CHAPTER 14

STARTUP FINAN(:E
(~I LEARNING OUTCOMES l ------
After going through the chapter student shall be able to understand:
D Introduction of Startup finance
D Pitch Presentation
D Sources of Funding
D Startup financing through Venture Capital Financing

((S· 1. THE BASICS OF STARTUP FINANCING

Startup financing means some initial infusion of money needed to turn an idea (by starting a
business) into reality. While starting out, big lenders like banks etc. are not interested in a startup
business. The reason is that when you are just starting out, you're not at the point yet where a
traditional lender or investor would be interested in you. So that leaves one with the option of
selling some assets, borrowing against one's home, asking loved ones i.e. family and friends for
loans etc. But, that involves a lot of risk, i nclud i n~1 the risk of bankruptcy and strained relationships
with friends and family.
So, the pertinent question is how to keep loans friom family and friends strictly businesslike. This is
the hard part behind starting a business -- puttirng so much at risk. But doing so is essential. It's
what sets entrepreneurs apart from people who collect regular salaries as employees.
A good way to get success in the field of entre!preneurship is to speed up initial operations as
quickly as possible to get to the point where outside investors can see and feel the business
venture, as well as understand that a person has taken some risk reaching it to that level.

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Some businesses can also be bootstrapped (attempting to found and build a company
from personal finances or from the operating revEmues of the new company).They can be built up
quickly enough to make money without any help from investors who might otherwise come in and
start dictating the terms.
In order to successfully launch a business and ge!t it to a level where large investors are interested
in putting their money, requires a strong busirness plan. It also requires seeking advice from
experienced entrepreneurs and experts -- people who might invest in the business sometime in the
future.

((S· 2. SOME OF THE INNOVATIVE WAYS TO FINANCE A

STARTUP
Every startup needs access to capital, whether for funding product development, acquiring
machinery and inventory, or paying salaries to its employee. Most entrepreneurs think first of bank
loans as the primary source of money, only to find out that banks are really the least likely
benefactors for startups. So, innovative measures; include maximizing non-bank financing.
Here are some of the sources for funding a startu[p:
(i) Personal financing. It may not seem to bE~ innovative but you may be surprised to note that
most budding entrepreneurs never though1t of saving any money to start a business. This is
important because most of the investors will not put money into a deal if they see that you
have not contributed any money from your personal sources.
(ii) Personal credit lines. One qualifies for ptersonal credit line based on one's personal credit
efforts. Credit cards are a good example of this. However, banks are very cautious while
granting personal credit lines. They provide this facility only when the business has enough
cash flow to repay the line of credit.
(iii) Family and friends. These are the people who generally believe in you, without even
thinking that your idea works or not. How1~ver, the loan obligations to friends and relatives
should always be in writing as a promissory note or otherwise.
(iv) Peer-to-peer lending. In this process group of people come together and lend money to
each other. Peer to peer to lending has b1~en there for many years. Many small and ethnic
business groups having similar faith or intmest generally support each other in their start up
endeavors.
(v) Crowdfunding. Crowdfunding is the use o,f small amounts of capital from a large number of
individuals to finance a new business initiative. Crowdfunding makes use of the easy
accessibility of vast networks of people th1rough social media and crowdfunding websites to
bring investors and entrepreneurs together.

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(vi) Microloans. Microloans are small loans that are given by individuals at a lower interest to a
new business ventures. These loans can be issued by a single individual or aggregated
across a number of individuals who each contribute a portion of the total amount.
(vii) Vendor financing. Vendor financing is the form of financing in which a company lends
money to one of its customers so that he can buy products from the company itself. Vendor
financing also takes place when many manufacturers and distributors are convinced to
defer payment until the goods are sold. This means extending the payment terms to a
longer period for e.g. 30 days payment period can be extended to 45 days or 60 days.
However, this depends on one's credit worthiness and payment of more money.
(viii) Purchase order financing. The most common scaling problem faced by startups is the
inability to find a large new order. The rea:son is that they don't have the necessary cash to
produce and deliver the product. Purchase order financing companies often advance the
required funds directly to the supplier. Thi:s allows the transaction to complete and profit to
flow up to the new business.
(ix) Factoring accounts receivables. In this method, a facility is given to the seller who has
sold the good on credit to fund his receivables till the amount is fully received. So, when the
goods are sold on credit, and the credit period (i.e. the date upto which payment shall be
made) is for example 6 months, factor will pay most of the sold amount up front and rest of
the amount later. Therefore, in this way, a startup can meet his day to day expenses.

((S· 3. PITCH PRESENTATION

Pitch deck presentation is a short and brief presentation (not more than 20 minutes) to investors
explaining about the prospects of the company and why they should invest into the startup
business. So, pitch deck presentation is a brief presentation basically using Power Point to provide
a quick overview of business plan and convincing the investors to put some money into the
business. Pitch presentation can be made either during face to face meetings or online meetings
with potential investors, customers, partners, and co-founders. Here, some of the methods have
been highlighted below as how to approach a pitch presentation:
(i) Introduction
To start with, first step is to give a brief account of yourself i.e. who are you? What are you doing?
But care should be taken to make it short and sweet. Also, use this opportunity to get your
investors interested in your company. One can also talk up the most interesting facts about one's
business, as well as any huge milestones one may have achieved.
(ii) Team
The next step is to introduce the audience the people behind the scenes. The reason is that the
investors will want to know the people who are !JOing to make the product or service successful.
Moreover, the investors are not only putting momey towards the idea but they are also investing in

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the team. Also, an attempt should be made to include the background of the promoter, and how it
relates to the new company. Moreover, if possible, it can also be highlighted that the team has
worked together in the past and achieved significant results.
(iii) Problem
Further, the promoter should be able to explain the problem he is going to solve and solutions
emerging from it. Further the investors should bH convinced that the newly introduced product or
service will solve the problem convincingly.
For instance, when Facebook was launched in 2004, it added some new features which give it a
more professional and lively look in comparison to Orkut which was there for some time. It enabled
Facebook to become an instant hit among the people. Further, customers have no privacy while
using Orkut. However, in Facebook, you can view a person's profile only if he adds you to his list.
These simple yet effective advantages that Facebook has over Orkut make it an extremely popular
social networking site.
(iv) Solution
It is very important to describe in the pitch presentation as to how the company is planning to solve
the problem. For instance, when Flipkart first started its business in 2007, it brought the concept of
e-commerce in India. But when they started, payment through credit card was rare. So, they
introduced the system of payment on the basis of cash on delivery which was later followed by
other e-commerce companies in India. The second problem was the entire supply chain
system. Delivering goods on time is one of the most important factors that determine the
success of an ecommerce company. Flipkart addressed this issue by launching their own supply
chain management system to deliver orders in a timely manner. These innovative techniques
used by Flipkart enabled them to raise large amount of capital from the investors.
(v) Marketing/Sales
This is a very important part where investors will be deeply interested. The market size of the
product must be communicated to the investors. This can include profiles of target customers, but
one should be prepared to answer questions about how the promoter is planning to attract the
customers. If a business is already selling goods;, the promoter can also brief the investors about
the growth and forecast future revenue.
(vi) Projections or Milestones
It is true that it is difficult to make financial projections for a startup concern. If an organization
doesn't have a long financial history, an educated guess can be made. Projected financial
statements can be prepared which gives an organization a brief idea about where is the business
heading? It tells us that whether the business will be making profit or loss?
Financial projections include three basic documents that make up a business's financial
statements.

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• Income statement: This projects how much money the business will generate by projecting
income and expenses, such as sales, cost of goods sold, expenses and capital. For your
first year in business, you'll want to create a monthly income statement. For the second
year, quarterly statements will suffice. For the following years, you'll just need an annual
income statement.
• Cash flow statement: A projected cash flow statement will depict how much cash will be
coming into the business and out of that cash how much cash will be utilized into the
business. At the end of each period (e.g. monthly, quarterly, annually), one can tally it all
up to show either a profit or loss.
• Balance sheet: The balance sheet shows the business's overall finances including assets,
liabilities and equity. Typically, one will create an annual balance sheet for one's financial
projections.
(vii) Competition
Every business organization has competition even if the product or service offered is new and
unique. It is necessary to highlight in the pitch pmsentation as to how the products or services are
different from their competitors. If any of the competitors have been acquired, there complete
details like name of the organization, acquisition prices etc. should be also be highlighted.
(viii) Business Model
The term business model is a wide term denoting core aspects of a business including
purpose, business process, target customers, o1fferings, strategies, infrastructure, organizational
structures, sourcing, trading practices, and operaltional processes and policies including culture.
Further, as per lnvestopedia, a business model is the way in which a company generates revenue
and makes a profit from company operations. Analysts use the term gross profit as a way to
compare the efficiency and effectiveness of a firm's business model. Gross profit is calculated by
subtracting the cost of goods sold from revenue!s. A business model can be illustrated with the
help of an example. There are two companies - company A and company B. Both the companies
are engaged in the business of renting movies. Prior to the advent of internet both the companies
rent movies physically. Both the companies made ~ 5 crore as revenues. Cost of goods sold was~
400000. So, the companies made ~ 100000 as. gross profit. After the introduction of internet,
company A started to offer movies online insteaid of renting or selling it physically. This change
affected the business model of company A positively. Revenue is sti l l ~ 500000. But the significant
part is that cost of goods sold is now ~ 200000 only. This is because online sales lead to
significant reduction of storage and distribution c:osts. So, the gross profit increases from 20% to
60%.
Therefore, Company A isn't making more in sales, but it figured out a way to revolutionize its
business model, which greatly reduces costs. Managers at company A have an additional 40%

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more in margin to play with than managers at company A. Managers at company A have little room
for error and they have to tread carefully.
Hence, every investor wants to get his money back, so it's important to tell them in a pitch
presentation as to how they should plan on generating revenue. It is better to show the investors a
list of the various revenue streams for a business model and the timeline for each of them. Further,
how to price the product and what does the competitor charge for the same or similar product shall
also be highlighted. It is also beneficial to discuss the lifetime value of the customer and what
should be the strategy to keep him glued to their product.
(ix) Financing
If a startup business firm has raised money, it i:s preferable to talk about how much money has
already been raised, who invested money into the! business and what they did about it. If no money
has been raised till date, an explanation can be made regarding how much work has been
accomplished with the help of minimum funding that the company is managed to raise.
It is true that investors like to see entrepreneurs who have invested their own money. If a promoter
is pitching to raise capital he should list how much he is looking to raise and how he intend to use
the funds.

((S· 4. MODES OF FINANCING FOR STARTUPS

(i) Bootstrapping
An individual is said to be boot strapping when hte or she attempts to found and build a company
from personal finances or from the operating revenues of the new company.
A common mistake made by most founders is that they make unnecessary expenses towards
marketing, offices and equipment they cannot really afford. So, it is true that more money at the
inception of a business leads to complacency and wasteful expenditure. On the other hand,
investment by startups from their own savings leads to cautious approach. It curbs wasteful
expenditures and enable the promoter to be on their toes all the time.
Here are some of the methods in which a startup firm can bootstrap:
(a) Trade Credit
When a person is starting his business, suppliers. are reluctant to give trade credit. They will insist
on payment of their goods supplied either by cash or by credit card. However, a way out in this
situation is to prepare a well-crafted financial plain. The next step is to pay a visit to the supplier's
office. If the business organization is small, the· owner can be directly contacted. On the other
hand, if it is a big firm, the Chief Financial Officer can be contacted and convinced about the
financial plan.

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Communication skills are important here. The financial plan has to be shown. The owner or the
financial officer has to be explained about the business and the need to get the first order on credit
in order to launch the venture. The owner or finaincial officer may give half the order on credit and
balance on delivery. The trick here is to get th e~ goods shipped and sell them before paying to
them. One can also borrow to pay for the good sold. But there is interest cost also. So trade credit
is one of the most important ways to reduce the amount of working capital one needs. This is
especially true in retail operations.
When you visit your supplier to set up your order during your startup period, ask to speak directly
to the owner of the business if it's a small company. If it's a larger business, ask to speak to the
chief financial officer or any other person who approves credit. Introduce yourself. Show the officer
the financial plan that you have prepared. Tell the owner or financial officer about your business,
and explain that you need to get your first orders ion credit in order to launch your venture.
The owner or financial officer may give half the order on credit, with the balance due upon delivery.
Of course, the trick here is to get the goods shipped, and sell them before one has to pay for them.
One could borrow money to pay for the inventory, but you have to pay interest on that money. So
trade credit is one of the most important ways to reduce the amount of working capital one needs.
This is especially true in retail operations.
(b) Factoring
This is a financing method where accounts rec:eivable of a business organization is sold to a
commercial finance company to raise capital. The factor then got hold of the accounts receivable
of a business organization and assumes the task of collecting the receivables as well as doing
what would've been the paperwork. Factoring c:an be performed on a non-notification basis. It
means customers may not be told that their accounts have been sold.
However, there are merits and demerits to factoring. The process of factoring may actually reduce
costs for a business organization. It can actually reduce costs associated with maintaining
accounts receivable such as bookkeeping, collections and credit verifications. If comparison can
be made between these costs and fee payable to the factor, in many cases it has been observed
that it even proved fruitful to utilize this financing method.
In addition to reducing internal costs of a business, factoring also frees up money that would
otherwise be tied to receivables. This is especially true for businesses that sell to other businesses
or to government; there are often long delays in payment that this would offset. This money can be
used to generate profit through other avenues of the company. Factoring can be a very useful tool
for raising money and keeping cash flowing.
(c) Leasing
Another popular method of bootstrapping is to take the equipment on lease rather than purchasing
it. It will reduce the capital cost and also help lessee (person who take the asset on lease) to claim

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tax exemption. So, it is better to a take a photocopy machine, an automobile or a van on lease to
avoid paying out lump sum money which is not at all feasible for a startup organization.
Further, if you are able to shop around and get tlhe best kind of leasing arrangement when you're
starting up a new business, it's much better to lease. It's better, for example, to lease a
photocopier, rather than pay $3,000 for it; or lease your automobile or van to avoid paying out
$8,000 or more.
There are advantages for both the startup businessman using the property or equipment (i.e.
the lessee) and the owner of that property or equipment (i.e. the lessor. ) The lessor enjoys tax
benefits in the form of depreciation on the fixed asset leased and may gain from capital
appreciation on the property, as well as making a profit from the lease. The lessee benefits by
making smaller payments retain the ability to walk away from the equipment at the end of the lease
term. The lessee may also claim tax benefit in the! form of lease rentals paid by him.
(ii) Angel Investors
Despite being a country of many cultures and communities traditionally inclined to business and
entrepreneurship, India still ranks low on comparative ratings across entrepreneurship, innovation
and ease of doing business. The reasons are obvious. These include our old and outdated
draconian rules and regulations which provides a hindrance to our business environment for a long
time. Other reasons are red tapism, our time consuming procedures, and lack of general support
for entrepreneurship. Off course, things are channing in recent times.
As per lnvestopedia, Angel investors invest in small startups or entrepreneurs. Often, angel
investors are among an entrepreneur's family and friends. The capital angel investors provide may
be a one-time investment to help the business propel or an ongoing injection of money to support
and carry the company through its difficult early stages.
Angel investors provide more favorable terms compared to other lenders, since they usually invest
in the entrepreneur starting the business rather than the viability of the business. Angel investors
are focused on helping startups take their first steps, rather than the possible profit they may get
from the business. Essentially, angel investors am the opposite of venture capitalists.
Angel investors are also called informal investors;, angel funders, private investors, seed investors
or business angels. These are affluent individuals who inject capital for startups in exchange for
ownership equity or convertible debt. Some angel investors invest through crowdfunding platforms
online or build angel investor networks to pool in capital.
Angel investors typically use their own money, unlike venture capitalists who take care of pooled
money from many other investors and place them in a strategically managed fund .
Though angel investors usually represent individUJals, the entity that actually provides the fund may
be a limited liability company, a business, a trust or an investment fund, among many other kinds
of vehicles.

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Angel investors who seed startups that fail diuring their early stages lose their investments
completely. This is why professional angel investors look for opportunities for a defined exit
strategy, acquisitions or initial public offerings (IPOs).
(iii) Venture Capital Funds
Evolution
Venture Capital in India stated in the decade of ·t970, when the Government of India appointed a
committee to tackle the issue of inadequate fundiing to entrepreneurs and start-ups. However, it is
only after ten years that the first all India venture capital funding was started by IDBI, ICICI and
IFCI.
With the institutionalization of the industry in November 1988, the government announced its
guidelines in the "CCI" (Controller of Capital lssuies). These focused on a very narrow description
of Venture Capital and proved to be extremely restrictive and encumbering, requiring investment in
innovative technologies started by first generation entrepreneur. This made investment in VC
highly risky and unattractive.
At about the same time, the World Bank orga1nized a VC awareness seminar, giving birth to
players like: TDICICI, GVFL, Canbank and !Pathfinder. Along with the other reforms the
government decided to liberalize the VC lndust1ry and abolish the "CCI", while in 1995 Foreign
Finance companies were allowed to invest in the 1country.
Nevertheless, the liberalization was short-spanned, with new calls for regulation being made in
1996. The new guidelines' loopholes created an unequal playing ground that favoured the foreign
players and gave no incentives to domestic high net worth individuals to invest in this industry.
VC investing got considerably boosted by the IT revolution in 1997, as the venture capitalists
became prominent founders of the growing IT and telecom industry.
Many of these investors later floundered during the dotcom bust and most of the surviving ones
shifted their attention to later stage financing, leaving the risky seed and start-up financing to a few
daring funds.
Formation of venture capital has been depicted in the diagram below:

Trust

Company

Limited Liability
Partnership

Investors in venture capital funds are shown in thte following diagram:

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Financial institut ions

Banks

Pension Funds

Corporat ions

Structure of Venture Capital Fund in India

Three main types of fund structure exist: one for domestic funds and two for offshore ones:
(a) Domestic Funds: Domestic Funds (i.e. cine which raises funds domestically) are usually
structured as: i) a domestic vehicle for the pooling of funds from the investor, and ii) a separate
investment adviser that carries those duties of as•set manager. The choice of entity for the pooling
vehicle falls between a trust and a company, (India, unlike most developed countries does not
recognize a limited partnership), with the trust form prevailing due to its operational flexibility.
(b) Offshore Funds: Two common alterna1tives available to offshore investors are: the
"offshore structure" and the "unified structure".
Offshore structure: Under this structure, an inv1estment vehicle (an LLC or an LP organized in a
jurisdiction outside India) makes investments directly into Indian portfolio companies. Typically, the
assets are managed by an offshore manager, while the investment advisor in India carries out the
due diligence and identifies deals.
Unified Structure: When domestic investors are expected to participate in the fund, a unified
structure is used. Overseas investors pool their assets in an offshore vehicle that invests in a
locally managed trust, whereas domestic investors directly contribute to the trust. This is later
device used to make the local portfolio investments.
Concept of Venture Capital Fund
Venture capital means funds made available for startup firms and small businesses with
exceptional growth potential. Venture capital is money provided by professionals who alongside
management invest in young, rapidly growing companies that have the potential to develop into
significant economic contributors.
Venture Capitalists generally:
•!• Finance new and rapidly growing companiE~s
•!• Purchase equity securities

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•!• Assist in the development of new products or services

•!• Add value to the company through active participation.
Characteristics of Venture Capital Financing:
(i) Long time horizon: The fund would invest with a long time horizon in mind. Minimum
period of investment would be 3 years and maximum period can be 10 years.
(ii) Lack of liquidity: When VC invests, it ta1kes into account the liquidity factor. It assumes
that there would be less liquidity on the equity it gets and accordingly it would be investing
in that format. They adjust this liquidity premium against the price and required return.
(iii) High Risk: VC would not hesitate to takei risk. It works on principle of high risk and high
return. So, high risk would not eliminate th1e investment choice for a venture capital.
(iv) Equity Participation: Most of the time, \IC would be investing in the form of equity of a
company. This would help the VC participate in the management and help the company
grow. Besides, a lot of board decisions can be supervised by the VC if they participate in
the equity of a company.
Advantages of bringing VC in the company:
•!• It injects long- term equity finance which provides a solid capital base for future growth.
•!• The venture capitalist is a business partn1er, sharing both the risks and rewards. Venture
capitalists are rewarded with business success and capital gain.
•!• The venture capitalist is able to provide praictical advice and assistance to the company based
on past experience with other companies which were in similar situations.
•!• The venture capitalist also has a network o"f contacts in many areas that can add value to the
company.
•!• The venture capitalist may be capable of providing additional rounds of funding should it be
required to finance growth.
•!• Venture capitalists are experienced in the process of preparing a company for an initial public
offering (IPO) of its shares onto the stock exchanges or overseas stock exchange such as
NASDAQ.
•!• They can also facilitate a trade sale.
Stages of funding for VC:
1. Seed Money: Low level financing needed 1to prove a new idea.
2. Start-up: Early stage firms that need funding for expenses associated with marketing and
product development.
3. First-Round: Early sales and manufacturing funds.

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4. Second-Round: Working capital for early stage companies that are selling product, but not
yet turning in a profit.
5. Third Round: Also called Mezzanine fiinancing, this is expansion money for a newly
profitable company.
6. Fourth-Round: Also called bridge financing, it is intended to finance the "going public"
process.
Risk in each stage is different. An indicative Risk matrix is given below:

Period ~ctivity to be financed

Financial (Funds Risk
Stage locked in Perception
years)
Seed Money 7-10 Extreme For supporting a concept or idea or R&D for
product development
Start Up 5-9 Very High Initializing prototypes operations or developing
First Stage 3-7 High Start commercials marketing production and

Second Stage 3-5 Sufficiently high Expand market and growing working capital need

Third Stage 1-3 Medium Market expansion, acquisition & product

development for profit making company
Fourth Stage 1-3 Low Facilitating public issue

VC Investment Process
The entire VC Investment process can be segregated into the following steps:
1. Deal Origination: VC operates directly 01r through intermediaries. Mainly many practicing
Chartered Accountants would work as intermedia1ry and through them VC gets the deal.
Before sourcing the deal, the VC would infornn the intermediary or its employees about the
following so that the sourcing entity does not waslte time :
•!• Sector focus
•!• Stages of business focus
•!• Promoter focus
•!• Turn over focus
Here the company would give a detailed businesH plan which consists of business model, financial
plan and exit plan. All these aspects are covmed in a document which is called Investment
Memorandum (IM). A tentative valuation is also carried out in the IM.

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2. Screening: Once the deal is sourced the same would be sent for screening by the VC. The
screening is generally carried out by a committee consisting of senior level people of the VC. Once
the screening happens, it would select the company for further processing.
3. Due Diligence: The screening decision would take place based on the information provided
by the company. Once the decision is taken to proceed further, the VC would now carry out due
diligence. This is mainly the process by which the VC would try to verify the veracity of the
documents taken. This is generally handled by e)(ternal bodies, mainly renowned consultants. The
fees of due diligence are generally paid by the \IC. However, in many cases, this can be shared
between the investor (VC) and Investee (the company) depending on the veracity of the document
agreement.
4. Deal Structuring: Once the case passes through the due diligence it would now go through
the deal structuring. The deal is structured in such a way that both parties win. In many cases, the
convertible structure is brought in to ensure that the promoter retains the right to buy back the
share. Besides, in many structures to facilitate the exit, the VC may put a condition that promoter
has also to sell part of its stake along with the VC. Such a clause is called tag- along clause.
5. Post Investment Activity: In this section, the VC nominates its nominee in the board of the
company. The company has to adhere to certa1in guidelines like strong MIS, strong budgeting
system, strong corporate governance and other c:ovenants of the VC and periodically keep the VC
updated about certain mile-stones. If m il estone~ has not been met the company has to give
explanation to the VC. Besides, VC would also e'nsure that professional management is set up in
the company.
6. Exit plan: At the time of investing, the VG would ask the promoter or company to spell out
in detail the exit plan. Mainly, exit happens in two ways: one way is 'sell to third party(ies)'. This
sale can be in the form of IPO or Private Placement to other VCs. The second way to exit is that
promoter would give a buy back commitment at a pre agreed rate (generally between IRR of 18%
to 25%). In case the exit is not happening in the form of IPO or third party sell, the promoter would
buy back. In many deals, the promoter buyback is the first refusal method adopted i.e. the
promoter would get the first right of buyback.

((S· 5. STARTUP INDIA INITIATIVE

Startup India scheme was initiated by the Gov1ernment of India on 16th of January, 2016. The
definition of startup was provided which is applicable only in case of Government Schemes.
Startup means an entity, incorporated or registe1red in India:
•!• Not prior to five years,
•!• With annual turnover not exceeding ~ 25 cmre in any preceding financial year, and

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•!• Working towards innovation, development, deployment or commercialization of new products,

processes or services driven by technology or intellectual property.
Provided that such entity is not formed by splitting up, or reconstruction, of a business already in
existence. Provided also that an entity shall cease to be a Startup if its turnover for the previous
financial years has exceeded ~ 25 crore or it has completed 5 years from the date of incorporation/
registration. Provided further that a Startup sh1all be eligible for tax benefits only after it has
obtained certification from the Inter-Ministerial Board, setup for such purpose.
What is a Startup to avaiil government schemes?

~~
Up to 5 years from its date of incorporation I registration

Incorporated as either a Private Limited Company or a Registered Partnership Firm or a Limited

Liability Partnership

Turnover for any fiscal year has not exceeded INR 25 crore

Entity should not have been formed by splittilng up or reconstruction a business already in

.
existence
' ,
=1~=
,-.. '\

Working towards innovation, development, deployment or commercialization of new product,

processes or services driven by tiechnology or intellectual property
Source: http://www.starlupindia.gov.inl

© The Institute of Chartered Accountants of India

 STARTUP FINANCE

TEST YOUR KNOWLEDGE

Theoretical Questions
1. Explain some of the sources for funding a start-up.
2. What do you mean by Pitch Presentation in context of Start-up Business?

ANSWERS/ SOLUTIONS
Answers to Theoretical Questions
1. Please refer paragraph 2
2. Please refer paragraph 3

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