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Litrature Review
ANUBHAB PATNAIK
RESEARCH SCHOLAR
SRI SRI UNIVERSITY CUTTACK
Abstract: In the past few years there has been huge uprising in startup enterprises in India, and
now days lot of innovation are coming in the shape of startup enterprise. The startup enterprises
are no doubt the outcome of the startup concept. The startup concept was introduced on 15th
August 2015, Prime Minister Narender Modi announced this initiative at the Red Fort as Start-up
India and on 16th Jan 2016 it was officially flagged by Finance minister Arun Jaitley. The aim
of the Central Government was to consider the collective aspirations and enterprise of the risk
taking Indian by provide maximum help and support through the medium of finance, technology
economic, social as well as environment. This concept was introduced by different states through
individual state wise startup policy on different point of time. The state of Odisha introduced
Odisha startup policy on 29 august 2016; the Odisha startup policy gives a very clear idea about
the mission, vision and mandates which are needed for an enterprise to make it recognized itself
as a startup. After the introduction of the policy more then 250 startup enterprises are either
registered or recognized as startup enterprises in the state of Odisha. Currently more then 40
categories of startups are operational in the state and having presence in most of the major
districts. Large number of startups were established in the last past couple of years. Many startup
enterprises are coming up but they are facing major problem in accessibility of finance and apart
from government schemes which are supporting a very few startups others suffer major problem
in getting smooth flow of finance for the startup, though it is claimed by many agencies that
alternative finance facilities are available for startups but such finance options are not opted by
the startup enterprises.
This paper reviews the literature on opportunities and challenges faced for financing of startup
enterprises in the state of Odisha. Focusing on the primary research orientations—i.e. studies
centering on different categories of startup operating, factors responsible for motivation of
starting of startup, employments generation through the startup, impact of the startup policy on
the startups, the different finance facilities available, Problems encountered by startups in
obtaining finance . From our review, it is clear that research is in a very early stage of the startup
phenomenon. This chapter will elaborate the results obtained from the article study and provides
the conjectural framework and a thorough review of the available literature.
Keywords Startup, Startup Policy, Finance, Literature Review, Conceptual Frame work
INTRODUCTION
An idea can be transform into a start-up. In some cases the crisis creates an opportunity and the
end result can be a start-ups. Many times it is seen that there is an idea but we do not have
courage to start it or we do not feel it is worthy. On the contrary some people take that idea as an
opportunity and mobilize into reality. (Dutta, 2016) Paul Graham [1] says that "A startup is a
company designed to grow fast. Being newly founded does not in itself make a company a
startup. It is not at all required for a startup to work on technology or take venture funding, or
have some sort of "exit". The only essential thing is growth. Everything else we associate with
startups follows from growth." (Sharifi1, 2015)
Startup is defined as “an entrepreneurial venture or a new business in the form of a Company, a
partnership or temporary organization designed and search of a repeatable and scalable business
model.”Startup India brings excitement and immense possibilities for the future. India admits the
evident truth of modern business and its complexity. (Dr.Shailja Badra1, 2016)
Startups are generally small in size and in the development stage being funded and operated by
few promoters or one individual. The main objective of startup enterprises is to provide service
or a product which is presently not being available elsewhere in the market, or being offered in
an inferior manner. In the beginning stages, expenses of startup companies' tend to go much
ahead then their earnings as they center themselves on developing, testing and making there idea
marketable. In many cases, they require funding. Startups enterprises always look for financial
support from commercial banks or credit unions, in the shape of business loans or through Small
Business loans from local banks sponsored by government, or approach nonprofit organizations
and state governments for different grants. Easy and quick accessibility to finance for startup
enterprises has always been a challenging issue to address by Economists and startup
entrepreneurs.
Funding gaps occur usually in cases of companies in a given point of theirlife and with special
field of activity. The problem of funding gap is prevalent in young, technology-oriented startup
enterprises. As a result of the funding gaps, companies with huge growth potential are not able to
obtain the necessary capital for their operation; hence they cannot live up to their growth
potential. Funding gaps evolve in case of startup companies as a result of their special
characteristics. In the seed and early stages of their lives these companies are in the phase of
product development or they have just made their market entry. They are in the lack of
collaterals or significant revenues; hence they are unable to obtain bank financing.(Balázs
Fazekas, 2015)
Problems linked to the decision of capital structure have attracted lot of attention, as these issues
are primarily associated in small and comparatively new firms. This paper aims on finding
different funding options that can be utilized by startup firms and also the pattern and duration of
availability. Furthermore with the significance on the possible options the startup firms can
acquire in order to make sure the smooth flow of funds in crucial times. The enterprises which
are addressed in this paper refer to “Start-ups”. During there early start period the startup
enterprise applies for finance, they face many problems as well. These problems will be
addressed along with the relevant fiancé options available to startup enterprises. The startup
Odisha policy have a major role in establishment, operation and recognition of startups in the
state, this paper will study the important aspect of the policy as well as the changes made
afterwards to explain the different aspects of the policy which can be very beneficial for the forth
coming startup enterprises. The study will also suggest changes which are needed for the
betterment and growth of startup enterprises in the state of Odisha.
THEORITICAL BACKGROUND
Growth is a necessary & essential condition for economic development and inclusive growth.
Growth is used as an indicator of economic wellbeing. The growth graph of the progressed
countries gives the view that as growth increases, the conversion of economy takes place from
traditional to modern sector i.e. from agro to industry to service sector. The share of industry and
service sector in the Gross Domestic Product (GDP) starts to dominate the economy while the
agricultural sector witnessed a decline in its share. One of the objectives of the inclusive growth
is to generate both higher quantity and quality of employment.(Joshi2, 2018) Talking about
startup enterprises in Odisha, cities of Bhubaneswar, Cuttack and Puri have appeared as the
startup destination. One of the primary reason which make the state capital Bhubaneswar a start-
up destination are the presence of premier educational institutes like Indian Institute of
Technology, National Institute Of Science Education And Research, College Of Engineering &
technology, Indian Institute of Information Technology, Central Institute Of Plastics Engineering
& Technology etc that provide global exposure. The presence of software and IT majors like
Infosys, Tata Consultancy Services, Wipro and MindTree in Bhubaneswar also acts as a
stimulant for the fast developing start-up ecosystem in the city. The young generation of the
capital is talented, enthusiastic and innovative. In the subsequent year, Bhubaneswar has
earmarked as best pathway and environment which is friendly to do business as reported by
World Bank. The situation is being studied by the venture capitalists and they are looking
forward for action in recent future. During communicating with the business think tankers, it is
observed that Bhubaneswar acts a great place to start and affirm customers. During 2015-19
period, Odisha government has a “target of generating 0.4 million jobs by promoting 0.15
million enterprises in the MSMEs (micro, small & medium enterprises) sector”.(Priyabrata
Nayak, Feb 2018) The other important districts, Jagatsinghpur, Kendrapada, Ganjam, Keonjhar,
Mayurbhanj and Sundergarh district are also taken into consideration for the study. There are a
many startups which are operating and face different challenges and opportunities in
development and growth in Odisha. The literature review is done to focus light on the related
study. In last few years, the Indian startup growth & development has been on a fast track and
made its mark—driven by elements, for instance, the increase in number of subsidy,
amalgamation exercises, advancement in innovation and steps towards expansion of local market
however it has long approach and there are different problems which are encountered in method
for Startup on the grounds that many controlling powers introduce in condition will ruin entire
amusement. Development of business enterprises depends to the great extent on government
directives, since government plays the major part in creating business person in a country
however young moving business person bypass that due protracted approach and customs it is
extremely hard to work together in India and world bank report totally bolster their feeling in
light of the fact that as indicated by this report India is positioned 130th out of 189 economies on
the effortlessness of working together, 133rd on the simplicity of exchanging crosswise over
fringes and 157th on the simplicity of paying charges besides India is positioned 155th if there
should arise an occurrence of beginning a business. Growing business visionaries need to make
various excursions to government workplaces to enlist and look for clearances.(Kamaldeep Kaur,
2017)
LITRATURE REVIEW
In all business idea has an important role; new companies can extent the spectrum. Some are
unshaped, when we consider them in commercial sense, where the promoter of the business
focuses on an idea that he thinks can fill an unfilled need among consumers. In many other cases
promoters moved ahead to reach up the scale and have transformed the idea into a marketable
product, with little to show in terms of revenues. Still others have moved even further down the
road to commercial success, and have a market for their product or service, with revenues and
the potential, at least, for some profits. (Omid Sharifi1, 2015) “The organizational approach
argues the conditions under which an organization is planned and the processes followed in its
initial development [phase, which] have important consequences on its structure and
performance in later life”. Yet, organization theories are silent on the issue of organizational
evolution, or more specifically on startup evolution (Salamzadeh, 2015a). However, there is
limited research which investigates the startup phase (e.g. see Boekerb&Wiltbank, 2005).(Aidin
Salamzadeh, 2015)
Startup implies to an institution created or registered in India not prior to 5 years with an annual
turnover not exceeding Rs 25 core in any preceding financial year , working towards innovation,
development, deployment, or commercialization of new products process 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 year has exceeded Rs 25 core or it has completed
5 years from the date of incorporation / Registration. This definition is applicable only for
Government enlisted startup schemes. In General scene, A Startup Company is a young company
that is just beginning to develop. Startups are usually small and initially financed and operated by
a handful of founders or individual. (Sarkar, 2016)
For a sample of startups from 27 countries,Nofsinger and Wang (2011) report that experience in
managing startups is the key factor in securing funding, as experienced owners are able to reduce
information asymmetry and obtain financing in the first year of operations. Besides experience,
education is another trait found to increase the likelihood of using credit in the startup year (Cole
and Sokolyk, 2013). However, for a sample of Australian startups, Cassar (2004) reveal that
owner’s demographic and socioeconomic characteristics are irrelevant for capital structure
decisions. The entrepreneur’s personal wealth may also affect the composition of capital in small
businesses. For example, Coleet al. (2004) show that the commitment of a small business
owner’s personal wealth is important to obtain external credit. Overall, these findings attest to
the impact of owner characteristics, suchas attitudes and beliefs, education, and experience, on
financial decision-making.In addition, the entrepreneur’s gender may have an impact on type and
size of theirstartup financing sources as males tend to be more risk tolerant than females. The
empirical evidence on the impact of owners’ characteristics on startup financing has mixed
results. (Carmen Cotei, 2017)
The main concern for these startup firms is not only limited up to the fact that how these sources
of finance are successfully acquired but also how these sources are effectively implemented once
they are made available, since the startup firms lack both the experience and expertise in dealing
with the core business operations. (Tariq, 2013) The alternative of financing growth from
retained earnings is feasible; however for a start-up this can be very slow. Moreover, technology-
based start-ups often experience a period of financial losses prior to the generation of surpluses
for reinvestment. (DOSSANI, 2002) The relative difficulty of start-ups in accessing finance is
likely to be aggravated by a weak business environment, in particular by inadequate legal
frameworks and underdeveloped financial systems. Given very limited access of entrepreneurs to
international financial markets, they are particularly sensitive to institutional constraints in
domestic countries. (Mickiewicz, 2008) Investing in a fledgling start-up firm is extremely risky,
because of the high rate of failure among new firms, something Stinchcombe (1965) termed the
‘‘liability of newness.’’
In general, private banks are unwilling to lend money to a newly established firm, because of the
lack of collateral and high risk of losing the principal as a start up is faced with no of issues that
have to be dealt with it in order to grow into a successful organization. Apart from planning the
most effective business strategy for this Startup Company is to look at the regulatory
environment and various legal issues and laws of the country where Startup proposed to be set
up. A Startup business should be protected from specific risk faced by the sector in which it
operates. Empowered with unique demographic advantages and guided efforts, analysts are
predicting that India will be poised to a position by itself among developed economics with in
the next 10 to 15 years. As indicated by the most recent UN articulation India with 356 million
10-24 year-olds have the real centralization of youth populace regardless of having a littler
populace than China. Youth is the main thrust behind advancement, creation, and the future
pioneers of a nation besides Youth likewise drives request and utilization design in a nation.
(Kaur, 2017)
It provides a huge opportunity to create a dominant position in the Global Market. In an Indian
context the ecosystem is growing however the speed of execution is slow. In the past couple of
years we have seen a good rise in the number of angel investments and early stage investments.
However the number of initial public offer (IPO’s) has decreased drastically. Hence the cycle as
such becomes incomplete. This creates an imbalance which gets carried forward to the future
years. Therefore, in order to have a flourishing start-up ecosystem in India there has to be a
balanced marketplace. Entities like Accelerator are crucial because they avoid further
inefficiencies and help create trust between entrepreneurs and angels while giving them an active
mentorship on all aspects on business. (ApoorvRanjan Sharma*, 2014)
SETTING OBJECTIVES
The primary objective of this paper is to determine whether the financial support
TESTING HYPOTHESIS
The four types of hypothesis are interrelated and correlated to examine the impact of
differentfinance support in development and growth of startups
Startup entrepreneurs start there enterprise by investing fund from self but in the later
stage alternative sources of fiancé fulfill there fund need for research and expansion
Loans from commercial banks and establishment of startup enterprises are correlated
with each other
Startup policies and schemes have significantly impacts on growth of women entrepreneurs
in the state.
RESEARCH METHODOLOGY
Research methodology of any research project is designed tailor made as per the specific
objectives of the research project. Research objectives are set basing upon the identified research
gap. From the literature review and gap analysis, presented in the objective part, following points
were identified as issues for investigation, as the factors are related to the formation and growth
of entrepreneurship. Intention as a construct has multiple variables associated. At the same time
each variable would vary in its level. Multiple intent variables would interact with each other and
in combination would generate a level of intent which could be substantial for new venture
formation. Similarly for each of the construct representing different activities or dimensions of
new venture formation it could be argued that there would be a threshold level of the construct
and the interaction among construct would indicate success or satisfaction from
entrepreneurship. The objective of linking the intention, support, ideation, measure and
satisfaction presented a novel challenge to the research design. Generally intention is take a
priori to the formation of new venture. (Kar, 2015) The personal values as sex, ages etc are taken
into consideration to fit into their scale of measurement. Average men and average women
participation were calculated and also average age were also calculated to analysis various
factors. Variance analysis and reliability test was done along with averages (Panagiota
Darvyri1*, Michael Galanakis2, Adamantios G. Avgoustidis3, Niki Pateraki1, Spyros
Vasdekis4, Christina Darviri1,2014).The questionnaire is designed with lot of care so as to elicit
the right kind ofinformation. The primary focus was on the three major Research objectives
ofeffectiveness of the intervention, additionality and counterfactual. The other objectives of
Bank’s willingness to extend credit, effectiveness on insistence on collateral security and
impact of the scheme towards motivating more persons to take on entrepreneurship werealso
factored in the questionnaire.
DATA COLLECTION AND DATA ANALYSIS
The survey questionnaires were mailed to a random sample of 10,000 business leaders in 1993
and 2001, respectively. Survey respondents were asked to “rate” the acceptability of behaviour
presented in 16 different ethically charged scenarios (L. N. Emerson Tisha, A. Mckinney Joseph,
2010).Albaum, G., & Peterson, R. A. (2006) had examined the ethicality of large corporations.
The 15 questions sample survey was conducted by author and more over 1000 samples from 20
different countries. There are17,243 respondents had responded to questionnaires. (Brammer,
Williams &Zinkin, 2006).
RESEARCH FINDINGS
It was found that only few entrepreneurs feel that the financial support is adequate for
starting there startup enterprise
It was found out that entrepreneurs fund there startups in the early stage but face major
difficulty in attaining alternative finance for there startup to fulfill there need of fund for
research and expansion
The finding suggest that the loans from commercial banks are not at all correlated with
establishment of startup enterprises
It was found that the indicator startup establishment have positive correlation with
employment generation in the state
It is found out that government policies have a significant impact in establishment of
startup
It was found that government schemes have insignificant role in the growth of women
entrepreneurs in the state
RESEARCH GAP
The impact of different schemes specifically meant for startupenterprises is not done
The study of different alternative finance facilities available have to be done
Investigating the Role of commercial banks in funding startup enterprises
Direct personal interview and in depth interview of samples are not accessed
The role of startup enterprises in employment generation has to be ascertained
F- test and t- test, Z- test are to be applied for testing of large sectional data and also small
number of samples.
A review of different startup study to be done
CONCLUSION
The literatures review defines that the startup enterprises are developing in the state of Odisha.
But constantly face challenges in different areas specifically in attaining timely finance. In some
cases the startup entrepreneurs are not getting benefits from the schemes lunched by the
government from time to time due to unawareness. Although specific commercial bank loan are
lunched by the central and state government but the startups are not successful in availing it. One
of the primary objectives behind startup enterprises is employment generation but that too need
to be addressed. It is seen in some cases that few startups are getting benefits from government
schemes but others are not.
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