The financial requirements of tech startups over its lifecycle in Bangalore: An analysis of why and how do they differ?

Abstract

AbstractIt is widely recognized by researchers, practitioners and policy makers that for a tech startup adequate financial capital is an essential resource in order to emerge, survive and grow over its lifecycle. However, there is a lack of understanding on what are the various needs for financing, what factors drive these needs and how do they vary over a startup's lifecycle. This study makes a key contribution to the literature by investigating the financial requirements for a tech startup and their determinants based on primary data gathered from 93 tech startups in Bangalore. Our findings suggest that, out of the three major categories of financial requirements, namely, Human Capital (HC), Research Capital (RC) and Social Capital (SC), financial requirements for HC and SC vary with a startup's lifecycle stage while financial requirement to acquire RC does not. With these results, we assert that, while all the three resources are essential, RC is the most critical financial requirement for a tech startup as it assumes predominance throughout a tech startup's lifecycle and acts as oxygen for its growth and sustainable competitive advantage.