Financing Small Tech Firms in India vs. Canada: A Comparative Study

Abstract

Regardless of how innovative your business idea is, the utmost essential element of a start-up’s success is the ability to obtain enough funding for beginning, sustaining and growing your business. Start-up funding or start-up capital, is the money needed to launch a new small tech firm. Funding from a variety of sources and can be used for any purpose that assists in the inception of the start-up. There are various sources of Start-up capital, for example funding from venture capitalists, angel investors, banks, or other financial institutions. It is basically a large funding that covers any or all of the company's major initial costs such as inventory, licenses, office space, and product development. In small tech financing, the main investor’s agenda of a good and successful exit from the investment can be brought around by chalking up agreements with other private equity funds regarding their availability and commitment to buy the main investor’s stake after an agreed date. Alternatively, one can sign a buy back agreement with the entrepreneur or other shareholders who agree to repurchase the main investor’s stake in the company after a predefined period of time (put option). The only impediment is that this step assumes that the prospective investors have enough money to buy the stake back during the exit date. Due to this, the prospective entrepreneur may be required to put away funds in an escrow account. Another way put may be the pledge of some assets of the prospective entrepreneurs.