Page 20 - Banking Finance September 2023

ARTICLE

institutional investors and also from Banks. When we talk Promotion of startups has dual benefits, firstly they provide
about startups the picture that flashes in our mind is of an an impetus to the economy by promoting GDP growth and
untested idea which could disrupt the way the business is increasing employment and secondly they provide a solution
done and if successful could be worth millions or billions of to the problems faced by the public by transforming the
dollars and if unsuccessful the investment could go down the solutions into a business idea. The regulator has also pitched
drain. They are not the only kind of startups, the loan given in with a number of awareness and policy initiatives to
by the banks to an entrepreneur is also a startup although promote the startup sector along with the government that
with a less level of disruption, none the less such a venture has undertaken number of steps for ease of doing business.
generates employment and aids the country's GDP growth.
Such ventures until recently were more synonymous by the It is also a fact that all the developed economies have a major
name of entrepreneurship than startups. contribution of entrepreneurs. And as we grow on the path
towards being a developed nation the proportion of
The banking industry in India had and is having a very active entrepreneurs and startups is bound to increase
role in encouraging the startup culture by promoting and exponentially and so will the opportunities for the financial
hand holding entrepreneurship. This endeavor on part of the and banking sector.
banks has now expanded to the funding of new ideas based
on their disruption potential. Country's leading banks have Some examples of Operational Chal-
now launched separate schemes to promote the startups
lenges (Risks) to Funding:
in the country and have formulated a well drafted policy for
the same. Country's largest bank State Bank of India has One of the startups which disrupted the taxi and mobility
recently opened a branch exclusively for catering to the business across the world, in its quest to grow, became
financial needs of Startups in the silicon valley of India, promoter of a toxic work culture leading to complaints
Bengaluru. and grievance by many employees. The investors had
to ultimately intervene and asked the founder to step
Seed stage startups though risky, provide a business down. That startup today is a significant contributor to
opportunity that has an increased probability of a either a our daily mobility solution.
high payoff or no payoff at all. The risks are there and so Another example is of an Indian Startup which was the
are the chances of return. There has been a shift in the way
first to enter the real estate market with a data and
startups have been viewed as a business opportunity.
analytics based approach. This startup which was initially
very promising, a trend setter of sorts and had the first
The government has also been very proactive and
mover advantage in the industry eventually lost its
supportive of startups and has been leading to ensure that
sheen due to dispute between one of the founders and
the funding requirements of startups are taken care of.
the investors.
Along with that the state governments are going all out to
One of the recent examples is of a financial startup
provide these budding entrepreneurs the right infrastructure
whose founder was accused by the investors of unethical
and administrative support so that the promoters only focus
practices and causing loss to the company. This founder
on their project.
also made counter allegations. The investors have since
taken control of the company and appointed a different
management team to steer the company clear of the
controversies and drive it to the next phase of growth.
Disputes between founders and investors / financers is not
new, they have happened before and would continue to
happen as long new businesses are created. In fact the late
founder of a company who was ousted by the other
stakeholders, came back after 10 years to make the
company one of the most valuable companies in the world.
He introduced the world to touch screen mobiles and change

20 | 2023 | SEPTEMBER | BANKING FINANCE