IDEAS home Printed from https://ideas.repec.org/a/idn/journl/v26y2023i2ep311-332.html

The Economics of Startup Business Finance: An Investigation Through the Lens of Financial Growth Cycle Theory

Author

Listed:
  • Yesubabu Konga

    (Pondicherry University)

  • Kasilingam Ramaiah

    (Pondicherry University)

Abstract

The provision of finance is the key to the survival and success of new firms. The current paper examines the startup firms’ finance acquisition through the viewpoint of financial growth cycle theory. We used chi-square and Mann-Whitney U tests to examine our hypotheses. Our study uses data from 386 Indian startup entrepreneurs over the period 2019 – 2021. Our results show that the startups access angel finance significantly in the initial years and the venture capital, banks and NBFCs in their later stage of life. Our findings argue that Indian startups partially follow the financing patterns proposed by the financial growth cycle theory.

Suggested Citation

  • Yesubabu Konga & Kasilingam Ramaiah, 2023. "The Economics of Startup Business Finance: An Investigation Through the Lens of Financial Growth Cycle Theory," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 26(2), pages 311-332, May.
    • Handle: RePEc:idn:journl:v:26:y:2023:i:2e:p:311-332
    DOI: https://doi.org/10.59091/1410-8046.2071
    as

    Download full text from publisher

    File URL: https://bulletin.bmeb-bi.org/cgi/viewcontent.cgi?article=2071&context=bmeb
    Download Restriction: no
    File URL: https://libkey.io/https://doi.org/10.59091/1410-8046.2071?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. N. Berger, Allen & F. Udell, Gregory, 1998. "The economics of small business finance: The roles of private equity and debt markets in the financial growth cycle," Journal of Banking & Finance, Elsevier, vol. 22(6-8), pages 613-673, August.
    2. Petersen, Mitchell A & Rajan, Raghuram G, 1997. "Trade Credit: Theories and Evidence," The Review of Financial Studies, Society for Financial Studies, vol. 10(3), pages 661-691.
    3. Zsuzsanna Fluck & Douglas Holtz-Eakin & Harvey S. Rosen, 1998. "Where Does the Money Come From? The Financing of Small Entrepreneurial Enterprises," New York University, Leonard N. Stern School Finance Department Working Paper Seires 98-038, New York University, Leonard N. Stern School of Business-.
    4. Massimo Colombo & Luca Grilli, 2007. "Funding Gaps? Access To Bank Loans By High-Tech Start-Ups," Small Business Economics, Springer, vol. 29(1), pages 25-46, June.
    5. Alicia M. Robb & David T. Robinson, 2014. "The Capital Structure Decisions of New Firms," The Review of Financial Studies, Society for Financial Studies, vol. 27(1), pages 153-179, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jubalt Alvarez-Salazar & Jean Pierre Seclen-Luna & Jessika Milagros Vasquez Neyra & Andrea Lazarte-Aguirre, 2025. "Networking, experimentation, and financing as drivers of accelerated growth in Peruvian startups," Journal of Innovation and Entrepreneurship, Springer, vol. 14(1), pages 1-23, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Canales, Rodrigo & Nanda, Ramana, 2012. "A darker side to decentralized banks: Market power and credit rationing in SME lending," Journal of Financial Economics, Elsevier, vol. 105(2), pages 353-366.
    2. Ana Venâncio & João Jorge, 2022. "The role of accelerator programmes on the capital structure of start-ups," Small Business Economics, Springer, vol. 59(3), pages 1143-1167, October.
    3. Bjuggren, Per-Olof & Elmoznino Laufer, Michel, 2015. "Startups, Financing and Geography– Findings from a survey," Ratio Working Papers 255, The Ratio Institute.
    4. Miglo, Anton, 2022. "Theories of financing for entrepreneurial firms: a review," MPRA Paper 115835, University Library of Munich, Germany.
    5. Maretno A. Harjoto & John K. Paglia, 2011. "Funding Continuum for Private Business Owners: Evidence from the Pepperdine Private Capital Markets Project Survey," Journal of Entrepreneurial Finance, Pepperdine University, Graziadio School of Business and Management, vol. 15(2), pages 1-22, Winter.
    6. Emilia Bonaccorsi di Patti & Valentina Nigro, 2018. "The financial structure of Italian start-ups, in good and bad times," Questioni di Economia e Finanza (Occasional Papers) 449, Bank of Italy, Economic Research and International Relations Area.
    7. Cole, Rebel A. & Sokolyk, Tatyana, 2018. "Debt financing, survival, and growth of start-up firms," Journal of Corporate Finance, Elsevier, vol. 50(C), pages 609-625.
    8. Francisco-Javier Canto-Cuevas & María-José Palacín-Sánchez & Filippo Di Pietro, 2019. "Trade Credit as a Sustainable Resource during an SME’s Life Cycle," Sustainability, MDPI, vol. 11(3), pages 1-16, January.
    9. Vaznyte, Egle & Andries, Petra, 2019. "Entrepreneurial orientation and start-ups' external financing," Journal of Business Venturing, Elsevier, vol. 34(3), pages 439-458.
    10. Honjo, Yuji, 2021. "The impact of founders’ human capital on initial capital structure: Evidence from Japan," Technovation, Elsevier, vol. 100(C).
    11. Honjo, Yuji & Kwak, Charee & Uchida, Hirofumi, 2022. "Initial funding and founders’ human capital: An empirical analysis using multiple surveys for start-up firms," Japan and the World Economy, Elsevier, vol. 63(C).
    12. Cumming, Douglas & Deloof, Marc & Manigart, Sophie & Wright, Mike, 2019. "New directions in entrepreneurial finance," Journal of Banking & Finance, Elsevier, vol. 100(C), pages 252-260.
    13. Magnus Schückes & Tobias Gutmann, 2021. "Why do startups pursue initial coin offerings (ICOs)? The role of economic drivers and social identity on funding choice," Small Business Economics, Springer, vol. 57(2), pages 1027-1052, August.
    14. Honjo, Yuji & Ikeuchi, Kenta & Nakamura, Hiroki, 2024. "Does risk aversion affect individuals’ interests and actions in angel investing? Empirical evidence from Japan," Japan and the World Economy, Elsevier, vol. 70(C).
    15. Diana Hechavarría & Charles Matthews & Paul Reynolds, 2016. "Does start-up financing influence start-up speed? Evidence from the panel study of entrepreneurial dynamics," Small Business Economics, Springer, vol. 46(1), pages 137-167, January.
    16. Pedro J. García-Teruel & Pedro Martínez-Solano & Juan P. Sánchez-Ballesta, 2014. "Supplier Financing and Earnings Quality," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 41(9-10), pages 1193-1211, November.
    17. Falavigna, Greta & Ippoliti, Roberto, 2023. "SMEs’ behavior under financial constraints: An empirical investigation on the legal environment and the substitution effect with tax arrears," The North American Journal of Economics and Finance, Elsevier, vol. 66(C).
    18. Ginés Hernández-Cánovas & Pedro Martínez-Solano, 2007. "Effect of the Number of Banking Relationships on Credit Availability: Evidence from Panel Data of Spanish Small Firms," Small Business Economics, Springer, vol. 28(1), pages 37-53, January.
    19. Arcuri, Maria Cristina & GANDOLFI, GINO & PISANI, RAOUL, 2026. "Italian SMEs and access to credit: Does being “green” matter?," Research in International Business and Finance, Elsevier, vol. 81(C).
    20. Buchetti, Bruno & Miquel-Flores, Ixart & Perdichizzi, Salvatore & Reghezza, Alessio & Lin, Luca X., 2024. "Loan guarantee and portfolio greening: evidence from European credit registers," Working Paper Series 2916, European Central Bank.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:idn:journl:v:26:y:2023:i:2e:p:311-332. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Shinta Fitrianti or Jimmy Kathon (email available below). General contact details of provider: https://edirc.repec.org/data/bigovid.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.