1.
Definition of Startups
A startup is a newly established business venture that is typically in the early stages of operations. It
is founded by entrepreneurs to develop a unique product or service and bring it to market. Startups
are characterized by innovation, high growth potential, scalability, and often rely on technology.
They usually seek to solve a problem in a novel way and aim for rapid expansion.
2. Mobilization of Finance (3Fs)
Mobilizing finance is crucial for startups to begin operations and sustain growth. The 3Fs refer to the
most common initial sources of funding for startups:
- Friends - Individuals in the founder's personal circle who invest.
- Family - Close family members who provide financial support, often without demanding strict
repayment terms.
- Founders - The entrepreneurs themselves invest their own savings or assets (also called
bootstrapping).
3. What is Liquidation, Its Advantages and Disadvantages
Liquidation is the process of closing down a business and distributing its assets to claimants, often
when a company is insolvent (cannot pay its debts). Assets are sold off to pay creditors, and the
business is officially dissolved.
Advantages:
- Debt Settlement
- Legal Closure
- End of Losses
Disadvantages:
- Loss of Business
- Job Losses
- Reputation Damage
- Loss of Investment
4. Mobilization of Human Resource
This involves recruiting, organizing, training, and deploying the workforce needed for a startup. Key
aspects include:
- Hiring skilled and motivated individuals
- Defining roles and responsibilities
- Creating a positive work environment
- Managing payroll, benefits, and team dynamics
5. Startup Problems and Challenges (Points Only)
- Difficulty in securing funding
- Recruiting and retaining talent
- Strong market competition
- Unclear value proposition
- Regulatory and legal issues
- Poor financial management
- Inconsistent cash flow
- Limited brand recognition
- High operational costs
- Burnout among founders
6. Equity Funding
Equity funding is the process of raising capital by selling shares of ownership in the business to
investors. These can include:
- Angel investors
- Venture capitalists
- Private equity firms
- Crowdfunding platforms
Investors receive a stake in the company and may share in profits but also take on the risks. Equity
funding does not require repayment like a loan but dilutes the founder's ownership.
7. Bank Loans
Bank loans are a form of debt financing where startups borrow money from a financial institution.
Key features include:
- Fixed or variable interest rates
- Pre-determined repayment period
- May require collateral or guarantor
- Regular EMI (Equated Monthly Installments)
Advantages: No loss of ownership.
Disadvantages: Regular repayments and interest burden.
8. Merger Up (Merger)
A merger is when two companies combine to form one new entity. This is often done to:
- Expand market share
- Achieve economies of scale
- Share technology and resources
- Eliminate competition
- Increase efficiency and productivity
There are different types of mergers (horizontal, vertical, conglomerate), and it can help struggling
startups survive by combining strengths.
