The Startup has become synonyms for the growth, entrepreneurial traits, vision,
and futuristic approach. India has a healthy environment and acts as a
game-changer, a long-lasting impact on the economy and standards of living of
any nation. Startups have grown in no time both in numbers and contribution wise
in a job and revenues.
This paper tries to conceptualize the phenomenon, i.e.,
,” and "Entrepreneurship
" recognizes the challenges they might face. For
the fashionable enterprise, assets in business activities are to support the
operation of their overall funding and is that the foundation of sustainable
management and financial risk. During this paper, the financial risks of
business activities of new enterprises is being studied, the strategies to
uplift the risk failure of startups offerings of government for encouraging
innovative ideas of the young generation.
An entrepreneur is an individual that looks for new business and is willing to
risk a loss to make money, and focus on managing, having a source of networking
and the right way to use his/her knowledge tactics.
The startup must defined as creating identity and making money, which includes
two or three entrepreneur persons for funding. The main challenge is to prove
the validity of the concept to potential lenders or investors.
The start-up and an entrepreneur might seem identical. Still, there is a
difference ,i.e., an entrepreneur achieving a financial motive , but the startup
founder aims to serve a unique product or service for the usual people.
Startups are diversified and complex, evolving mainly on three theories is:
- Organisation: It urges to be the creation stage which meant to be planned and
processed followed in its initial development.
- Management: An individual having specific qualities such as teamwork,
valuation of the resources, etc.
- Entrepreneurship: An entrepreneur in the bootstrapping stage set of
activities that turn out to be creative ideas into a profitable business.
Before this there are several provocation among different startups, financial
challenges which means that the startup founder should have the ability to
convince the investors and with a reasonable valuation plan, with the support of
environmental elements then the success of startups, Lack of access to such
support mechanism can lead to a higher risk of failure, If the founder lacks for
human resource management then lead to the critical stage of failure due to lack
of hiring employees, negotiate with the people. Government permission to
register a business an obstacle faced by them, Absence of effective brand
strategy can also lead to failure.
The next most significant challenge is gauging
the market need for the merchandise, existing trends, etc. Innovation plays a
considerable role since the startup has got to fine-tune the merchandise
offerings to suit the market demands. Also, the entrepreneur should have the
thorough domain knowledge to counter competition with appropriate strategies.
Thanks to new technologies that are emerging, the challenge to produce over and
above an earlier innovation are pertinent.
Namrata Garg, Director, Send Kardo feels that the greatest challenge is that they
have to steadily reinvent themselves and are available up with a service to be
able to match up customer expectations and exceed them.
initiatives and other government schemes have also given a
lift to startups with many individuals entering the fray. Starting a project may
be a tactically and disciplined exercise with due consideration of both internal
and external factors which will impact the sustainability of the venture.
contributions from a variety of entrepreneurs would have a cascading effect on
the economy and employment generation, which would complement medium and large
industries efforts catapulting India into a quickly growing economy. The startup
arena includes a lot of challenges starting from finance to human resources and
from launch to sustaining the expansion with tenacity.
Country's Startups Scenario Of Past Ten
Startup ecosystems speak about a startup business in a corporation engages in
the development, production, or distribution of the latest product, processes,
or services. They are new and exist for less than five years and revenue of up
to INR 25cr, employing 50 people or less. So this startup grows and develops
with support of huge companies and universities, and acquires funds from funding
organizations like an angel investor, risk capital, public markets. Incentives
within the sort of tax holiday for three years are a benefit worth considering.
It's also apt to think about equating capital gains with the regime within the
listed market. Most significantly, interchange regulations are to be in tune
with investor needs, so that the most effective don't register outside India.
But in the global market, plenty of challenges on sustainability, technology,
regulatory and financial, etc.
The startup has been in line with the world trend dominating the space. Even the
aspiring unicorns have had an honest run during this era, where managing to seek
out investors is sometimes considered a tricky task. The trends of investments
suggest that investors want to enter as an early investor, even before the
beginning of the firm. From an overall viewing, India comes across as a thriving
under-penetrated consumer-driven market with scope for exponential growth.
Internet penetration and its increasing importance will drive most of the
companies. On account of the patron demographics, with China being out of
bounds, India offers the biggest pie of investment opportunity that the globe is
eyeing. The startup can be despite the multitude of operational, regulatory, and
taxation issues that surround the business running environment in India.
As per India scenario, Bangalore rightfully called as a startups hub which deals
with emerging and multidisciplinary companies, a number of the highly funded
companies are food delivery, e-commerce, online education, etc.
Entrepreneurship isn't only about eCommerce; an exemplary model for the young
blood, Sarthak Paul launches Mean Metal Motors to make India's superstars. In
the year 2014, the most decisive challenge was the ambitions like his need for
plenty of money. Keeping a talented team motivated on a shoestring budget isn't
easy. Only three friends ,which includes networking with a global team , about
42 talented youth ,which they mentored and great success over this project.
Financial Characteristics Of Startups
Methods Of Financing
Traditional methods of financing:
Traditional methods represent plausible arrangement for start-up companies to
start raising money, and most start-up companies enter the entrepreneurial world
in this way.
Modern Methods of Financing:
- Bank loans: It is the oldest form of providing financial resources to
startup companies. But as a founder, it seems to be the complex procedures
of bank or financial institutions because mainly it is founded by the young
group of people who don't own personal property and find it hard to get bank
- 3F (Friends, Family, and Fools): It's being considered to be an delicate
source of finance collection. As the founder explains the creative idea
adopted from his/her opinion to be familiar with closet individuals and the
risk factors. Fools because they invest their money although from the last
decade there is a failure in the three years of business. Potential risks of
such financing are disagreements that may occur in the families or between
friends if the project fails in the end.
- Seed Investments: These being collected at the earliest stage of
fundraising, and they usually include personal savings and funds from family
members and friends. These being considered to be initial investments that
help start-up companies to expand their business. For exploring seed
investments it is mandate to accelerate the growth and development of their
- Business angels: It's called "smart funding" because it includes the
sharing of knowledge, providing skills, expertise, and business contracts.
Business angels are the most crucial link between funding and companies,
from the start-up stage to the stage in, which companies are ready to be on
the capital market. Moreover, business angels provide financial and
managerial rampart which is the additional option for the endurance of the
companies. The government also provides a tax exemption on their investment.
- Venture Capital Investments: Focused on high-risk projects, potentially
high return on investment. It is considered to be the corresponding part of
the ownership of a company and also not affected by the company's cash flow
statement. The main aim is to provide financial assistance at the early
stage of development so their young and creative ideas can being transformed
into a future business. Another name can be risk capital funds with a
- Startup boot camp: It is one of the selective programs set up in
the European locations, which helps in providing mentors and partners in all
areas of working. An online platform shares innovative ideas with the
experts and collaborates to have stupendous success.
- Seed Camp: An investment program for companies at the early stage
of development. It offers experts in the field of product development, human
resource, marketing, journalists, lawyers, etc. It's being initiated by the
venture capital funds and business angels. Venture Capital funds decide not
to finance some project/start-up; this presents significant distress signal
to other potential investors.
- Fundable ( Crowd funding): It is an online platform for gathering
investments into small companies, i.e., a form of collecting development funds
that are used for different purposes and in various amounts; it is a form of
collecting donations for charities and intriguing projects in general. Each
entrepreneur can raise funds from future clients before the project is being
developed. In case of a failure, money is returned to those who contributed,
while Fundable ensures that all the transactions are being made fairly.
Magnitude Of Financial Crises
Chagrin stands up for financial crises. VAR in finance means two things:
variance and value at risk, but when A company isn't capitalized, it means the
value at risk. It's being usually quoted in units of dollars forgiven
probability and time horizons. For instance, As per the context of startup
founder shares in the U.S. stock market, the 1% one year VAR of $10 million means
one %chance that a portfolio will lose $10 million in a year. Stress test refers
to a method of assessing risks to firms or portfolios. It is a measure , not a
statistical approach. As in the startup companies, it requires doing annual
stress tests for non-bank institutions for at least three different economic
Contractual Restrictions And Debt Trap
Contractual restrictions mean to use one land imposed by the agreement. The
startup founder lends the funds and is being promulgated in the name of the
firm. Every business set its legal requirement for having a smooth running of
the firm. Ultimately, contractual restrictions and debt traps have a linkage
that the one lacking behind to contract, then the firm leads to a Debt trap,
which refers to a situation in which a debt is difficult or impossible to repay,
typically because of high-interest disbursement prevent repayment of the
A startup founder is in a debt trap when borrowers charge
high-interest payments that are being considered to be internal validates
between an entrepreneur or any other firm. Taking a loan is one of the classic
indicators for the debt trap. In the downslide of valuations in the crunch of
financial markets, startup founders often lose their control over the firm.
The fund's needs are not only to run the business but also for the control
factor over the firm. Not every startup runs its organization for the
profitability purpose but also for the high rates of Initial Public Offerings
In India, this pandemic situation is bringing online markets to
downsizing such as India Markets, which trades for the selling of bulk goods ,
which created a stellar debut in the market. Still, the current scenario is in
the bearish period. Still, the reputation remains constant. If the startup
founder keeps the proper planning, then the firm will never face a debt trap,
and also taking loans for the regular expenses can be sliding to the debt trap.
How Startup Can Survive With Zero Financial Resources
A Startup can start with no monetary assets; it can firstly start with the
volunteering work, which will lead a person to know the working of an
organization and which will give a reliable networking source. As per the
technology advancement, online platforms are inevitable examples such as
startups for e-commerce websites, which will include no such resources.
It must be a service-oriented program which will help to create the users to
attract towards the startup. Crowd funding websites lead the founders to
collaborate with themselves and can help them to work efficiently. Government
offers financial institutions to the founder person so they can be financial
aided for the creative ideas brought by them. Selling any sole knowledge which
leads to an associate manager or property manager as per the interest of an
individual which can be survival for the short term in the market.
Characteristics Of An Entrepreneur
Many skills like leadership and confidence are inherent in an entrepreneur, buta
number of the time , a person grasps the items through experience, learning
tactics, and situations with the imperative world. Various legal and political
policies may also help an entrepreneur to create the absolute decision at the
correct time, which is showcased by his confidence level and well informed
about the legal status. An entrepreneur needs to scan the environment for the
business opportunity, which may be for the advantage of the organization.
An entrepreneur should have leadership skills that the best efforts may being
taken out of the hiring of the staff.
An entrepreneur's ideas aren't unique and might still survive within the market
because of doing same work efficiently and economically producing goods or
services. Entrepreneurs are constant dreamers focused on moving up or
Persuasive one among the prominent factors for an entrepreneur, there will be
many folks skeptical in nature before giving support and lending money to begin
a freshly baked idea. Entrepreneurs are ready and willing to approach things
with an open mind. Many entrepreneurs don't need staff to perform their duties.
They are considering the sole entrepreneurs having the creation of their while.
Entrepreneurs should have the right attitudes and the right personality traits.
Internal locus of control may being defined as human perception of events being
contingent upon one's characteristics or actions. On the opposite hand, external
locus of control is defined as one's feeling of the outcome being entirely
independent of humanforce i.e., the reaction being the results of luck, chance,
fate, or authoritative to others. Locus of control is associated with
There is also a study gap in entrepreneurial education of scholars who have low
degrees of entrepreneurial characteristics and supply recommendations to
governments and universities for the event and sufficient learning of
entrepreneurship. Even to generalize this, it had affected the extent of
components of various groups.
Risks For Startups
Market risk indicate to those risks which an investment faces due to fluctuation
in the market; it's a risk which refers to know whether or not there is enough
demand for what you are offering at a convinced price in the market. Market risk
includes many different situations or events over which we have no control, such
as civil unrest or political upheavals, the economic sanctions that target a
specific product can seriously hurt the value products.
In a market, unless you sell a commodity, there is no another way to see that
how the market will receive a new product, you may use several techniques to
know the degree of market acceptance. Still, you can never know for sure that
whether market accepts your product or services until you sell it, because until
the original costumers start using your products or services you never know that
what you are doing is right or wrong.
While starting a new venture you need to understand that you are not the only
player in the game, several other individuals may have some concept of business
as yours and even if an individual don't have the same idea they will start
playing rough, they may copy your principal model for your startup, a sole will
out-innovate you, they can out-spend you, they will create the situation of
price wars, they may spread rumors related to your product or service, they will
try to an end-run around your patents or trademark, they will poke into your
trade blue print and secretes and try to steal it, they will make an effort of
influencing your potential customers by way of lobbying and other strategies,
and they will try their best to destroy your business to stay in a market.
Now you see that how competitors can enter into the market, and if you don't pay
attention, it can easily be spun in another way. You could inadvertently become
what from you were defending yourself before. To stride a step ahead of your
competitors, you must continuously think that how others can defeat you and then
develop appropriate defense by understanding your strengths, weaknesses,
opportunities, and threats then figure out what you can do better than your
Operational risk can being summarized as the chances of uncertainties that a
company faces in its daily conduct of operational activities, procedures, and
systems; it focuses on how things are accomplished within the organization and
often associated with decisions that how the organization functions and what are
its priorities. Like if you are going into the business of making and selling
any electronic gadget, then it's quite another thing to master the actual
technicalities of making and selling it.
Operational risk broadly covers everything having to do with the execution, such
as can the product design be done in given R&D budget, will your product work as
intended, can the team optimize the logistics of product distribution, can you
create product amiable infrastructure, will you have a backup plan to keep your
company in motion in case an accident destroy some necessary types of equipment
in your data center. To tackle all these situations, there is no substitute for
experience because it's all about careful planning and management by the
experienced people who know what they are doing.
People risks which are also known as team risks are one of the most crucial as
well as the most unpredictable element of any startup venture, the right
selection of the combination of experience, connection and character among the
founding team can exceedingly increase the enterprise overall success and
failure to recruit and retain the right team members can spell doom. After
selecting such group, it is your responsibility to create a clear vision and
culture so that the all the team members can rally behind. A healthy environment
must be created with a wealthy culture of the organization so that the
employees can accept it and work following one another, which in turn helps to
manage egos, mediate personality clashes and disagreements, and rein in the
rogue group members.
As a leader, you should allow your team to do what they do best while recruiting
your team to invest in those people who believe in your concept and what you are
offering in the market and instill a sense of confidence that they can help you
get your idea of startup across the finish line.
Your team is the strongest as well as the weakest link, when you let your
relationships cloud your judgments, like if you recruit if old college friend
who is also proper in marketing but may not be the person to market your
specific product, then you should conclude fast that it isn't going to work and
must take steps to fix it quickly before the situation goes out of hands.
Legal And Regulatory Risks
The legal and regulatory section is one of the essential areas where startups
seem to falter. It is necessary to meet all legal requirements to avoid failure;
for any startup, it's not viable to pool in resources to the same extent as well
as established corporate houses, for any startup to survive in the market should
avoid a run-in with the law.
There are various legal challenges that a startup
potentially faces, including taxation, labor laws, business structure, business
license, protection of intellectual property, corporate governance, etc. the
list of challenges with legal heritage is almost endless, tax complications
stemming from your choice of legal entity or state of incorporation; disputes
arising from poorly structured agreements; lawsuits filed by a competitor
alleging misappropriation of trade secrets and many more.
To avoid such issues firstly, you must learn enough about what you are doing in
your startup so that you can fully appreciate that you left, secondly hire
valuable attorneys for both corporate as well as intellectual property matters
and keep your attorney informed of what is happening in your business so that
they prevent such problems before it gets out of hands.
Financial risks are the biggest nightmare for all the startups; it's an end road
for any venture when its start is going out of funds, the financial risk becomes
more severe when you don't have a backup plan in case the money lenders and
investors say no, it is a reason for the failure of various ventures because
they make the mistake of betting everything on being able to secure outside
Investors don't invest their capital on a rookie entrepreneur, it is obstacle to
find an investor willing to take a risk on you are slim, so it's prudent to
start with an idea which requires a more modest amount of initial funding. For
that, you should have two plans for market one is for, the growth of the
business if you succeed in finding an investor and second for bootstrapping the
business if you have to go it alone.
Once you find the investor and raise enough capital the second job is to find
the ways to generate ample revenue to cover the cost in the case you run out of
funds. But the financial risks, are never going to disappear once your business
is in motion, several things affect the cash flow in an operating business such
as credit risks, commodity price risks, exchange rate risks, interest rate
risks, asset price risks, etc. So to mitigate the risks it's essential to keep a
reserve of funds for such circumstances.
Reasons For Failure Of Startups
The leading reasons for the failure of startups are - such as the product had no
market, firm ran out of cash, don't have right team, or have pricing issues,
having destitute product and marketing strategy, had no investors interests,
these reasons substantiate most of the problem and risks that have discussed
Here are some examples of Startups and the reason for their failure.
This startup was being incorporated in 2014 with its two kinds of businesses
B2B retail and B2B wholesale; its headquarter was in Noida.
Reason for failure – It says that the colossal reason was the government's demonization step taken in the year 2016 caused flagging sales and
Incorporated in 2015, Doodhwala was the delivery platform worked on the model to
deliver milk and groceries directly to your doorsteps, offering a service of
distribute the product before 7 AM daily at very miniscule delivery charges of
Reason for failure:
Even with such unmatched offerings this venture failed to
raise subsequent financing.Still, another sunstantial challenge for Doodhwala
was the cluttered market, the presence of prominent players like Big Basket and
Swiggy who consumed their child companies like RainCan and Morningcart (big
Basket) and SuprDaily (Swiggy) for their micro Delivery services, making it
difficult for Doodhwala to sustain on its own, and finally, competition forced
Doodhwala to shutdown.
Aditya Birla Payments Bank (Abipb)
ABIPB was being launched on February 22, 2018; it's a joint venture between Aditya Birla Nuvo Ltd. and Idea Cellular with shares distribution of 51 percent
with Aditya Birla Nuvo and 49 percent with Idea Cellular.
Reason for failure:
the reason for its failure is negative profit-building, as
they invested huge capital in setting up the initial infrastructure, which leads
to higher operating expenses, and they only in government securities which
generate less return as compared to other ventures such as mutual funds. Another
reason was that in India , the larger section still prefers the traditional
methods of banking transactions, as there isn't awareness and comfort with the
The unviable business model of ABIPB led to its closure.
Doc Talk was being incorporated in August 2016as an app, where you can get
detailed prescriptions by your doctor, store medical files, save your
medications, etc. As in India, the leading healthcare facilities are still
offline due to which the Doctors faced the problem of follow up and calls of the
Reason for failure – the reason for the failure of Doc Talk as it did not have
the backup plan in case the primary business model fails, the planned transition
into the electronic medical record solution business from the existing business
model didn't yield the acceleration that is needed. The company had to close the
entire health tech concept, and aid off a majority of its employees.
Pragmatic Risks Management
After discussing various hazard while starting a new venture, it has become
quite clear that risks are an inevitable and integral part of all startups that
means you can't eliminate it, Hence, it's better to learn how to manage risks
to protect and strengthen the growth of the business. But that doesn't mean that
building a startup is overawing; you should focus on having a system to point
out and cure vulnerabilities and threats to the venture and other sections
related to it.
The process of risk management is prioritizing and identifying the probable
risks before it strike by taking the preventive steps to reduce and curtail
them. To analyse and attenuate risks for your venture, you need to establish a
pragmatic risk management plan consist of the following steps.
In the first step, you have to think about all the possible things that could
cause substantial harm to your startup.
Secondly, you have to categorize the risks into different categories, which we
have discussed above; this categorization helps you to know who might be best
qualified to manage that particular risk.
Now in the third step, think of the correlative probability to demonstrate that
particular risk as critical, moderate, or ignorable.
In the fourth step, elucidate what would happen to the business if that
particular risk manifests itself.
In the fifth step, you have to compile all the things which can be used to
curtail probability or lessen the impact of the consequences of any particular
risk manifests itself. Choosing the appropriate tactic is a very crucial job, so
don't employ any tactic just because it is visible.
In the sixth step, think about the cost of implementation of the chosen tactic.
Lastly, once you have taken all the above steps you need to decide the
mitigating tactic you are going to implement, keep this in mind that there is no
right or wrong; your choice of plan always depends on individual risk tolerance.
After developing your risk management plan, its time to take the perspective of
your advisors and team members as we all have made different mistakes and have
learned different lessons, so its good to have multiple view point. The plan of
risk management needs to get revised as the circumstances evolve.
Even, you have a well-developed risk management plan you shouldn't obsess over
it; It's neither possible nor practical to forecast all potential risks. Because
no matter how intelligent you are or how focused you are in assessing the
situation, you can't think of everything.
So, this risk management isn't about identifying and attenuate the probable
sources of risks, it's about engaging common sense to recognize and mitigate the
most obvious risks in a cost-effective manner, using some of the measures
described above and creating a culture of responding to unanticipated
developments that are, putting out fires in a calm, rational way. Building a
startup is itself a risk-taking job; by robust risk management, you can beat the
odds and form a prosperous and gratifying venture by learning to identify and
In the planet of finance, risk management refers to the applying of identifying
potential risks beforehand, analyzing them, and taking precautionary steps to
curb the chance. When a startup founder makes an investment decision, it exposes
itself to a variety of commercial risks. The portion of such risks depends on
the sort of economic instrument.
These financial risks could be within the assortment of high inflation,
volatility in capital markets, recession, bankruptcy, etc. So, as to attenuate
and control the exposure of investment to such risks, fund managers and
investors practice risk management.
A decent risk management plan should state strategies techniques to being
accustomed to recognize and confront threats and vulnerabilities facing the
corporate and supply possible solutions to the matter.
- Financial Risk Management Practices in Financial and Non-Financial
- India's world largest growing startup ecosystem, Amity Research Journal
of tourism https://amity.edu/arjtah/pdf/vol1-2/10.pdf
- Indian Startup -Issues, Challenges, and opportunities.
- Startup companies-life cycle and challenges
- Shevaaz Khan And
- Sakshi Kothari