Venture Capital Vs. SISFS (Startup India Seed Fund Scheme): A Comparative Study of Funding Models For Startups

Abstract

Background: Startup success heavily relies on access to sufficient funds, yet selecting the right funding model is equally critical. Thus, assessing finance options that are in favor of both growth and long-term sustainability is the main requirement in the ever-changing startup ecosystems.
Purpose: The study work has done a comparison between the effect of Venture Capital (VC) and Startup India Seed Fund Scheme (SISFS) on success of startups in terms of growth and competition in the sector.
Design/ Methodology/ Approach: Utilizing data from 403 individuals connected with startups in India, the research examined the impact of funding on growth results along with the role of funding type as a moderating factor between industry competition and startup success.
Findings: Research revealed that the companies supported by VCs outpaced their sales in the market due to customers' accessing them, mentoring, and help from VCs. The companies funded by SISFS, however, had a gradual increase of sales which was the effect of the low-risk approach. The study also indicated that VC financing significantly reinforced the positive association between rivalry and firm growth, whereas SISFS had a minor effect.
Practical Implications: Startup founders, investors, and policymakers may find these outcomes very useful in practical terms. Therefore, if startups want to grow quickly, they may get along with venture capital funding, while SISFS will be their option for slow growth with least financial risk.
Originality/Value: Hybrid models with government support are suggested for successful startups.