Financing practices of labeled startups

Abstract

The research investigates the formal and informal financing practices utilized by labeled startups in Algeria, emphasizing their essential role in economic development. Despite the recent dynamism observed in the Algerian startup ecosystem, these enterprises face substantial growth challenges due to limited access to financing, a critical factor for their success. To address this issue, a study was conducted involving 129 owners of labeled startups as of June 2023, employing a questionnaire for data collection. The data were analyzed using descriptive statistics and multivariate logistic regression. The findings confirm the prevalence of personal financing/love money as the dominant source of funding, with venture capital also identified as a significant financing method. Additionally, 28% of startups resorted to informal financing practices due to inadequate bank financing and difficulties in accessing other funding sources. The study also reveals that support structures have no significant impact on startup financing. This research provides valuable insights into the financing challenges faced by labeled startups and offers directions for future, more comprehensive research.