CHALLENGES FACED BY STARTUPS IN ACCESSING EXTERNAL FINANCING

Abstract

A startup faces many types of challenges during its life cycle. Among all those challenges, access to external financing is the most robust and consistent challenge faced by entrepreneurs. Therefore, it is necessary to understand the challenges faced by startups in accessing external financing to increase the chances of their survival and the ability to generate profits as well. Hence, this study has been conducted to understand different challenges faced by startups in accessing external financing by using case study methodology. In-depth interviews were conducted with 20 startups in Peshawar region to understand the challenges from their viewpoint. The data were analyzed using a series of steps suggested by Creswell (2009) and Miles and Huberman (1994). As a result of the study, the main challenges identified by the startups include unrealistic requirements put forward by external funds providers such as demand for collateral, equity sharing, and huge returns on investments. These requirements can easily be satisfied by established businesses. However, it becomes difficult for startups to meet such criteria, which creates challenges for them in accessing external financing. These challenges are enhanced for startups operating in Peshawar region due to its comparatively less developed infrastructure and lack of opportunities. It implies that before reaching out to any potential source of external financing, startups must do prior research to understand its evaluation criteria to save time and resources. The external fund's providers must also design a separate evaluation criterion for startups rather than treating them like any other typical business