gains as per his choice.
 Secured job: Job security is one of the basic needs of human beings and it is also referred
in the Maslow need hierarchy theory. If job is not secured one cannot work with full zeal.
And on the other hand, when one works in the business with the tag of an owner the zeal
and enthusiasm comes automatically, and the job is secured.
 Job creation: When any entrepreneurship is started people tend to create jobs for others
also. An individual can start a business but cannot run it alone. So, the opportunity of jobs
being created.
 Own brand: It always feel good when one tells the other person that the brand belongs to
him or he is the owner of that developing brand. It gives immense pleasure to introduce
yourself as an entrepreneur.

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 Quality of life: Due to the impact of globalization and e-commerce everyone wants to be
at ease and desires to the best quality of life. Being as an owner one has the freedom to
choose the life accordingly.
 Be your boss: It’s always good not to have a boss. In the business you are not answerable
to anyone accept yourself.
 Converting vision into reality: Everyone has a vision but very less people turn it into reality.
While owing an entrepreneur you can convert your vision into reality.
 Pride: It is a thing of pride when you introduce yourself as the owner of the start-up or an
entrepreneurship.
 Recognition: It is also a need which comes under the need hierarchy theory (Maslow,
1943). Every single person wants fame and recognition. And business provides the same.
 Economic independence: Having more money its one’s decision where to put that money.
One has the more economic independence.
 Changing the world: Every time we talk about changing the world with lots of ideas but
we never take the initiative to do so. People who take the initiative can change the world
according to them, if not the world till they make a difference.
Action Plan for Start-ups in India
India’s Prime Minister announced action plan for encouraging Start-ups.
 Funding support through “Fund of Funds for Start-ups” (FFS) with corpus of Rs. 10,000
crores out of which Rs.500 crore used in 2015-16 and Rs.600 crore in 2016- 17.
 Entrepreneurs should register a company in one day, against 15-20 days as row.

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 No tax on Profit, inspection for 3 years
 Capital Gain Tax exemption.
 Credit Guarantee Scheme.
 Easy & Faster Exit Policy.
 No Capital Gain if money is invested in another start up.
 Self-certification-based compliance for Labour& Environment laws.
 Set up of start-up India hub for clearance
 Mobile apps, portal for registration.
 Holding with Govt. acting as a friend and colleague.
 Encourage start-ups in Government purchase.
 Special Scheme for women entrepreneurs.
 Support bio-technology start-ups
 Programmed to encourage innovation among students in 5 lakhs Schools.
 Building innovation centers at National Institutes.
 Setting up Research Park.
Characteristics of a Start-up
Most successful start-ups do not share common characteristics from thoroughly researching about
product-market fit, to focusing on what matters the most, and what to let go. Some of the common
characteristics of start-ups are:

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 Small Test Markets:
Conversely, just because entrepreneurs found that the product or service is serving to a
large market, doesn't mean they should tackle it all. As PayPal co-founder and early
Facebook investor Peter Thiel recently told Stanford University students: "The biggest
mistake you can make as a young start-up is going after a giant market from the get-go.
That signifies that you haven’t defined categories correctly. And you’re going to be dealing
with too much competition in one way or another." It's counterintuitive that you need a
product that covers a large market share, or you'll never be able to scale into a large
company. However, start small to fine-tune your process and ultimately get there. A classic
tech example of starting with a small market is Facebook. Mark Zuckerberg infamously
started the site at Harvard, followed by some of the other Ivy League universities. Later
the Facebook gave its access to anyone in the country with an educational email address.
Long before it took over the world, they were constantly in the innovation mode and
adjusting to feedback.
 Product Market Fit:
Providing a service or product to customers that they actually want is important. Customers
must be able and willing to pay for what start-ups are selling. Seems obvious and
straightforward, yet many start-ups do struggle with at the time of defining their product-
market fit. 42 percent of all the failed start-ups that were surveyed attributed their failure
to bad market fit. It can be assumed that most of these companies carried out some kind of
research before launching their start-ups in to the market. You may initially well-received
with the product or service, only to later find out that the product doesn't have the level of
demand or support you require to be successful. Successful start-ups are aware that any
idea or product concept is needed to be fine-tuned as it rolls out. They continuously keep
on testing their assumptions and make changes in the course of action as and when needed.
As soon as they nail down product-market fit, there are better chances of a successful start-
up.

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 Passionate About Disruption:
Successful start-ups are mostly based on disruptive ideas. More than a buzzword,
disruption has always been changing the status quo in the present marketplace. Disruptive
technology leads to creation of value networks and new market that eventually displace
more established ones. Most important factor of any successful start-up is over and above
someone willing to be their boss of their own business but its envisioning something which
is a new normal for their target market. It’s that differentiating factor which sets them apart
and places them in the face of existing competitors, norms and industry standards. Many
factors are also contributing to it. Of course, what disruptive idea is will always remain
debatable. Generally, it's something that will always be irritating someone (competitors),
while delighting someone else (customers).
 Company Cultures:
At the start with company's initial couple of years, half of their employees will probably
part ways, according to Forbes. Main reason for quitting mostly it comes down to improper
management, which is directly correlated with the culture and work environment.
Traditionally speaking, company’s culture is nothing more than a common set of beliefs
shared by a community. Therefore, an office culture is essentially made up of the
assumptions held by management about how (and why) work is done:
1. Who are we as a business and as individuals?
2. What do we believe in/stand for?
3. How close should we be with our coworkers?
4. Should dogs be allowed at work?
Answers to these questions ultimately determine the overall culture of any start-up. With
the constant pressure always on everyone to speed up product development and get rolling
on customer acquisition, it's no wonder that many founders do tend to neglect

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culture. Clear idea of what are common beliefs leads to cultivating a strong culture
ultimately by clarifying your values as a company, and then passing those values into
everything from work environment to office policies. It's for this reason many of the new
founders refuse traditional office settings over shared tech workspace. With limited
resources and time, getting along with the kind of culture you want to replicate is a smart
move.
 Feedback:
Another factor contributing to the success of any startups is the way they adjust and work
on the feedback. Irrespective of the source of the feedback let it be from investors,
customers, mentors, or advisors, successful startups find value in feedback to improve on
their business model, service, or product. Ultimately, it's a balancing act of knowing when
to hold your ground and when to pivot.
Tech savvy founders extract from connections that they have with mentors and advisors
early on, forming a bond with those that entered before them can help them learn from their
mistakes and success. The best possible ways to make such connections are by co-working.
Setup center in a tech related workspace, and you'll be connected with mentors and advisors
who understand the challenges you face.
Startup Development Stages
1. Ideation: Formation of concept of startup or the idea takes place, with some questions to
answer which are need for design rights, patents, trademarks, database rights, and
copyrights. Reviewing the initial structure as Limited Liability Partnership, Limited
company, Traditional Partnership or sole trader. Is funding required? If yes then what kind
of funding is most suitable?

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2. Concept: Checking for naming rights in applicable registries in relation of trade names for
the proposed entity, deciding the structure by setting a goal and implementing as to
company/partnership and sole trader/limited structure. Complying with formalities.
Negotiating terms of any option scheme or shareholder agreement.
3. Commitment: Shareholder Agreement to be made after agreement and get it signed then
the initiation of the Option scheme is done followed by finalizing terms for funding and
signing agreements. Any corporate formalities associated with the above are to be
addressed. Negotiating and agreeing any software development agreements (for e.g.
website or products). Thereafter startup comes in existence and is to be validated.
4. Scaling: Many of legal aspects of validating repeated but multiple times and with greater
consequences and only big step is looking for international development through
franchising, licensing or establishing of local entities.
5. Growth and Establishment: Business should now be generating a consistent source of
income and regularly taking on new customers. Cash flow should start to improve as
recurring revenues help to cover ongoing expenses, and you should be looking forward to
seeing your profits improve slowly and steadily. In this stage one of the challenges for
entrepreneurs finding time between new ranges of demands which are to be addressed and
managing increasing revenues, dealing with the competition, attending to customers,
accommodating an expanding workforce.
6. Maturity and Possible Exit: Year-on-year profits for the company should now be
stabilizing. While many companies try to continuously grow their top line at a decent pace,
others companies struggle to enjoy such high growth rates. It can be assumed that the
entrepreneurs are left with two options, either to go for expansion where they will have
monitor growth and look for opportunities in the current market for expansion. Is your
startup capable of enduring failed attempt towards growth? Many company’s

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strategy is to employ an experienced CEO to tackle any liabilities that may befall towards
progress. Some companies compensate the loss by maximizing sale depending on the
varied companies.
Different ways of raising funds for a Start-up
 Equity Finance
 Debt Finance
 Bootstrap Finance
All types of financing are majorly categorized into these three only. Let’s take a look at
different ways in each of them.
 Equity Finance:
In this method raising fresh capital is done by selling shares publically by the company,
financial institutions or institutional investors. The people who investing in the company
through shares are known as shareholders of the company as they have ownership interest
in the company.
 Financing from Family and Friends: Entrepreneurs may have some cash and
assets which they want to inject into the business, so it will act as the initial base.
Maybe sometimes they also have family or friends interested in the business idea
and they are willing to invest in their business. This is very good on the surface to
anyone, but even if this is the ideal arrangement for them, there are many factors
they must consider before they jump in. If anyone decides to take the investments
from family and friends, entrepreneur will be using a financing form called equity
financing.

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You should be clear about whether your family and friends willing to invest in your
business or are giving loan to you in form of some money for your business idea.
If they want to invest in your business, then offering that you are getting is equity
financing. If they are willing to loan you money for your business idea, then this
can be quite different and will be actually considered debt financing.
 Venture Capital: - Venture capital can be seen as other people's money. It is the
financing taken by new startups, usually the high-risk startup businesses which are
just like any of the new product that someone is wanting to bring in to the market.
There are a lot of renowned and well-known firms that have names anyone would
recognize that have been financed, when they were s called startups, by venture
capital.
Venture capital firms are known to pool investment dollars from pension funds,
investment companies, university endowment funds, large corporations and even
wealthy private individuals and they use all these funds to invest probably in high-
risk and return start-up companies that according to them will be profitable in
future. These pooled funds can often be called private equity. Venture capitals are
liable to others so firms pick wisely and choose all their investments carefully
because they are investing for other people through their money. They only think
of and take on those projects which they think will earn them high return. They
usually also become involved into the businesses by lending the expertise that they
have in the hope of assisting the business succeed. Their ultimate goal can be seen
as to take the business in public someday.
 Angel Investors: Angel investors can be wealthy individuals or some groups of
such individuals who are willing to invest money or equity financing in selected
startup or early stage small businesses. They are investors who are usually
providing private equity or are participating in second-round funding for any
growing and profitable small businesses who need money to continue to grow.

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 Even after the family and friends funding, also the small business owner funds,
which has been provided the seed money to the startup companies, that companies
then are willing to turn to either of one debt or equity financing in order to survive
in market and move forward. If debt financing is unavailable due to tight and
narrow credit markets or one of the perceived risks of that of venture, then investors
as well as private equity financing can be seen as the next logical source for
financing, if it is available.
Who are these angel investors? They cannot be accredited investors as designated
by the one and only Securities and Exchange Commission (SEC). However, most
of the times the money coming from any of the angel investors is coming from
accredited investors. Accredited investors, which are defined by the SEC, which
they have at least $1 million in assets and have to make at least $200,000 in income.
Some angels are a part of the angel investing groups and some are on their own.
Some angels are quite skilled and knowledgeable about investing in any private
companies. Some angels are always willing to get involved in all the companies or
startups in which they have invested. Others don't care for anything or much
involvement.
Angel investors are not one homogeneous group. All angel investors have one thing
in common, however. They will only be investing in small businesses in which they
are sure or think they can earn a high percent of return on their investment which
can be perhaps as high as 20% to 40%.
 Peer-to-Peer Lending: This method utilizes websites as a link between lenders and
owners of businesses together. From there, the two parties negotiate the all terms
and then usual process that the lender provides some of the funds and so on. This
is usually always an individual (much like some angel), but we can say that the
platform is quite a bit different as the lenders will be on the bid side of the
businesses that are of any interest to them based on the profile of business.

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 Initial Public Offering: For some of the established businesses, a common source
of equity financing is an initial public offering (IPO)6. BY means of an IPO,
companies do raise capital thru offering ownership of equity shares to the public.
Very often, any IPO deals in different modules of shares for purchase to individual
investors and institutions, comprising of common and preferred stock. This way of
obtaining financing can sometimes be a bit costly and also time consuming and it
is typically done majorly only after company has explored other sources for equity
financing have been considered.
 Equity-based crowd-funding: People often get confused with the concept of
equity crowd-funding. In other forms of crowd-funding such as donation-based, an
individual who is contributing towards the project is known as a donor, whereas in
equity-based, the person who helps is known as an investor. In India, the rules
regarding crowd-funding are moderated by the market regulator SEBI (Securities
and Exchange Board of India).
In the initial stages of crowd-funding in India, there were no set regulations, but
later on, SEBI has set up certain guidelines for people to follow. Equity-based
crowd-funding is termed illegal in India. Apart from crowd-funding which is
Equity-based, other forms such as crowd-funding through reward-based and
donation-based are completely legal. In this method of equity crowd-funding,
investors are the one to invest money which will support the company.
In return, investors are entitled for a small share in equity of the same company. In
such form of crowd-funding, most of the investors never invest minor amounts but
they do spend some larger amounts which are usually around one to two lakh rupee
minimum. This technique of crowd-funding is frequently used to raise cash for the
introduction of the company, and not only supporting the cause, but focusing
mainly on the growth of the enterprise.
In India, these funds are raised by an Angel or a venture capital for a startup. People
resort to angel funding when banks are denying a loan. It's because banks

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have lengthy procedures before giving out a loan. Crowd-funding for startups in
India: Crowd-funding for most of the startups either has to adopt the form of debt
based funding or donation-based funding; Startups are unable to get crowd-funding
in form of equity based. A startup can opt for crowd-funding either by means of
offline or online route; using some platforms like Gofundme, Milaap .etc.
There have been many successful instances by means of offline crowd-funding
which have taken place in the past. Any crowd-funding, either online or offline
requires a little effort to make campaigns and publicize them.
Since centuries, authors are resorting to the practice of crowd-funding to evaluate
their idea. If people liked the idea of the book, they contributed towards it, and the
author published the book. Startups do have many of the advantages using this
method of crowd-funding. Crowd-funding websites allows people to evaluate all
the plans that startup has for future, and then it provides some valuable feedback.
It also attracts the interest of the consumers, and it helps greatly to popularize your
brand.
 Debt Finance:
Debt finance is borrowed money that you pay back with interest within an agreed time
frame. The most common forms of debt finance include bank loans, overdrafts, mortgages,
credit cards and equipment leasing / hire purchase.
 Bank Loans: Bank loans are the most widely recognized method of debt finance
for an organization or a business. Organizations raise a fund from commercial
banks by keeping some security as a guarantee against the bank loan. Bank loans
time period are fixed and businesses are required to pay their installments regularly.
This loan can be one among other as the better source of financing thru debt for
large companies. Bank offers three types of loans majorly short-term

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loan, intermediate loan according to the necessities of the business and long-term
loan.
 Insurance Agencies: - Insurance agencies are also another main source of debt
financing for small or medium business or startup companies. They usually offer
two types of loans i.e. Mortgage Loan or Policy Loan. A policy loan rest on the
portion of cash that is paid in the form of a premium on the protection policy. On
other note, any mortgage loan can be selected by mortgaging any of their assets in
the organization. Then again, the arrangement credit now depends on the amount
of cash that will be paid as a premium on the protection approach.
 Bonds: Those companies which are well recognized and needs fund for growth,
one option for them is Bonds which are the top source of debt financing. The
companies can raise capitals by selling their private bonds to the open market that
can be purchased by many different buyers and also sharing benefits on such
activities for which the bonds are issued. For examples: any company can issue
bonds such as “Infrastructure Development Bonds” and any state or country also
can issue a bond such as “Road Transportation Development Bonds” with healthier
interest rates than those provided by banks saving or fixed deposit rates with the
intention to attract buyers or investors.
 Debt-based Crowd-funding: Debt-based crowd-funding is the practice of raising
funds from individuals, in return for interest. The person who supports your project
by putting his money is known as an investor. In other words, debt-based crowd-
funding is also called as "crowdlending”. Debt-based crowd-funding has always
been confirmed as one of the most effective methods to raise funds for the startups.
Although it is similar to the traditional bank loans, debt-based crowd-funding has
got many advantages when it is compared to the bank loans. Startups can use it as

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an alternative if they think, approaching a venture capital, might be a tedious task.
Advantages are that it has competitive or less interest rate when compared to banks,
it is more flexible than a traditional bank loan, which makes the repayment easy,
your brand, in turn, gets more reach among the masses and project becomes
popular, and more and more people try to become a part of it.
 Bootstrap Finance:
It is perhaps one of the finest and most cheap routes an entrepreneur can use when raising
investment. It utilizes unused opportunities that can be found within your own company by
simply managing your finances better. Bootstrap financing is one of the ways to pull you
up without the assistance of others.
 Factoring: This is a method of financing wherein you can actually sell all your
accounts receivable to any buyer which can be a commercial finance company for
the only reason of raising capital. A "factor" purchases accounts receivable,
generally at a discount rate that can range between one and fifteen percent. The
factor now becomes the creditor and undertakes the task of collecting all
receivables as well as doing majorly what would have been your paperwork chores.
Factoring as a process can be performed on a non-notification basis. This means
that your customers do not know that their accounts have been sold. There are some
pros and cons to factoring.
Many of the financial experts do believe that you should not attempt factoring
except that you can't obtain the necessary blocked capital from other sources. In
our opinion factoring can be one very good financial tool to be utilized. If you
consider the cost which is associated with maintaining all the accounts receivable
which can be bookkeeping, credit verifications and collections now compare
those overheads against the discount rate at which you'll be selling them for,
sometimes this even pays off to utilize this financing method.

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After all, even if factor is only taken on parts of the paperwork chores that is
involved in keeping accounts receivable, your costs will come down significantly.
Most times, the factor will undertake full responsibility for all the paperwork. In
addition to sinking your internal costs, factoring also releases money that would
else be tied to receivables. Especially for companies that sell to government or other
businesses, there are frequently long delays in disbursement that this would offset.
This cash can be used to produce profit through other opportunities for the
company. Factoring can be a very helpful tool for keeping cash flowing by raising
money.
 Trade Credit: Normally, a supplier will give you a credit only after you are a
consistent customer for 30, 60 or 90 days, without charging interest. For example,
suppose that a supplier ships something to you, and that bill is due in 30 days but
you have trade credit or terms. Your terms might be net 60 days from the receipt of
goods, in which case you would have 30 extra days to pay for the items. However,
when you're first starting your business, suppliers aren't going to give you trade
credit. They are willing to make every one of their order as C.O.D (cash or check
on delivery) or to be paid by the credit cards in advance unless and until you have
recognized that you can also pay your bills on time. While this is honestly a normal
practice, to raise cash during the startup period you are going to now try and
negotiate the trade credit with your suppliers. One of the important things that will
obviously help you in such a negotiation is a properly prepared financial plan.
When you call your supplier to set up your order throughout your startup period,
ask them to speak straight to the owner of the business if it is a small or medium
size company.
If it is a larger business, ask them to speak to the chief financial officer or any one
of the other persons who supports credit approvals. Show the officer the entire
financial plan that you have ready with you. Tell the owner or the financial officer
all about your business, and explain that you want to get your opening orders on

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credit in order to inaugurate your venture. The owner or financial officer can give
you at least half of the order on credit, with the other balance due upon delivery. Of
course, the trick here with one motive is to get your goods shipped to you, and sell
them well before you have to pay them yourself.
You could also borrow the money at the time to pay for your inventory, but you
would be liable to pay interest on the money. So now trade credit is one of the most
popular and important ways to decrease the amount of working capital that you
require. This is especially right in the retail operations.
Despite the wish to use trade credit on a frequent and consistent basis, you should
study it as a source of money to meet relatively minor, short-term requirements. Do
not look at it as a long-term solution. By doing so, you may find your business
heavily committed to those suppliers who accept extended credit terms. As a result,
the industry may no longer have that ready access to other, more viable suppliers
who might deal at lower prices, a higher end product or more dependable deliveries.
Depending on the positions available from your suppliers, the cost of trade credit
may be quite high.
For example, assume you do a purchase from one supplier who decides to give
credit to you. The terms that supplier gives you are two-percent of cash discount
with 10 days and a net date of 30 days. Essentially, the suppliers are saying that if
you pay within 10 days, the purchase price will be discounted by two percent. On
the other hand, by forfeiting the two-percent discount, you are able to use your
money for 20 more days. On an annualized basis, this is actually costing you 36
percent of the total cost of the items you are purchasing from this supplier! (360
(20 days = 18 times per year without discount; 18 (2 percent discount = 36 percent
discount missed.). Cash discounts aren't the only factor you have to consider in the
equation. There are also late-payment or delinquency penalties should you extend
payment beyond the agreed-upon terms. These can usually run
from one to two percent on a monthly basis. If you miss your net payment date for
an entire year, that can cost you as much as 12 to 24 percent in penalty interest.

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Effective use of trade credit requires intelligent planning to avoid unnecessary costs
through forfeiture of cash discounts or the incurring of delinquency penalties. But
every business should take full advantage of trade that is available without
additional cost in order to reduce its need for capital from other sources.
 Customers: Customers are one of many other sources of bootstrap financing; there
are numerous different ways to take benefit of such valuable assets. One of the ways
to use customers is by getting financing by having them to write a letter of credit to
you.
For example, suppose you are opening a business which does manufacturing of
industrial bags. A large company has placed a demand with your startup for a
regular flow of cloth bags. Then a major supplier from whom you will get the
material for bags is situated in India. In such a scenario, you can obtain the letter of
credit from your purchaser at the time at which order is placed, and the raw material
for the bags is bought using this letter of credit in the form of security. You do not
have to add a penny to purchase the raw material. In your financial dealings, you
may have come across a builder, or someone else who is working for you may have
asked for money in advance in order to procure the materials for your work. That
contractor usually uses that money to get rolling on the job. You were in fact
helping to fund that business. This is usually how customers can be used as a form
of financing.
 Equipment Suppliers: If you devote a lot of money on tools, you may get caught
without enough working capital at dispense to keep your business operating in its
initial months. Instead of disbursing out cash for your tools, you can procure them
with any kind of loan from different types of manufacturers; that is, you spend for
the equipment for a period of time. In this way, all of your equipment suppliers are
acting as a source of bootstrap financing to your business.

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Two types of credit contracts are most commonly used to finance the equipment
purchases:
1. The conditional sales contract: Wherein the buyer does not receive any title
to the equipment unless and until it is fully paid for.
2. The chattel-mortgage contract: Wherein the equipment directly becomes the
property of the buyer on delivery, but the seller has a mortgage claim against
equipment until the entire amount which is specified in the contract is paid.

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SWOT ANALYSIS
 Strengths:
1. Boldness:
Since you have nothing to lose, as a startup you can experiment all you want and lose very
little. Cheap experimentation is a tool, but the fact that I have nothing to lose leads to
boldness in approach. As a side note, tech startups typically believe that if you are not
embarrassed by your first launch, then you launched too late. For large corporations with
a lot of brand equity at stake, that's simply not the case.
2. Talented People:
Another advantage that most start-ups have is the quality of talent that they have working
for them. During the early stages of a start-up business, the founders of the company will
be working on many different tasks. These individuals are often much more qualified than
what they are currently doing to get the business off the ground. Even though the business
is using this strategy so that it can save money on overhead, it also works to the business's
advantage by resulting in higher- quality work.
3. Flexibility:
One of the most notable advantages of a start-up business is that it is completely flexible.
Before the business gets too large, the business owner still has the ability to adapt the
infrastructure to meet the needs of the marketplace. After a bit of testing in the market, the
business can alter some of its practices to be more efficient. Big businesses often find
themselves becoming obsolete because they are unable to change with the needs of the
market.
4. Access to Talent:

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Strong founding teams benefit from having the ability to attract top talent which in turns
breeds more top talent and weeds out poor performers over time. Similarly, a startup has
an unparalleled ability to align incentives with its employees. Examples can be emotional,
intangible, financial.
5. Agility:
Small teams, focused resources, little bureaucracy & hierarchy and sticky notes instead of
lengthy requirements are among some of the elements that yield a higher speed of
execution for startups vs. large companies.
 Weakness:
1. Fragility:
A startup can implode anytime due to lack of funding, a founder dispute or simply people
losing interest in the idea or market opportunity.
2. Lack of Capital:
Even though start-up businesses have flexibility, they often do not have the necessary
capital to expand. New small businesses may not have enough money to advertise as they
should, and this could negatively impact sales. The lack of capital often keeps a business
from bringing on additional employees and securing additional facilities. This can keep the
business smaller much longer than the owners of the business would have hoped. Attracting
additional resources can often be a necessary step for a new business to turn the corner.
3. Cash Balance:

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Lack of financial resources to solve distribution and critical mass in terms of adoption to
get to revenue is one of the most frequent reasons why startups fail.
4. No Name:
Every startup needs to figure out a way to open up doors and for some, this can be more
challenging than others. Personal and professional networks can make a huge difference.
Hustle is always a must.
5. Responsibility:
Another potential weakness of start-up companies is that too much responsibility is placed
on a single individual. Many times, the owners of s start-up business rely on each other to
do practically everything for the company. When someone is not up to the task, it can
significantly impact the success of the business. In larger businesses, everything is
compartmentalized so that one person performing poorly will not hurt the business as a
whole.
 Opportunities:
1. Unlimited Upside:
Disruption potential is unlimited if the stars are aligned properly (the element of luck) and
execution of course. Examples here can be Air BnB, Uber, Facebook and Google which
redefined the world as we know it and generated billions of dollars in return to its founders
and investors. In some cases, billions in terms of social wealth.
2. Greenfields:
As a startup, developing new markets with new or redefined products is quite common, but
pioneering can sometimes turn into the threat of getting arrows on your back. But this also
acts as a one of the wonderful opportunities.
3. Learning:

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How to translate data and lessons into money? You fail, learn and iterate at the speed of
light which gives startups an unfair advantage. The ability to learn fast is an opportunity
every startup exploits.
4. Ride A Wave:
The ubiquity of the smart phone gave birth to many new products and services (including
FinTech). As an example, without a smart phone, Instagram wouldn't exist. Waves refer to
inflection points generated by catalysts for change. Recent examples can be the onset of
FinTech as a permanent change shaping the Financial Services industry and many startups
are surfing that wave. Hyper-growth fueled by regulatory changes can also generate major
tsunamis of innovation as well.
 Threats:
1. Unrealistic Expectations: Success does not come alone. It brings expectations with it.
Most of the times, these expectations seem realistic, But in the real sense of the word, are
merely unrealistic. This same concept holds true for young startups. Startups tend to face
challenges when they set ‘unrealistic expectations’ following a booming success.
Remember, success is short-lived and expectations never end. This is where startups need
to translate what the real expectations are? Sustainability is the name of the game. And
sustainability requires consistent efforts. In order to succeed in a competitive business
world, startups need to have high but controlled expectations, keeping view of the resources
available, the extent of growth potential, and other market factors as well.
The corporate world is quite fierce. There is always a competition going on between the
giants. Competition poses one of the biggest challenges for the survival of startup
businesses. And if you have an online business startup, the competition gets tougher. The
competitive environment keeps the startups on their toes, as there is no margin of error
available. Both B2B and B2C organizations always tend to feel the heat of the fierce

35. 35
competition. In order to survive in this competitive business environment that covers both
traditional and online businesses, the startups need to play aggressively, and punch above
their weight to gain the much needed recognition amongst the clusters of ever challenging
and expanding businesses.
2. Partnership Decision Making:
Partnership is the essence of success. And this logic holds true for startups as well. In this
ever-expanding and ever-changing digital era, where organizations need to battle hard for
their survival, startups also find it difficult to find trustworthy partners. It’s really a big
challenge for startups today. And as far as tech startups are concerned, stakes in partnership
are much higher for them. Going into a partnership pays great dividends for the startups,
but they need to consider a variety of factors before making any decision to collaborate
with another company working in the same ecosystem. To reap out maximum benefits out
of a partnership, startup businesses should look for organizations that enjoy a sound
presence within the market and a good reputation amongst the industry giants.
3. Hiring Suitable Candidates:
One of the most important factors that define organizational culture within a startup
company is the synergy of the team. A team comprises of individuals with similar
capabilities and identical focus. In order to develop a highly successful team culture,
organizations in general – and startups in particular – need to hire suitable candidates.
There is a huge pool of aspiring individuals available. Selecting a suitable candidate that
fits the job well enough is a peculiarly tricky task. It is one of the biggest challenges facing
the startup businesses in this digital age. When hiring a suitable candidate, organizations
must remember one golden rule: Birds of a feather flock together.
4. Financial Management:
Money begets money. Remember the fact that when income increases, the expenditures
also increase. There is no doubt about it. One of the biggest challenges that startups face

36. 36
today relates to financial management. It is a fact that small startups rely heavily on
financial backups from the investors. At times, when there is a cash inflow, small firms,
most importantly startups tend to find it really hard to properly manage their finances, and
they bog down against the pressure. In order to address this kind of situation, startups need
to play a safe and cautious hand, by keeping all the cards close to their chests. Taking help
from a reputed financial consultancy firm may really help out in managing financial crises
facing today’s startup businesses.
5. Winning Trust of Customers:
Customer is the king. Winning a customer’s trust is one of the most important challenges
that businesses in general – and startups in particular – face today. With a highly satisfied
and loyal customer base, startups can scale and make progress towards excellence.
Customers are the real force behind a startup’s success. Their word-of-mouth power and
their presence on social media can give tech startups an edge against all the traditional
businesses.
To win customers’ trust and loyalty, startups need to work aggressively to implement a
customer-centric working philosophy, so as to enable them to succeed in their pursuit of
attaining the height sustainable growth and progress they desire to achieve in this tech-
savvy and challenging business world. Well, this brings us to the end of this blog. It is a
fact that there is no single stop solution to the surmounting challenges facing the startups
in this age. In order to face and tackle the so called challenges of a violent business world,
startups need to be resilient and focus on keeping their integrity in tact against all odds.
6. Cyber Security:
This is the digital age. And surviving the challenges in this age requires small startups –
especially the ones operating online – to be super agile to counter the so called online
security threats. Hackers are everywhere, and they take advantage of any loophole within
the systems installed within a startup firm. The rate of cybercrimes has increased

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dramatically during the past couple of years. Startups that are active online do face online
security threats. Be it unauthorized access to startup’s sensitive information, employee
records, bank accounts’ information, or any other related information that is deemed
important for the survival of a tech startup, they might be at risk.
In order to safeguard the all-important online data, startups need to have robust and
military-grade security systems in place. A virtual private network (VPN) connection
serves the purpose of protecting a startup’s information, and employee records, by offering
the much needed encryption and data security to the startup’s employees, thereby
restricting unauthorized access to organizational data over the web.
Financial Challenges faced by Startups in India
 Problems with Venture Capital Financing:
Venture capital financing can be seen in the early stages in many regions of India. The budding
scenario of this global competitiveness will put some huge pressure on to the industrial sector
to escalate their quality levels with reduction in the cost of products by using all the new and
latest technology and related skills. The repercussion will be the help in obtain suitable
financing along with the needed hi-tech equipment’s to make an innovative artifact which can
prosper and grow in the existing market condition. Unfortunately, India lacks on both the
fronts. The required capital can be found in form of the venture capitalist firms who believe in
an above average rate of return on all the investments. The financing firms only expect a sound,
mature, experienced, and capable management team of the company which is being financed.
Since the original project involves a huge risk, there is an expectancy of higher returns in the
project. The reimbursement period is also pretty high (5 - 7 years).
The various problems and queries can be outlined as follows:
1. Requirement of some experience in management team.

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2. Requirement of rate of return in excess of average on the investment made in startup.
3. The payback periods are longer which can also act as resistance while investing.
4. Uncertainty about the success of the product that is being launched in the market.
5. Questions concerning details of the infrastructure of production facility such as plant
location, relationship with the suppliers as well as creditors, accessibility,
transportation means and labor availability in the locality near plant etc.
6. The categorization of the potential customers and accordingly then packaging of
product and also the details which will be required for the pricing of the product.
7. The size of the market is also an issue.
8. Major competitors operating successfully and the market share they have.
9. Skills as well as training which is required and the cost involved in training the team.
10. Financial considerations which can be Return on Capital Employed (ROCE), the
Internal Rate of Return (IRR) of the project, cost of the project, total amount of funds
required, borrowed capital, ratio of owners investment (personnel funds of the
entrepreneur), mortgage loans etc. in the capital employed.
 Financing Difficulties for SMEs in India
Financing any business has always been challenging and for SMEs it is a big task, with too
many factors to consider some overweigh others such as risk and profit predictions. Let us take
a look at some problems faced by SMEs: The small and medium size enterprise does not have
a clear picture of property rights, which can easily hinder the corporate financing.
The small and medium sized enterprise usually has a low credit performance and weaker credit
concept. Generally small and medium sized enterprise do not a have credit rating as high in
India as compared to other countries. Data indicates that, in India, more than 50% of

39. 39
all the small and medium sized enterprise have financials with poor management, which
contains some Unreasonable phenomenon where one that commonly exists is “off balance-
sheet business” and also “check by cash”. Banks are in a difficult situation to get the real
condition of the corporate finance, which affects the decision making and bank loans. A case
in point is that many small and medium enterprises do go for tax evasion, which is resulting in
the huge loss of credit funds and added damage to the credit level.
Compared with some large enterprises, the ability to dodge risk of nearly all the small and
medium sized enterprises is noted to be significantly weaker. The leading reason for small and
medium sized enterprises have been suffering slow development pace is the financing
difficulties they face. This means that they have a tendency to suffer from lack of enough
funding at disposal for enterprises to be able expand further in production or improve their
research and development abilities, competitiveness and product quality. Furthermore, keeping
in mind the present situation of financing, problems are caused by the inconsistency of small
and medium sized enterprises and also due to large business risk, in the cash supply tension,
under the situation of asymmetric information, and into a vicious circle.
Limited guarantee agencies are a reason for mortgage difficulty. In terms of assurance, many
guarantee agencies implement membership system, where small and medium sized enterprises
are required to pay some security to become the member of the agency. However, the warranty
processes are quite tiresome, and asset registration fee, guarantee fee, valuation fee are very
high for them, which adds to the financial load and lead to failure to get any guarantee for
small and medium sized enterprises. In terms of the mortgage, if the company intent to apply
for any kind of property mortgage, they normally need to process through the multi- channel
procedures, including their property evaluation, insurance, registration and notary procedures.
This requires small and medium enterprises to manage with many departments and also
provide amounts of materials, which can be time consuming mainly in today’s information
society with so many opportunity fleeting. In addition, evaluation cost is high as well as the
cost of mortgages is huge while the mortgage rates are a relief by the bank

40. 40
to enterprises as it is low, which is the reason that the amount of loans asked by small and
medium sized enterprises by the means of mortgage are small.
Limited amount of profits tend to make banks unwilling to lend to the small and medium-sized
enterprises. The first principle that any commercial bank management follows is profitability.
The character of the Small and medium-sized enterprise loan taken from the bank is very small
amount, but frequency is high. In a short period of time, the costs of management are then
relatively high for all the banks to the loan to small and medium enterprises. At the same time,
many small and medium sized enterprise do have internal problems, which makes the amount
that bank loans to them have problems in following, supervision and mortgage security
maintenance. High risk, limited profits and high cost makes it is difficult for any small and
medium enterprises to apply for any loans from the bank. The capital market as well as the
private financial institutions develops slowly. The financing channel by China in small and
medium sized enterprise is narrow. At current the major source of funds is its own addition.
Since the official financial system is unable to encounter the financing requirements of small
and medium- sized enterprises, some of them go to private lending players in market for
financing, and turn out to be the main participants into the private lending market.
 Operational finance:
Most startups are self/family funded with limited workforce which makes it difficult to
maintain records both financial and operational. Flawed business models and lack of
innovative revenue strategies have led to the failure of many startups and they are forced to
shut down operations. Overcoming unnecessary business steps to manage business operations.
 Funding/Capital Deficiencies:
Capital and access to capital has been a perennial problem for startups.
1. Government and private sector investors have set aside funds through investment channels
but they are not available for all forms of business. The biggest problem for such

41. 41
organizations has been to attract investors and gain their trust with regard to their mode of
operations.
2. In the initial phase of operations, startups do not get funding from banks given no credit
history of the firm. In addition, there is limited number of credit rating firms for small and
medium sized enterprise.
3. Despite having raised good investments, startups struggle to survive the competition.
Startups are unable to mitigate the gap between burn rate and revenue.
 Cash flow management:
Effective cash management is an important factor to achieve objectives both short term and
long term. Cash is still a preferred option for payments owing to the fact that electronic
payment has not achieved complete penetration to Tier 2 and Tier 3 cities.
1. Gap between burn rate and revenue: Given rising competition from peers both from big as
well as small, it becomes imperative for startups to scale up the business and require
external funding for the sustainability/growth in the market.
2. Evolution on the basis of funding: Mega funding and mega announcements have become
a thing of the past, post consolidation on a large scale across the sector over the last few
years. Both the investor and the entrepreneur are now more consciously focusing on
innovation, capital efficiency and client/customer satisfaction, a view which is bound to
impact the funding scenario hence-forth.
 Collateral for Bootstrap Finance:
Bootstrap financing is also well-known to put companies in trouble, in any given situation. The
most noticeable disadvantage of doing bootstrap financing is that it functions without
cash funded from any outsiders or lenders. So, in the absence of any alternative for income
resource, startups find it very difficult to sustain in market. According to SBA (Small Business

42. 42
Administration), nearly 33% of all the recently set up companies that gamble with bootstrap
financing stumble.

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LITERATURE REVIEW
• Gail Brooks, Alan Heffner (2014). The purpose of this study was to utilize and understand
the SWOT analysis to determine the use of social media for a small start-up company.
Strengths of the company include the good reputation and the positive feedback from
customers of the company. The majority of the employees are young, energetic even if the
number of employees is small and the comparison study be done comparing the subject
company with a small manufacturing company and a nonprofit organization. Knowledge
gained from this comparison study could lead to the development of a model which is
applicable to any small businesses seeking to improve their competitive knowledge.
• Ramana Rao, S. V. Kumar (2016). This paper aims to provide an overview on angel
investor(s) and their role in the Indian start-up ecosystem. Initially capital is provided to
start-ups by the investors. In India start-up businesses have picked up in the recent past.
There were 3100 start-ups in the year 2014 and projections are that it will go to 11,500 by
the year 2020. Such expected huge growth is a revolution in the entrepreneur mind set in
India which is need of the hour to emerge as a significant global player. This growth is
possible as India is witnessing positive factors for the start-up ecosystem like consolidation,
technological developments, increasing domestic market and massive funding activities.

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OBJECTIVES OF THE STUDY
 To find challenges faced by entrepreneurs while raising funds.
 To study various Government initiatives towards Start-ups in the country.
 To conduct a SWOT analysis for Start-ups in India.
 To find different ways of raising funds for Start-ups and challenges involved in it.
 To find better options for financing Start-up.

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RESEARCH METHODOLOGY
 Type of Research:
The study is done on the lines of Exploratory Research to know the basic factors which can
affect any start-ups in India. SWOT analysis is used in this project.
Exploratory research is not conducted or generalized to the population at large. The results
of this are usually not useful for decision-making by themselves, but they can provide
significant insight into a given situation. Exploratory research often based on secondary
research such as reviewing available literature or data, or qualitative approaches such as
informal discussions with consumers, management or competitors, and more formal
approaches through in-depth analysis, projective methods, case studies or pilot studies.
 Source of Data:
Secondary research is carried to find the opportunities faced by the start-ups where various
websites are referred.
The validity of any research is based on the systematic method of data collection and
analysis of the data collected. The data is collected through secondary sources. Secondary
Source: This study is done on the basis of data collected from websites and research papers.
 Tools & Techniques:
Internet/ prominent search engines have been used for collecting the data, market watch is
also used to some extent for interpretation analysis. All data which is collected is carefully
classified, tabulated for the purpose of research and interpreted on the basis of charts and
tables.

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LIMITATIONS
In this project work some of the limitations which were faced are as following:
 The duration of the study is limited.
 Most of the information collected is secondary data.
 Since the data is secondary different sites provide different data so variable data is present.

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CHALLENGES
Out of many challenges we will focus on the challenges in funding a start-up as we move ahead,
for now let us look at some other challenges for start-ups. Starting a start-up is not a piece of cake.
It is quite challenging. A few arenas that can affect while starting and running a start-up are the
following:
 Competition: The corporate world is fierce. Competition between the corporate world
giants is constant. Amidst this, you need to survive. Errors must be minimised. Correction.
Errors must be nullified. There is no room for errors because you are in a war field.
Darwin’s theory of “The survival of the fittest” applies here without doubt. The start-ups
need to play aggressively in order to survive and gain the much needed recognition
amongst the expanding businesses.
 Expectations above Limit: All start-ups set out with a vision. They are driven towards
diverse goals. Having expectations on where the start-up will reach in the following five
years is natural. It’s called ‘having a vision’. But when expectations become incompatible
with reality, you need to strike them off from your bucket list. In order to cope up with and
succeed in the competitive business world, start-ups need high yet controlled expectations.
 Manpower: There is no shortage of qualified and trained professionals to hire from in the
world. But the people who are designed for your company are limited. They will be hidden
amongst pool of candidates that apply for a job in your start-up and you are burdened with
the task of hiring the right people to build your team. If your team, apart from being strong
and powerful, is totally molded for your start-up, then your company can be driven towards
success and hassle-free without doubt.

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 Money Matters: Managing your finance is crucial. Winning Trust of Customers: Prove
yourself that you are worth the customer’s trust. The clients are found to be tentative in
trusting start-ups as compared to the companies already in market because these young
companies have yet to prove their standard, quality and efficiency in yielding what the
world demands. Setting up a company is not much work; but driving it towards success is
where the real task lies.

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RECOMMENDATION AND SUGGESTIONS
 Doing business is one of the most important things in government. Effective policies for
business environment ecosystems require active Government involvement. It is important
to make sure government policy is very focused - the policy should be developed that way
that includes all aspects of the business environment rather than demand picks areas of
special interest.
 Giving more focus to the human and psychological capital - education, formal training, and
more support agencies provide highly skilled workers and thus more opportunities for
successful business activities. Introducing business classes and new strategies from scratch
categories of education are important in establishing a culture of initiation. Skills
development is also one of the most important ways to increase innovation, productivity,
and economic growth.
 Reviving Business Incubators and Creating and Establishing Composition Business centers
in the main regions of Kosovo (not only in Cyprus) to re-contribute to the preparation to
start from the first stage of incubation to the point of application market segment.
 Provide space for natural growth and not just low-level solutions - build and renew from
existing ones industries that are naturally formed in a region or country rather than want to
create new industries that are difficult to adapt.

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CONCLUSION
From the above study we can conclude that startups have many options to pick from the various
funding methods, from local government to international banks and also venture capitalists. The
criteria to select a type or method of funding totally depends on the comfort level of an
entrepreneur or the board members, each method of financing has its advantages as well as
disadvantages we got to understand from the study.
We can conclude that startups prefer mezzanine and venture capital financing over other ways of
funding as it keeps the control with them and also brings some experience of venture capitalists.
On the other hand, the ones who are already in the market opt for IPO when they are in quick
expansion mode. Here we can see that tenure in the market also affects the decision of financing
as and when a company runs out of all methods of financing they look out for IPO in later stages
of their business.
Challenges faced by startups are mostly internal and at the initial stages which they can overcome
but will be a time consuming task, with the support from the Indian Government and also with
involvement of foreign players in the startup ecosystem, financing for startups is getting much
more easier and India being a developing country provides a lot of opportunities to all the wannabe
entrepreneurs with more positives than challenges in the startup ecosystem in India.

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