CHAPTER 1

Introduction

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1.1 INTRODUCTION

Start-up companies are newly founded companies or entrepreneurial ventures that are in the
phase of development and market research. They are usually, but not necessarily, associated with
high-tech projects because their product is mostly software which can be easily produced and
reproduced.

Start-up companies are newly founded companies or entrepreneurial ventures that are in the
initial phase of development. They are most commonly associated with hightech projects,
development and production, distribution of new products, processes or services. The Ministry of
Commerce and Industry released a notification on April 1, 2015 to define a startup. According to
it, “an entity will be identified as a startup.

1. Till up to five years from the date of incorporation.

2. If its turnover does not exceed 25 crores in the last five financial years.

3. It is working towards innovation, development, deployment, and commercialization of new

products, processes, or services driven by technology or intellectual property.”

1.1.1 HISTORY OF STARTUPS IN INDIA

Before the recent hysteria of Startups, India was mostly popular as an IT outsourcing destination
that provided cheap and easy labor to the global companies for carrying on various back-end
jobs. Technology startups in India date back almost three decades. On compilation of the
Industry’s major landmark, Microsoft Accelerator in India came up with four distinct phases of
growth and maturity that have traversed so far: software services and global delivery model, the
dotcom era, the rise of product startups and growth of startup ecosystem. Some of the milestones
include US-based Texas Instruments’ decision to start an R&D center in Bengaluru in 1985
which further served to be an incubator for many of the current entrepreneurs, and the launch of
the infamous accounting software Tally in 1986. Aiming to foster entrepreneurship and
promoting innovation by providing an ecosystem that is conducive for growth of Start-ups, with
an object to facilitate India become a nation of job creators instead of being a nation of job
seekers, the Indian Prime Minister launched the initiative formally on January 16, 2016 from
Vigyan Bhawan, New Delhi.

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1.1.2 STAGES OF STARTUP AND AVAILABLE MODES OF FINANCE AT EACH
STAGE

From an investors point of view there are 6 phases of investment; Self Funding or Bootstrapping,
Friends and Family, Seed, Growth (also known as the ‘Early Stage’) and Expansion.

Self-funding/Bootstrapping

Self-funding being the first phase of the entire investment process is the stage in which a founder
invests his or her money to begin the startup journey. A founder introduces the initial startup
investment from his own funds/savings before going to the next stage of investment. However, a
high net worth individual can be expected to put in much more money. It also demonstrates
additional commitment on the part of the entrepreneur to other outside investors (including
Angel Investors) from whom the money can be raised at a later stage. Sometimes entrepreneurs
also choose to provide funds via loans to their company. This is a common practice, although
most venture investors usually require that such debts are converted into equity during the entire
investment process.

Friends and Family

In the friends and family phase of investing, the founder reaches to people from friends and
family and asks them to put a portion if not all of their life savings in the business idea. The
founder needs to be very honest with them about the risks of losing all of their investments in
case the startup business stagnates, thereby failing, so that their expectations are set clearly
upfront. A major risk is that because these investors are often not aware of the technicalities of
running a newly setup business, they might have unrealistic expectations and may be too much
demanding on how much ownership stake they should be given.

Seed

The seed stage of investing is the first level of raising capital outside of the most common reach
of the Entrepreneur such as self funding. Usually, this round is sourced from professional,
experts or seed capital investors such as Angel Investors can either individually, or in an angel
group comprising small individual angel investors. Since Angel Investors in most cases having
their own businesses have experience, being a founder they can provide more than just capital. It
is their knowledge, experience and expertise of the startup ecosystem prevailing in an economy
that might provide useful insights to the Entrepreneur. Usually, the three most common traits of
an Angel Investor include Wisdom, Wealth, and willingness to Work. These Angel Investors in
India invest solely into an entrepreneur with an idea and they usually do not encumber the
entrepreneur with any corporate governance responsibilities.

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Growth/Early Stage

Early Stage Investing is the first round into venture capital. It is often used to scale the
company’s business model & often comes from larger institutional funds. Many of the famous
venture funds are the commonly known early-stage investors in India. The major advantage of
having a conventional venture fund as an investor is that they typically have sufficient funds for
investment and therefore can provide growth capital in the future, leading to “Series A”
financing rounds and also actively participating in “Series B” financing and sometimes beyond
that. Moreover, VCs invest money according to their fund size. An entrepreneur looking to raise
INR 5 – 10 Crores could approach early stage Venture Capitalists also known as Micro VCs. The
benefit of choosing a Venture Capitalist that can participate in follow-on investment rounds is
that it is not required of the entrepreneur to start looking for an investor once the initial money
invested is over. Depending upon the size of investment and the stage at which they enter in a
startup, Venture Capitalist expect returns as low as 2 times upto a maximum 10 times cash on
cash basis.

Expansion

The expansion stage is where the startup business is growing month over month at a good pace.
Business valuation varies wildly in this phase and has a great scope for heavy negotiations. One
common thing is that the founder will own a microscopic amount of the company started by him
in comparison to the stake owned by him at the Self Funding stage. In most cases, his share
would be 10% or less but a very high valuation. If the founder believes and hopes to have a real
chance of the company becoming a unicorn (a company valued over $1B) in the future with an
excellent chance of going public, then it is a common practise to sell the business at this point or
very soon after that, in order to be in a win-win situation for all.

The entrepreneurship promotion is taken in the wider sense of the word and it includes ‘start of
new entrepreneurial projects’ as well as promotion/expansion, modernisation, diversification,
rehabilitation and revival of industries with the financial and other (direct as well as indirect)
assistance of the development banks operating at all-India level and implement some of their
schemes through the state financial institutions. Precisely speaking the entrepreneurship
promotion, thus, means and includes:

 The creation of new enterprise viz. Start of new projects, (may be started by an
established entrepreneur).

 The expansion or diversification of existing enterprises.

 The modernisation ofthe old and obsolete existing plants/industrial units.

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  The rehabilitation and revival ofthe closed and/or sick industrial units.

 Facility availability of working capital/seed capital/short-term loans/loans to meet

pressing needs for any industrial/manufacturing activities of any of the aforesaid
categories.

1.1.3 BANKS

Banks are financial middle people that acknowledge stores and make credits. Banks offer a few
preferences in associating acquires and loan specialists. By pooling the assets of thousands of
various contributors they can make expansive credits past the methods for any individual
financial specialist. Moreover, in light of the fact that they bargain in such an extensive volume
of advances, their expenses to making a credit are littler than for a solitary financial specialist.
One unique sort of expense is data cost. When you make a credit, you need to know the
probability that the advance will be reimbursed. This data is hard to decide for low maintenance
financial specialist. Be that as it may, banks have some expertise in making credits as are better
at evaluating hazard. An extra favorable position of banks is that they can make little advances.
In the event that you maintain a private venture that expected to acquire $50,000 it would be too
expensive to even consider issuing bonds to raise that little sum. Or maybe, you would go to a
financial go-between to get the assets.

Banks make a wide range of sorts of credits. They loan cash to organizations for capital
improvement ventures, called business and mechanical advances. They loan cash to shoppers for
ventures, for example, auto and school credits, called purchaser advances, and furthermore to
buy a house, called a land advance, or a home loan. Banks make benefits by the spread between
the financing cost on the advance that they make and on the stores that they take. For instance,
you may have the decision between getting an immediate credit at 6% premium or heading off to
a bank. In the event that you experienced a bank it may charge 8% for the advance and just pay
5% to the investors. But since of the administrations and accommodation of experiencing the
bank, borrowers and loan specialists are happy to do it. The 3% goes to the bank as installment
for the administrations it gives. The financial framework in the US has experienced a generous
development in the course of the most recent 50 years. Verifiably, there has been a doubt of
substantial financial institutions in the US, especially after the breakdown of the financial
framework amid the Great Depression. This brought about a severe guideline of banking
practice. Business banks were compelled to keep out of different business, for example,
protection or speculation banking (the matter of helping firms issuing new securities). Business
banks were additionally limited to having branches in just a single state. This brought about a
very cracked banking and financial framework. As of late this enactment has been canceled,
creating a whirlwind of mergers and developments. Various center and substantial estimated
banks converged to progress toward becoming super banks. The banking finished has swung to a
blend of a substantial number of exceptionally little neighborhood banks and a couple of

5
amazingly extensive banks. The banks likewise extended the administrations they offered to
incorporate shared assets, protection and venture banking.

1.1.4 Credit Unions and Savings

Banks Savings banks, reserve funds and advances and credit associations are simply different
sorts of banks. Their essential business is to take in stores and make advances. They contrast
fairly from standard business banks by they way they are controlled and their assessment
treatment.

1.1.5 Credit Scoring and Risk Management

One of the vital choices made by bank directors is whether somebody ought to be offered a
credit. The essential thought is whether the borrower will pay the cash bank – higher financing
costs are of no incentive to the bank if the advance isn't reimbursed. Previously, credit
assessments were performed by directors at the bank. They would take a gander at various
distinctive components that may anticipate whether the borrower would reimburse the credit: the
borrower's pay, their benefits, the measure of obligation they have, in the event that they have
defaulted on an advance previously, etc. This procedure represented a few issues for the bank. It
left open the issue of how essential was pay in respect to resources, or different factors; and it
was an expensive procedure as it required experienced and talented bank directors to settle on
every choice. The utilization of a factual procedure, called acknowledge scoring, joined with PC
innovation has essentially changed this procedure. The initial phase in the credit scoring process
is to take a gander at a huge number of past advances. Factually, the bank figured out which
factors.

6
Foresee the likelihood of defaulting on a credit. Each factor is doled out focuses, the more vital it
is in anticipating reimbursement, the more focuses it gets. At that point, for every individual
applying for a credit, each factor is evaluated. An absolute score is appointed, and is utilized to
settle on a choice on the advance. On the off chance that an individual has a sufficiently high
score, they get the advance, else they don't, or they will be handscreened or offered an alternate
advance. Credit scoring offers a few points of interest to banks. The first is that by taking a
gander at a great many past credits, they can consolidate information that just an accomplished
administrator would have. Second, when the underlying factual examination is done, this is a
minimal effort method for assessing advances; it doesn't require much human time and does not
require particular administrators. At last, it is quick. When you apply for a credit, when the data
is entered, the bank can settle on a speedy choice, without trusting that a human will go over the
documents. The expense of this methodology is that even a decent PC program isn't as adaptable
as a well trained, experienced administrator. There might be situations where an individual is a
decent credit hazard, yet will get a low financial assessment (or visa versa) and the administrator
would settle on the right choice where the PC would not. Nonetheless, this expense of the credit
scoring approach is by all accounts littler than the advantages it conveys to the banks. Along
these lines, most extensive financial mediators consolidate credit scoring, and are very shrouded
of their precise program. On the off chance that they have a superior program than others they
will have an upper hand in the commercial center.

1.1.6 Other Financial Intermediaries

Common Funds

One of the troubles that little financial specialists face is that it tends to be costly to develop a
well diversified portfolio. Most financiers expect you to make buys of a base size (in spite of the
fact that this size breaking point has fallen significantly with the coming of web businesses). On
the off chance that you just had $1,000 to contribute, and you needed to purchase partakes in 20
distinct organizations, it is hard to do. Additionally, the expense per share, when purchasing this
number of offers, is a lot higher than if you could make a request for 10,000 offers. One
approach to get around these issues is to pool your cash with different financial specialists and
together purchase extensive lumps of offers. Common assets do precisely that. Financial
specialists purchase partakes in the reserve and the shared store utilizes the returns to purchase
securities, for example, stocks and bonds. Since the common store is managing a great many
financial specialists, they have a great many dollars to contribute, thus pay low exchanges
charges on their buys and can hold an expansive number of various stocks and bonds. Most

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common reserve organizations offer a wide assortment of assets to mirror the distinctive
premiums of the financial specialists.

Common finances organizations gain salary in two different ways. The first is that the chiefs are
paid expenses by the financial specialists dependent on the estimation of the benefits in the firm.
Numbers around 0.5% are run of the mill. Some common assets additionally charge an expense
when the assets are first bought, called a "heap". For instance, in the event that you contribute
$10,000, 3% of that may go to the shared reserve while the rest would be put resources into
stocks and securities (so you have actually quite recently contributed $9,700 through the
common store). Assets that don't charge this underlying expense are called no-heap reserves.
Another preferred standpoint that common assets may offer to little speculators is that by
utilizing full-time financial examiners they can improve in picking the sorts of ventures to make.
We will investigate that thought when we take a gander at portfolio hypothesis and the
productive market speculation. The commonplace way shared assets are organized is that the
offers can be recovered whenever at the estimation of the basic resources. Since the estimation of
these advantages will change from everyday, the estimation of the offers will change in the
meantime. These assets are called open-end common assets. Conversely, shut end common
finances issue a fixed number of offers. The estimation of these offers, thus the value, still mirror
the estimation of the basic resources, yet may likewise reflect different issues, (for example,
liquidity). These offers are acquired from different financial specialists and not from the reserve.
Currency showcase common assets are an uncommon sort of shared store that just puts resources
into financial instruments from the currency advertise, for example, Treasury Bills, business
paper, or transient office securities. These benefits are for the most part present moment and
have exceptionally okay. As a result of this okay, the guideline put resources into a currency
showcase shared store is treated as fixed. The loan fee paid will vacillate with changes in
financing costs. Currency showcase common assets are fundamentally the same as ledgers.
While they are not protected, they are extremely okay and they by and large offer some sort of
checking, in spite of the fact that they more often than not require any check to be over a set
least. These assets are frequently utilized as brief records for financial specialists, as a protected
method to keep cash or holds.

Insurance agencies

A great many people know about insurance agencies through the administrations they offer
customers: vehicle protection, extra security, mortgage holders' protection. What individuals are
less acquainted with is that insurance agencies hold a great part of the premiums they get as
bonds and different securities, making them a vital institutional speculator. These speculations
give a flood of income that is utilized to satisfy on strategies and to give the benefits to the firm.

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Individual Savings

Individual investment funds are most normal and prudent financial sources utilized in the
underlying period of business which are utilized by the greater part of the SME's that are
ownership. Such subsidizing sources permits command over the organization just as the expense
for such sources is irrelevant, anyway the impediment of capital from such source can prevent
the organization development (Bovee and Thill, 2005). Albeit individual store is utilized in the
start-up period of business life cycle, it's additionally utilized generally amid the development
organize as some held income amid the market and business extension (Riely, 2015). Indeed,
even the outsider sources, for example, banks and other loaning establishment venture approach
in becoming SME's depend on such speculation (Brooks, 2010).

Families, Friends, and Fools

Another normal wellspring of financing in the improvement arrange; they are the general
population around your group of friends who knows you and have faith in your thoughts. They
are the snappier and less expensive sources as far as intrigue and reimbursement terms
adaptability, in any case, business visionary can confront additional pressure if business gets into
challenges (Riely, 2015). Credits given by such sources can be casual understandings or formal
contracts with explicit reimbursement plans

The significance of the foundation and improvement of startup organizations is expanding from
year to year, which can be seen based on an extensive number of applicable institutions in
nations that are managing this issue. Dependence on this sort of financial improvement is ending
up progressively essential motor of this procedure. Some of acknowledged meanings of startup
are: "A startup is a human foundation intended to convey another item or administration under
states of outrageous vulnerability". A startup is an enterprising endeavor which is ordinarily a
recently risen, quickly developing business that plans to meet a commercial center need by
creating or offering an imaginative item, procedure or administration". A startup is a "transitory
association intended to scan for a repeatable and adaptable plan of action". The new startup
adventure accept that the solitary business visionary goes out on a limb to bring something new
into the world. Normally startup is private venture in high innovation „garage organizations"
frequently with an exceptionally straightforward structure. Huge enterprise and startups are

9
altogether different associations. „The hole between the corporate and startup methods for
working postures genuine difficulties to getting the two sides together

Startups are a critical piece everything being equal, so governments try to help imaginative
startups through various supporting projects and help them develop in the correct manner. This
sort of help basically experiences a system of institutions, whose critical assignment is to help
startups in the entirety of their phases of activity. Supports by laws, approaches and guidelines
are basic for this mind boggling process. We can say that business enterprise and startups
arrangements assume a key job in the monetary and social advancement of a country. Strategy
producers need to perceive an open doors for advancement and making reasonable arrangement
of startups. Given that, startups are an exceptionally delicate and youthful business subjects,
dimension of alert ought to be extremely high. Encouraging business is one of the principle goals
to be accomplished for the organizations. This procedure ought to include every significant
subject that will prompt its effective foundation and working.

Startups needs assistance in a few territories, particularly around the passage and situating their
items and administrations available. In any case, it's essential to be precise about decision of help
for startups, since certain institutions bolster the progressing development of startup business, yet
some give next to zero esteem.

When all is said in done, institutions strongly affect the development and advancement of new
business. "Institutions are the tenets of the diversion in a general public or, all the more formally,
are the humanly contrived requirements that shape human interaction"[6]. Three essential
highlights of institutions are evident in this definition: (1) that they are " humanly formulated,"
which stands out from other potential crucial causes, as geographic components, which are
outside human control; (2) that they are "the principles of the diversion" setting "limitations" on
human conduct; (3) that their significant impact will be through motivators [6].The real job of
institutions in a general public is to diminish vulnerability by building up a stable (yet not really
effective) structure to human communication. „The generally speaking solidness of an
institutional structure makes complex trade conceivable crosswise over both existence" [7]. In
particular, higher sureness implies that the expenses of contracting and of securing property are
brought down, which thusly implies that more startup undertakings will be embraced. As
Bjørnskov and Foss (2013) contended, higher assurance and motivators for profitable practices
are especially firmly impacted by the degree to which private property rights are secured,
including measurements, for example, all inclusive statement (i.e.,equals are dealt with
similarly), straightforwardness and responsibility in open basic leadership, and, significantly, a
desire that property rights are successfully upheld .

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A vital effect on this section, has a nature of guidelines and the legal framework, and that is one
of the significant reasons why the startups flop, particularly in creating nations where this
framework are typically extremely fragile and deficiently advocated. In Europe, every nation is
attempting to build up possess startup environment, regarding the guidelines that apply in the EU
as a brought together network. Experience demonstrates that the mapping of the institutional
arrangement of different nations, are not the correct method to creating startup biological
community, because of the particular decides that every nation has. The uniqueness and
adaptability of the startup biological system based essentials for its usefulness and proficiency. It
is essential to consider the way that the startups are entirely flighty elements, which are for the
most part arranged to inquire about business openings. The job of the institutions is imperative
and should assist startups with becoming a changeless association with an anticipated plan of
action. The significant institutions make a different projects with the objective to startup
transforms into utilitarian substance. These projects require an abnormal state of responsibility,
suitable mastery and adequate assets for their execution.

1.1.7 The job of government in the startup biological community

Governments all around the globe are fascinating for entreprenuership and startups, for example,
potential answers for hailing financial development and expanding work in their states. The
essential objectives for governments should expel impediments for financing startups and their
development, particularly in regions, for example, building up a useful strategy, aggressive
guideline available, unreasonable tax collection on little organizations, pulling in speculation
capital and help them in the touchy phases of their improvement.

A portion of the key suggestions for government strategy of the cultivating startup environment
are :

1. Make the development of pioneering movement an administration need – The plan of

successful arrangement for innovative biological communities requires the dynamic
inclusion of Government Ministers working with senior local officials who go about as
'institutional business people's to shape and enable approaches and projects.

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 2. Ensure that administration strategy is extensively engaged – Policy ought to be built up
that is all encompassing and includes all segments of the biological community as
opposed to trying to 'carefully choose' zones of uncommon intrigue.

3. Allow for characteristic development not top-down arrangements – Build from existing
businesses that have framed normally inside the area or nation as opposed to trying to
produce new ventures from green field locales.

4. Ensure all industry parts are viewed as not simply innovative – Encourage development
over all industry divisions including low, mid and cutting edge firms.

5. Provide initiative, however delegate duty and possession – Adopt a 'top-down' and 'base
up' approach lapsing obligation to nearby and local specialists.

6. Develop strategy that tends to the necessities of both the business and its supervisory
crew – Recognize that private company arrangement is 'value-based' while enterprise
approach is 'social' in nature.

1.1.8 The job of subsidizing associations in the startup biological system

The foundation and further advancement of a startup can't be envisioned without the help of
subsidizing associations. A portion of these associations, which assume a critical job in vitalizing
of startups, particularly in financial section are:

Banks

Bank give an advance for startup and make uncommon projects of help which frequently
incorporate tutoring programs. These financial institutions are attempting to give however much
help as could reasonably be expected to the advancement of startups, and then again to verify
their ventures. Startup hatcheries and quickening agents - The brooding idea looks for a
compelling way to interface innovation, capital and expertise so as to use enterprising ability,
quicken the improvement of new organizations, and in this manner speed the misuse of
innovation .

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Bunches

Bunches Clusters are geographic groupings of interconnected organizations and institutions in a

specific field . In bunches, an equalization is come to among participation and rivalry, which
ends up obvious in the higher profitability of the organizations in view of their expanded access
to inputs, data, innovation and institutions; or in more prominent development and adventure
creation. The imperative job of the group is to give motivations to the section of new
organizations or startups.

Holy messenger financial specialists

Holy messenger financial specialists are high total assets, non-institutional, private value
speculators who have the longing and adequately high total assets to empower them to put some
portion of their benefits in high hazard, exceptional yield pioneering adventures as an end-result
of an offer of casting a ballot, salary and eventually, capital increase [20]. Holy messengers
typically put resources into beginning time adventures where the establishing group has depleted
their own investment funds and wellsprings of subsidizing from family and companions [20].
These endeavors are not adequately created to remain alone, or adequately appealing to pick up
investment financing .

Investment reserves

Venture capital (VC) is a value speculation gone for supporting the pre-dispatch, dispatch and
beginning time improvement periods of a business . In spite of the fact that it is normally thought
to be the principle wellspring of seed and beginning time financing, in actuality most of funding
firms intercede at a later stage . The endeavor reserves are the sort of venture supports that deal
with the cash of speculators who look for private value in startups with anticipated a high and
solid development potential.

Crowd funding

Crowd funding is the way toward approaching the overall population for gifts that give startup
funding to new pursuits. This idea incorporates utilizing a little measures of capital from
countless or associations to fund some new startup. Types of group financing are: gift
crowdfunding, remunerate crowdfunding, crowdfunded loaning, value.

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1.1.9 The job of network in the startup environment

The startup networks give the help and hatching periods that cultivate driving organizations and
drive the development for a bring future. These people group included a variety of individuals
and numerous nonentrepreneurs, so it's vital to get driving help in each phase of advancement,
and more often than not the significant job in that procedure takes a business visionary.

1.1.10 The job of enterprises and other help associations in the startup biological system

The reconciliation of companies in the startup environment is objective need, which demands an
abnormal state of collaboration and it's bolstered by various open associations, developments and
quickening agents. Extensive organizations could give coaching the making of arrangements,
providing innovation, financial help, master help, building appropriation channels for the
startups, and so on. The perception is that startup biological community couldn't exist without
approach creators, speculators, the reconciliation of scholarly institutions and accomplices, who
can give the vital limit and development openings.

1.1.11 THE SUPPORT PROGRAMS OF EU FOR STARTUPS AND SMEs

One of the fundamental objectives of the Common European Policy is the reinforcing support for
business visionaries and advancements in the all circles of activity. This is the way how the
makers of European approach impact on the improvement techniques.

14
CHAPTER 2
REVIEW OF LITERATURE

15
2.1. REVIEW OF LITERATURE

In this study, the researcher has reviewed the following mentioned literature:

La Porta et al. (1997, 1998) and Beck et al. (2001) follow the connections between the legitimate
causes of financial market laws crosswise over nations and relate them to the level of speculator
assurance and consequently the capacity of financial mediators to raise and loan capital.

Paravisini (2008) appears with regards to Argentina that banks not just face gratings in their
entrance to outside financing, however that these grindings keep them from undertaking
beneficial venture openings in the genuine economy.

Banerjee and Duflo (2008) have comparable discoveries with regards to a coordinated loaning
program in India. One of the vital choices made by bank directors is whether somebody ought to
be offered a credit. The essential thought is whether the borrower will pay the cash bank – higher
financing costs are of no incentive to the bank if the advance isn't reimbursed. Previously, credit
assessments were performed by directors at the bank. They would take a gander at various
distinctive components that may anticipate whether the borrower would reimburse the credit: the
borrower's pay, their benefits, the measure of obligation they have, in the event that they have
defaulted on an advance previously, etc. This procedure represented a few issues for the bank. It
left open the issue of how essential was pay in respect to resources, or different factors; and it
was an expensive procedure as it required experienced and talented bank directors to settle on
every choice. The utilization of a factual procedure, called acknowledge scoring, joined with PC
innovation has essentially changed this procedure. The initial phase in the credit scoring process
is to take a gander at a huge number of past advances. Factually, the bank figured out which
factors.

foresee the likelihood of defaulting on a credit. Each factor is doled out focuses, the more vital it
is in anticipating reimbursement, the more focuses it gets. At that point, for every individual
applying for a credit, each factor is evaluated. An absolute score is appointed, and is utilized to
settle on a choice on the advance. On the off chance that an individual has a sufficiently high
score, they get the advance, else they don't, or they will be handscreened or offered an alternate
advance. Credit scoring offers a few points of interest to banks. The first is that by taking a
gander at a great many past credits, they can consolidate information that just an accomplished
administrator would have. Second, when the underlying factual examination is done, this is a
minimal effort method for assessing advances; it doesn't require much human time and does not

16
require particular administrators. At last, it is quick. When you apply for a credit, when the data
is entered, the bank can settle on a speedy choice, without trusting that a human will go over the
documents. The expense of this methodology is that even a decent PC program isn't as adaptable
as a welltrained, experienced administrator. There might be situations where an individual is a
decent credit hazard, yet will get a low financial assessment (or visa versa) and the administrator
would settle on the right choice where the PC would not. Nonetheless, this expense of the credit
scoring approach is by all accounts littler than the advantages it conveys to the banks. Along
these lines, most extensive financial mediators consolidate credit scoring, and are very shrouded
of their precise program. On the off chance that they have a superior program than others they
will have an upper hand in the commercial center.

Berkowitz and White (2004) find that business visionaries are more averse to get
acknowledgment for their startups in U.S. states with more grounded liquidation insurance for
people. At the point when banks are less sure of recuperating their advances if a startup comes up
short, they are less inclined to broaden credit in any case.

Guiso et al. (2004) analyze nearby variety in the supply of credit crosswise over areas in Italy.
They locate that even in a very much created and incorporated financial market like Italy,
districts with more profound capital markets advance the passage and development of new firms
and increment the affinity of people to begin new organizations.

Sorenson and Stuart (2001) find that VC firms are considerably more prone to finance business
visionaries situated inside a short geographic separation from where they are based.

Dark and Strahan (2002), Cetorelli and Strahan (2006) and Kerr and Nanda (2009a) find
sensational increments in startup action resulting to between state branch banking deregulation.
In addition, Kerr and Nanda (2009a) demonstrate that these builds keep on being critical when
contrasted with the standard of office developments by existing firms – especially so for firms
entering at a littler size where financing requirements are well on the way to be generally intense.
Notwithstanding these progressions at the broad edge, Kerr and Nanda (2009b) additionally
observe that startups were probably going to be bigger at section with respect to their greatest
size in the initial three years of activity, proposing serious edge impacts of the changes also.

17
Petersen and Rajan (1995) contend that startups may profit by concentrated financial markets
since monopolist banks can take part in intertemporal cross-appropriation of credits.

Berger et al. (2005) find that distinctions in bank hierarchical structures sway the credit
imperatives of little firms over the U.S. Canales and Nanda (2008) show a comparable impact for
terms of loaning to independent companies in Mexico. In numerous regards, the ongoing
advancements for microfinance in creating nations, for example, the Grameen Bank established
by Muhammad Yunus, can be viewed as decreasing observing expense for educationally dark
small scale organizations. These developments empower financial go-betweens to loan littler
adds up to business people at a benefit because of the lower fixed expenses of assessing and
observing ventures.

Bozkaya and Kerr (2007) demonstrate that nations with solid business security laws – where
terminating laborers is increasingly troublesome – are related with more fragile VC and private
value markets. Their discoveries propose that institutional conditions can have first-request
impacts on the nearness and structure of specific sorts of financial delegates and consequently on
the accessibility of startup capital in particular kinds of enterprises.

Nobility and Hubbard (2004) find that business people include just shy of 9% of family units in
the U.S., yet they hold 38% of family resources and 39% of the absolute total assets. In addition
to the fact that entrepreneurs are wealthier, the affluent are bound to progress toward becoming
business people.

18
2.2. OBJECTIVES OF THE STUDY:

The objectives of the particular research study are mentioned below:

i. To analyze the contribution of financial institution towards promotion of

entrepreneurship and startups
ii. To analyze the contributing factors for the promotion of entrepreneurship

19
CHAPTER 3

RESEARCH METHODOLOGY

20
3.1. RESEARCH METHODOLOGY

Research Methodology can be defined as the systematic process which performs the
function of analyzing as well as finding solutions to the entire data accumulated and
collected by the researcher which allow the researcher to pave a pathway for interpretation
into meaningful data about the same. It can also be delineated by systems and techniques in
order to touch the results at the base level and discovering tools in order to prove supportive
or unsupportive the learnings and information collected by the researcher. “(Nachamias et
al., 1996; Saunders et al., 2007).”

3.2. Purpose of Research Methodology:

The Start up Industry is a very fast growing and successfully going forwards industry among
all businesses. With each passing year, this sector has only seen increasing amount of
success and a positive growing attitude of entrepreneurs. The purpose of using research
methodology for this particular research is to analyze the contribution of financial
institution towards promotion of entrepreneurship and start-ups also the contributing factors
for the promotion of entrepreneurship.

3.3. Research Design:

A Research Design is a predefined set of methodologies and procedures that are utilized in
the accumulation, collection and analysis of the measures of variables/ factors which are
specifically mentioned in a respective research study.

For this particular research study conducted, the researcher has used Quantitative research
methodology in order to identify and analyze the contribution of financial institution
towards promotion of entrepreneurship and start-ups also the contributing factors for the
promotion of entrepreneurship.

21
I. Data Collection Design used:

 Population: It is the number of respondents. In this particular study, the researcher

has collected responses from 200 respondents.
 Sampling techniques: In this particular study, the researcher has used Convenience
Sampling Technique which is type of Non-Probability sampling method. This
aforesaid sampling technique is used because the questionnaire was based upon
analyze the contribution of financial institution towards promotion of
entrepreneurship and start-ups also the contributing factors for the promotion of
entrepreneurship. Also, the responses were collected of all genders & ages.

II. Data Analysis Design: In this study, the researcher has used Description and
Inferential statistics. The survey for the study was conducted through an Online
Survey Questionnaire which was created with the help of Google forms. The data
accumulated time period was from Data was collected from January 2019 to
March 2019, inclusive of 200 respondents across all ages and gender.

III. Sources of Data Collection:

i. Primary Data: Primary data refers to the first hand and fresh data
collected first handedly by the researcher in the first place. In this study,
primary data was collected with the help of a cross- sectional
questionnaire survey wherein all the 200 respondents chose their
particular age group, gender and best option of their interest made
available by the researcher against each question. The questionnaire
includes multiple choice questions, single best option choice and Likert
Scale (5= Outstanding, 4= Excellent, 3= Neutral, 2= Satisfactory and 1=
Poor) and also some question includes different options.

ii. Secondary Data: Secondary data refer to the data which is being already
collected in the history of research, after intense interpretation and
analysis upon a subject matter by previous researchers are the same are in
records. In this study, the researcher has utilized various secondary data

22
 inclusive of journals literature, websites and books which have aided
greatly in the study.

IV. Sampling Methods: Sampling method is the procedure of selecting sample

members from a population for the study, by the researcher. Here, non-
probability sampling method is being used.
 Sampling Unit: The sampling unit used for the study were the
entrepreneurs who are trying to set up a startup and also from the new
comers who wants to go for a start up in Delhi NCR.
 Sampling Size: The sampling size used by the researcher of the study was
200 who are all Entrepreneurs or individual seeking to go for start up.
 Sampling Frame: the sampling frame is Delhi- NCR for the particular
study
V. Tools Used: The statistical software IBM SPSS Statistics 19 was used for
running the tests of:
 Cross Tabulation
 Frequency analysis
 Pie Charts

23
3.4. LIMITATIONS OF THE STUDY:

For the research work data was collected and interpreted with reliability and consistency but
certain limitations during the study were encountered, which are mentioned below:

a. Time limitation is one of the prominent drawbacks in the research project.

b. Quality of information is highly dependent on the knowledge of the respondents.

c. Research was confined to the city of Delhi-NCR only.

24
 CHAPTER 4

DATA ANALYSIS AND INTERPRETATION

25
 4.1 DESCRIPTIVE ANALYSIS

In this particular study, the data analysis and interpretation was done on the basis of all
structured questionnaire, filled up by 200 respondents of all ages and gender.

Table 1: GENDER

Statistics
Gender
N Valid 200
Missing 0
Mean 1.51
Median 1.00
Mode 1

Gender
Cumulative
Frequency Percent Valid Percent Percent
Valid Female 109 54.5 54.5 54.5
Male 81 40.5 40.5 95.0
Other 10 5.0 5.0 100.0
Total 200 100.0 100.0

Figure 1

26
4.1.1 Interpretation of Data: On the basis of the above study, the numbers of female
respondents (54.5%) were higher in comparison to the male respondents’ quantity (40.5%).
5% i.e. around 10 respondents had given others as their gender.

Table 2: AGE

Statistics
Age Group
N Valid 200
Missing 0
Mean 2.15
Median 2.00
Mode 2

Age Group
Cumulative
Frequency Percent Valid Percent Percent
Valid 18-23 47 23.5 23.5 23.5
23-28 93 46.5 46.5 70.0
28-35 44 22.0 22.0 92.0
35 & above 16 8.0 8.0 100.0
Total 200 100.0 100.0

27
Source: Field Survey
Figure 2
4.1.2 Interpretation of Data: The above statistics analyses that the age group which is
highly engaged in, within the limit of the sample size of 200, is aged in between 23-28.
Followed by it is the group of 18-23, 28-35, and the minority age group of respondents
using online travel agency are 35 & above.

28
Table 3:

3.1 What do you think about starting a new business ? Tick all that apply.

3.2 What do you think about incapability of businesses to internationalize? Tick all that
apply

3.3 How do the startup businessman finance their Business in the Initial phase of business?

Model Summaryb

Adjusted R Std. Error of

Model R R Square Square the Estimate

1 .749a .722 .707 .658

ANOVAa

Sum of
Model Squares df Mean Square F Sig.

1 Regression 218.613 10 21.861 50.555 .015b

Residual 84.324 195 .432

Total 302.937 205

29
Coefficientsa

Unstandardized Standardized
Coefficients Coefficients

Model B Std. Error Beta t Sig.

(Constant) .199 .187 1.067 .287

33.1 What do you think about

.404 .090 .368 4.492 .000
.starting a new business ?
1
3.2 What do you think about
incapability of businesses to
3internationalize? -.020 .079 -.019 -.256 .798
.
2

3.3 How do the startup

businessman finance their
Business in the Initial phase of -.016 .095 -.015 -.170 .865
business?

INTERPRETATION AND HYPOTHESIS

H0 – Financial institutions helps in startup

H1 – Financial instistutionsdonot help in startup

According to the test statistics significance value is lesser than 0.05 and B coefficient are positive
so H0 is accepted and H1 is rejected .

30
TABLE 3 : Do you think that financial institutions can help startups?

from 1-5 where –5 = Strongly Agree4 = Agree3 = Neutral2 = Disagree1 = Strongly

Disagree

Strongly Agree 22
Agree 68
Neutral 0
Disagree 0
Strongly Disagree 0

4.1.3 Interpretation of Data: On the basis of the above study, the numbers of Strongly
Agree (66.7%) were higher in comparison to the Agree’ quantity (33.%).

31
TABLE 4 : Do you agree that financial institutions can help startups in making them
successful?

A Yes
B No
C May Be

4.1.4 Interpretation of Data: On the basis of the above study, the numbers of Yes
(83%) wereh higher in comparison to the May be’quantity (16.7%).

32
TABLE 5 : Do you think that financial institutions can help the startups financially
effectively?

A Yes

B No

C May Be

Interpretation of Data: On the basis of the above study, the numbers of Yes (50%)
were equal in comparison to the No’quantity (50%).

33
TABLE 6 : Do you think that financial institutions charge high interests from startup
companies?Kindly rate from 1-5 where –5 = Strongly Agree4 = Agree3 = Neutral2 =
Disagree1 = Strongly Disagree?

Strongly Agree 0
Agree 0
Neutral 156
Disagree 0
Strongly Disagree 144

Interpretation of Data: On the basis of the above study, the numbers of Neutal 156
were higher in comparison to the Strongly Disagree’quantity

34
TABLE 7 : Do you think that financial institutions form future and base of stratups?

A Yes

B No

C May Be

Interpretation of Data: On the basis of the above study, the numbers of Yes 50% were
higher in comparison to the No 33% and may be 16.7%’quantity.

35
TABLE 8 : Do you agree that financial institutions should lower the interest rates ?Kindly
rate from 1-5 where –5 = Strongly Agree4 = Agree3 = Neutral2 = Disagree1 = Strongly
Disagree

Strongly Agree 22

Agree 68

Neutral 0

Disagree 0

Strongly Disagree 0

Interpretation of Data: On the basis of the above study, the numbers of Neutral 50% were
equal in comparison to the Agree 50%.

36
CHAPTER 5

Findings

37
FINDINGS

 On the basis of the above study, the numbers of female respondents (54.5%) were
higher in comparison to the male respondents’ quantity (40.5%). 5% i.e. around
10 respondents had given others as their gender.
 On the basis of the above study, the numbers of Yes (83%) wereh higher in
comparison to the May be’quantity (16.7%).
 On the basis of the above study, the numbers of Strongly Agree (66.7%) were higher
in comparison to the Agree’ quantity (33.%).
 On the basis of the above study, the numbers of Yes 50% were higher in
comparison to the No 33% and may be 16.7%’quantity.
 On the basis of the above study, the numbers of Neutal 156 were higher in
comparison to the Strongly Disagree’quantity

38
 CHAPTER 6

RECOMMENDATIONS, SUGGESTIONS &

CONCLUSION

39
 CONCLUSION

The development of the quantity of startup organizations that are opposing business sector
moves prompts the fortifying of the economy. The job of government is essentially at
characterizing a structure strategy for work of startups, and permits their change in the SMEs.
Crafted by every single other foundation which are incorporated into the startup biological
community is straightforwardly molded by the measures and laws that the legislature embraces,
and their impact is basic for startup organizations to succeed. The help which institutions
provided for startup organizations are: wide sorts, (for example, tutoring and associating), and
financial and practical sorts (for instance: plan of action help, hatching, and so forth.) [25].
Affected by every single fast change and the associations themselves are changing in all respects
rapidly and adjusting to the present minute. This procedure of changing is critical for the two
sides; institutions and startups. This prompts much increasingly noteworthy incorporation of
extremely essential subjects in the startup biological community, particularly subsidizing
associations, for example, hatcheries and quickening agents, bunches, funding reserves, holy
messenger speculators, and so forth. Making a wide scope of help programs prompts high
development and improvement rate of startups. Current EU programs for help startups and SMEs
have been planned and visualized to cover the advancement of this territory by 2020. The regular
attributes of these projects are: supporting a nearby, provincial and European startup biological
communities, to improve environment perceivability, empowering ventures, simplicity of
setting-up business, business development and increasing speed, and so on. Based on appeared,
we reason that the job of institutions in help of startups will be progressively critical and higher.
It is vital to find in which bearing further help projects will be made, how their execution will be
completed and which institutions they will depend. It is very sure that these projects will include
countless, key European institutions, yet in addition institutions with neighborhood and
provincial character.

40
REFERENCES

[1] Ries,Erik (2014), Lean startup, Mate, Belgrade, Serbia.

[2] What is startup? The Historical background (2017) Avaiilable at:

https://www.growly.io/what-is-a-startup-thehistorical-background/ (accessed : 21 June 2017)

[3] Blank, Steve. (2013) “Why the Lean Start-Up Changes Everything.” Harvard Business
Review

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