Who will fund these start-ups?

There is so much noise and hullabaloo about start-ups, them getting VC funding and crowdfunding and so many other encouragements. But what about those who set up shops – like a clock repair shop, the cobbler, the florist, the panwallah and medium-sized enterprises like jewelers, book-sellers, weavers, restaurant owners, your neighbourhood Udipi and Chaat shop? They neither have fancy IIT and IIM degrees nor foreign–returned pedigree. But did you know that employ 111.4 million people in India? In fact a startup news website did a study and found that 60% of the series A funding raised by startups in a two-month period in 2015 went to those founded by alumni of the elite Indian Institutes of Technology (IITs) or IIMs.

What do they do if they need money? Their first source is usually their own personal savings, friends and family and then they approach formal channels like banks. But the problem is banks need collateral and that they do not have. Funding from any venture fund – that never happens to them!

Though the Govt and RBI have made many reforms to ensure smooth and easy funding to this huge sector of India, the reality is that money to SMEs and MSEs does not really percolate down and this industry, contributing 7.7% to the GDP of India is left floundering.

This is what happens when big rouge like Mallya loots the banks – the people who actually need the money, never get it.