Start-ups and Risk Financing

Start-ups, Risk financing, Venture Capital, Entrepreneurship, Artificial Intelligence, Venture Ecosystem, Innovation, Valuation, Contracting, Private Equity

IRIS Webinar

Centre for Research on Start-ups and Risk Financing would aspire to become globally recognized as a leading centre of research engaged in-

  • Scholarly research encompassing the areas innovation, entrepreneurship, and risk capital.

  • Develop a data repository on innovation, venturing and risk capital

  • Knowledge and evidence synthesis based on unique data sets

  • Thought leadership dissemination and continuous engagement with stakeholders

Start-ups and Risk Financing

Thillai Rajan A.

Principal Investigator


Krishna Prasanna P

Area of Interest

R K Amit

Area of Interest

R K Amit

Co-Principal Investigator

Management Studies
Ashok Jhunjhunwala

Area of Interest

Ashok Jhunjhunwala

Advisory Principal Investigator

Electrical Engineering
Prabhu Rajagopal

Area of Interest

Prabhu Rajagopal

Advisory Principal Investigator


Mechanical Engineering
T Pradeep

Area of Interest


  • Scholarly research encompassing the areas innovation, entrepreneurship, and risk capital. The objective of this research would be to uncover new ground leading to publications in top tier journals. Faculty members along with their collaborators will pursue bespoke based on their research interests and the thrust areas of the centre.

  • Develop a data repository on innovation, venturing and risk capital to address the fundamental challenge of data non-availability in this sector and create the infrastructure to do high quality research. Creation of entrepreneurship specific language models will facilitate better understanding of the entities in the ecosystem, while facilitating use of latest research in AI, ML to generate new insights.

  • Knowledge and evidence synthesis based on unique data sets from organizations in the start-up ecosystem such as incubators, investor networks, government missions, and so on. Such grounded research can help to generate novel findings, which can be published in high impact journals. Visible output from such grounded research at the IITM ecosystem could also help in networking with such organizations in other Indian institutions.

  • Thought leadership dissemination and continuous engagement with stakeholders in the innovation and start-up ecosystem. Interface of scholarly and rigorous research with policy and practice has been very minimal. By actively engaging with various stakeholders the centre would be well positioned to impact policy and practice.

1. Development of CREST data repository

  A key objective of the CREST CoE is to develop the data repository on innovation, venturing and risk capital. This will help to address the fundamental challenge of data non-availability in this sector and create the infrastructure to do high quality research. Creation of entrepreneurship specific language models will facilitate better understanding of the entities in the ecosystem, while facilitating use of latest research in AI, ML to generate new insights. A schematic representation of the same is given in Figure 1.

Figure 1: Schematic of the data repository.

Entrepreneurship and Start-up Landscape specific Natural Language Models and Datasets

The latest research in Machine Learning, Deep Learning, and Data-driven algorithms not only improved performance but also brought in automation at various levels, which previously required human intervention. Given the exponential growth and interest in the Venture Capital (VC) and Private Equity (PE) domain over the past few years, it is necessary to automate and bring efficiencies in various processes involved. Building custom algorithms to mathematically understand and represent the various entities would help in modelling these interactions better. Majority of the information available in this domain is in text. Building custom models would involve curating custom datasets and training algorithms for each of the following tasks:

  • Named Entity Recognition.
  • Relation Extraction.
  • Text Categorisation.
  • Question Answering.
  • Vector Space Models.

The first step and the main challenge is curating and annotating all available information in the VC & PE domain, for building this custom dataset for the above-mentioned tasks of NLP. The raw information is available in silos, in multiple places which need to be collated together. This involves intensive text mining from various sources, websites, documents, PDFs, images, voice recordings etc., and building a robust pipeline of applications to seamlessly annotate this information. This is to be revised regularly, for incorporating any updates and new information, removing duplicates etc., which are challenging problems to be solved. Creating this repository means building a one-stop place for research information related to entrepreneurship, venture capital and private equity domain.

Reducing Information Asymmetry in Technology choices, Tools used, Methods followed in different phases of the Start-up’s Journey

Entrepreneurship is about building the product, managing the team, identifying business opportunities, raising investment, getting users and ultimately creating a brand. Tools and technologies a start-up use often reflects the overall efficiency in day-to-day operations throughout their journey, more so in early stages. Making the right technology choices, using the right tools and following the best management frameworks would save tremendous amounts of time by eliminating iterations, transition overheads and a possible technical debt in the future.

An open platform for entrepreneurs to share and discover information related to their domain would be developed to address such problems. Such a system could be incentivised by providing the entrepreneur with insights and custom reports related to their domain. The user-generated content shall also be utilised to draw more insights into the landscape. A thorough analysis and insight visualisation on this platform should give the entrepreneur a good sense of direction in making the right choices during any stage of their venture. The number of companies and entrepreneurs using the platform and the amount of data in the system could be considered as the Key Performance Indicators (KPIs).

A unique and advanced repository such as the one highlighted above, would help in undertaking a new line of research in entrepreneurship and venturing. Using ML and AI approaches would help to use advanced quantitative approaches to analyse and research the sector. Previously, such data driven approaches were possible only in capital markets and securities trading, and not in private capital transactions (Figure 2). Using such data intensive approaches would help in better understanding of various entities and uncover new linkages and relationships between the different entities in the innovation and venturing ecosystem. Such path-breaking findings would help in publications in high impact journals.

Figure 2: Illustrative use of quantitative approach in innovation and ventures.

2. Grounded research from knowledge and evidence synthesis from the IITM innovation ecosystem

An interesting feature of ground research is the potential to unearth novel findings, that might not have been possible otherwise. IIT Madras is blessed with various formal and informal organizations that relate to the innovation and venturing ecosystem. The most important organizations are: IITM Incubation cell, IITM Research Park, GDC for Innovation and Entrepreneurship, MedTech Incubator, HealthTech Incubator, NIRMAAN - the pre-incubator scheme, Centre for Innovation, Innovative Projects Scheme, IC&SR, ICCW (commercialisation of innovation), E-Cell, and IITM Entrepreneurship forum (Alumni related informal organization).

Grounded research that helps to leverage the experiences of these different organizations would help to answer important questions in the innovation-venturing-funding value chain. The questions that would be taken up in the initial phase would be:

  • How does incubation help in the commercialization of innovation? What facets of incubation support need to be strengthened to improve start-up success?

  • How can we increase the success rates of commercialization of innovations through university start-ups? Role of faculty, alumni, and institutional reputation.

  • What are the main challenges faced by young innovators in starting ventures? What prevents many to pursue entrepreneurship?

3. Risk management strategies by venture investors

  Venture Capital investments are known for high risk. The success of these investments is proportionally related to how well the risk is managed. Investors with better risk management always rank high as compared to their peers. Risk management starts from deal selection until the exit. In each stage, the investor engages different strategies to mitigate the risk. For example, a VC firm may choose to invest in a venture developed by a successful serial entrepreneur instead of a fresh entrepreneur to increase the chances of success rate. Further, investors may syndicate to pool the different resources; this allows them to have close monitoring of the venture. Some of the risk management strategies adopted by risk capital investors are summarised in Figure 3.

The literature on venture capital risk management is fragmented and continuously evolving. One of the key challenges that researchers must deal with is lack of data. These transactions are private and do not provide any incentives or have an obligation for VC firms to reveal the data to the public. Hence researchers must deal with incomplete data in while drawing consistent empirical insights on venture capital investment.

Information asymmetry is prevalent in VC investments. Largely risk mitigation strategies are aimed to handle information asymmetry and moral hazard. For example, it is preferable for an investor to invest in the venture from an industry that he/she is familiar with. It is a common practice and seen as a risk-mitigating activity. It allows the investor to observe information and make better decisions. Amit et al. (1998) argue that while VCs naturally focus on industries where information asymmetries are high, within these industries they prefer to finance firms that have relatively milder information challenges.

Further, investors prefer successful serial entrepreneurs, these entrepreneurs constitute an important source of investment opportunities for VC firms. Having a successful track record gives a lot more confidence to the VC firm to take up the investment. Successful serial entrepreneurs also come with essential entrepreneurial skills required to run a successful venture. Gompers et al. (2010) estimate that in the 1990s in the US, approximately 10% of all VC-backed founders were serial entrepreneurs. They find that previously successful serial entrepreneurs also have a higher success rate in their current venture.

Figure 2: Illustrative use of quantitative approach in innovation and ventures.

Syndication is one more important lever for VC firms when they want to monitor distance ventures. Brander et al. (2002) test the hypothesis with Canadian data from the 1990s that syndicated deals are more profitable and find that syndicated deals have higher returns as compared to single investor investments. Sometimes venture firms also co-operate to pool their expertise to have better information on their portfolio venture technologies. Syndicated VC firms also benefit from better selection criteria, a second opinion from their peers. Financial contracting is also a focal point in risk management for any VC – entrepreneur discussion as they are crucial in determining the financial relationship between the parties by aligning incentives. Structuring an investment contract as compared to common equity will solve a large part of the risk concern for the investor.

In this study, we propose to study the structuring decisions of the VC financing in Emerging markets like India. Our observations on Indian VC contracts motivated us to see why certain rounds are financed using common stock while the other rounds have used different securities. We plan to categorize securities used in venture investments into four categories: Common stock, Debentures, Convertible Preference equity and Combination of Common stock & convertible preference equity for our analysis.

4. Valuation and Cost of Capital:

  Illiquidity of VC Investments coupled with probability of failures and defaults aggravate risk premium of Start-ups; Research focus is to estimate cost of capital to validate pricing efficiencies, volatility affects and macro economic affects on the valuation of start-ups.

5. Technology Choices, Information asymmetry, and Decision Making :

  Investment in newer technologies are taken under high risk and ambiguity. Research focus is on developing game and decision-theoretic models to mitigate risks and decipher evolution of technology ecosystems.

Expected deliverables of the research

Academic Journal Publications: Targeted journals would be:
  • Journal of Business Venturing
  • Venture Capital
  • Entrepreneurship Theory & Practice
  • Technovation Existing and immediate high-quality research would be targeted for these journals. Target Number of Papers: 6
Practitioner Journals: Targeted journals would be:
  • Harvard Business Review
  • Sloan Management Review
  • Economic & Political Weekly Target Number of Papers: 1

For 10 years, IIT Madras published the India Venture Capital & Private Equity Report. From 2020, we have formed the Innovation, Venturing and Entrepreneurship in India Network (iVEIN) Consortium consisting of IITM, IITB, IIMB, and IIMK. iVEIN would be publishing the biennial India Innovation and Venturing Report. The proposed TIER CoE would be anchoring the effort from IITM.


Target Number of Publications: 1
  • As and when the situation becomes conducive, organize the India Entrepreneurship and Venture Capital Conference

Current status

  • Data Repository on Indian Start-Up Ecosystem – First version completed and available for use
  • First iVEIN Publication is in production. Expected to be released shortly
  • Special issue of Journal of Indian Business Research


Industrial Collaborations:

CREST would have an implementation partnership arrangement with YNOS Venture Engine, an incubate Start-Up of IIT Madras Incubation Cell. A primary objective of CREST is to create a data resource for high quality research. YNOS would be responsible for developing and implementing this project with technical expertise from CREST.

YNOS has already developed the AI based intelligence platform for early stage ecosystem. While this primarily meets the need of entrepreneurs, the data platform is sufficiently exhaustive and would be a valuable resource for students and researchers.

YNOS provides unique data sets such as:
  • Demographic details of founders and angel investors
  • Investment transactions in seed stage ventures
  • Incubators and the start-ups that they contribute
  • Start-ups similar to each other
  • Estimation of valuation

Societal impact

A major outcome of this proposal would be the Data Repository on the Innovation and Entrepreneurial Ecosystem, which has the potential be a public good infrastructure. It can be accessed by different stakeholders connected with the entrepreneurial ecosystem and can be benefitted from the information and insights generated from the platform. Despite the increased entrepreneurial activity across the country, those in Tier 2 and 3 cities have significant challenges. It is the vision of the centre to democratize the process of innovation and entrepreneurship. By making information accessible and enabling communication to those in the smaller towns and cities, TIER CoE can play a major role in entrepreneurship development in India.

Sustenance Statement

Financial Sustenance
  • Naming rights: Given the increasing visibility to entrepreneurship and innovation, CREST can attract a donor on whom the Centre can be named.
  • Revenue generation through training programs: Conducting various short-term executive education programs would help to generate revenues to meet a part of the centre expenses.
  • Research and other grants: The centre would compete and apply for various research grants, which will also help to sustain the activities of CREST.
  • Consultancy projects: Efforts to engage in consultancy assignments would continue, which will also help to defray the expenses associated with the centre.
  • License revenues: It is envisaged that the data repository developed as a part of the centre would be of interest to various users, leading to licensing and subscription revenue.
Organizational sustenance
  • Design an appropriate rotation policy for the centre leadership, which would help to bring new ideas and expand the team.
  • Create a culture of openness and joie de vivre that makes the centre a vibrant place attracting strong talent. Engage in various team building and other activities on a regular basis.
Sustenance of relevance
  • Continuously adapt to the changing intellectual landscape and reinvents itself to stay relevant. Help CREST to become a major thought leader and help to attract funding and talent.
  • ICICI Bank.
  • V. Shankar, IITM Alumni (Acsys Investments).
  • Kris Gopalakrishnan.
  • Chiratae Ventures.
  • T-Hub.
  • Small Industries Development Bank of India.
Annual publications on the Indian Venture Capital and Private Equity Industry from 2009 - 2018.
  • What angel investors want when investing in start-ups, The Hindu BusinessLine, May 08, 2021.
  • Why more of India needs to Stand up, The Hindu BusinessLine, April 10, 2021.
  • Indian start-ups becoming increasingly attractive for overseas angel investors. The Hindu BusinessLine, March 23, 2021.
Journal Articles
  • Kuruva Ramesh and Thillai Rajan Annamalai (2020): What affects investment duration, exit type, and returns in venture investments? The Journal of Alternative Investments Spring 2021, 23 (4) 47-60; DOI
  • Kuruva Ramesh and Thillai Rajan Annamalai (2020): Corporate Tax Havens and Venture Capital Investment, Journal of Taxation of Investments, 37 (3), Spring Issue: 79 – 91.

Technical/ Scientific Progress

New work done in the project:

“YNOS Venture Engine is the technology implementation partner for the Centre for Research on Start-Ups and Risk Financing (CREST). With technical expertise from CREST, it has created a unique data repository on the Indian start-up and innovation ecosystem. The data repository would be a very valuable tool for researchers to analyse and conduct research on the Indian Start-up ecosystem. Currently, researchers are constrained by the lack of a accessible high quality data-set that would help in generating top quality research. One of the important contributions of CREST is to address the limitation and create suitable data infrastructure for researchers.

The database would be constantly expanded and enriched with additional data depending on availability. The recent statistics of the database is as follows:

The database now covers 85,000+ start-ups, 5900+ angel investors, 1750+ VCs, 600+ incubators, 125,000+ founders

For the first time, the database has been updated with information on patents filed by Indian start-ups. As a result, YNOS possesses information on 12655 patents published by 3466 Indian start-ups incorporated between 2005 and 2021

Integration of social media links, google business data, google news data, App store, Play store, Average rating, trademarks data, web site performance data provides wide scope for answering a variety or research questions

A major highlight is the demographic information of angel investors and founders which is not present in most data sources

Current Projects:

Using the data-set that has been put together, we are currently embarking on the following projects.

  1. Creation of a machine learning model to estimate the probability of a start-up being funded
  2. Classifying the start-ups based on their business model and estimate the impact of business model on start-up valuation
  3. Alternate Approaches for Valuing Start-Ups: Investigating The Effectiveness Of Risk Neutral And Cascade Neural Network Approaches "
  • CREST hosted a lecture on ““Building Successful Ventures: Effectual Principles for the Indian Start-ups”” by Saras D. Sarasvathy, Professor, The Darden School of Business, University of Virginia on January 27, 2022.

  • CREST organized a lecture on ““How unconscious biases drive investor interest - Insights for Start-up Founders”” by Dr. Lakshmi Balachandra, Associate Professor, Babson College, Massachusetts, US on November 30, 2021

  • CREST organized a panel discussion in collaboration with CII and Accenture Ventures on ““Commercialization and Social Impact of Deep-tech Research” as part of ICONN 2021, a startup corporate connect initiative on November 18th 2021. The distinguished panel had discussed on the increasing relevance of creating commercial use and achieving social impact for the deep-tech research and project activities in leading institutes of higher education in the country. The panel also had discussed the role of start-ups in the use of deep-tech and the infrastructure and institutional support needed to nurture such start-ups.

  • CREST hosted a lecture on “Entrepreneurship in the handloom industry: The Master Weaver perspective” by Prof. Suresh Bhagavatula, IIM Bangalore on October 29th 2021.

  • CREST hosted a talk on “Entrepreneurial competencies of founders and teams in the Indian startup ecosystem” by Dr. Priyatej Murthy Kotipalli, Assistant Professor, Mahindra University on September 30th 2021.

  • CREST had its first public webinar on Tuesday, August 10, 2021. The webinar was conducted for the public to know about the centre and to explore opportunities for collaboration with CREST. The webinar was moderated by Prof. Suresh Cuganesan, Deputy Dean, Professor, University of Sydney Business School.

  • ‘Shifting Orbits: Decoding the Trajectory of the Indian Start-up Ecosystem’, a book co-edited by Prof. Thillai Rajan A., was launched by Shri. Amitabh Kant, Chief Executive Officer, NITI Aayog, on July 23, 2021. The event was followed by a discussion on “The evolving start-up landscape” with Shri. Amitabh Kant and Shri. Kris Gopalakrishnan, Co-Founder, Infosys.

  • Centre for Research on Start-Ups and Risk Financing (CREST) was inaugurated on June 22nd, 2021, with a keynote lecture on how ““Cultivating societal trust can unlock India’s entrepreneurial potential””, by Prof. Tarun Khanna, Jorge Paulo Lemann Professor at Harvard Business School.

CREST Inaugural Tarun Lecture







Industrial Engagement

Confederation of Indian Industry (CII)

The Confederation of Indian Industry (CII) has partnered with Centre for Research on Start-Ups and Risk Financing (CREST) IIT Madras for one of their initiatives titled ICONN, which aims to encourage strategic interaction between the corporate sector and startups, as well as other key stakeholders.

As part of ICONN, CREST organized a panel discussion along with CII on “Commercialization and Social Impact of Deep-tech Research”, a start-up corporate connect initiative on November 18th 2021. The distinguished panel had discussed on the increasing relevance of creating commercial use and achieving social impact for the deep-tech research and project activities in leading institutes of higher education in the country. The panel also had discussed the role of start-ups in the use of deep-tech and the infrastructure and institutional support needed to nurture such start-ups.

White Paper with Accenture Ventures

CREST in collaboration with Accenture Ventures has completed a White Paper titled “Deep-tech Start-up Ecosystem in India,” which will also feature a case study on the “The Deep Tech Ecosystem at IIT Madras”. The white paper will be presented to the Hon’ble Minister of Commerce and Industry.

Other Industry Collaborations

The dataset developed in partnership with YNOS Venture Engine is being used by various members of the industry.Some of them include:

  • T-Hub
  • Confederation of Indian Industry (CII)
  • Pontaq Venture Capital
  • Inflection Point Ventures
  • ICICI Venture
  • Arali Ventures
  • Accenture Ventures
  • StartupTN
  • Kerala Startup Mission
  • Coromandel International Ltd.
  • Toyota Kirloskar Motors
  • Rana Investment Advisors
  • GrowTrust Ventures Consultancy Pvt. Ltd.
  • AccelScale
  • CII
  • Venture Intelligence
  • Headstart
  • Federal Bank
  • Probe
  • 10000 Startups
  • TiE
  • BusinessLine
  • Vikatan
  • WeAim
  • Bharat Book Bureau
  • Indigram Labs
  • iTIC Foundation
A tour of the data platform has also been provided to various members in the industry. Some of them are given below:
  • Social Alpha
  • Indigram Labs
  • MAGIC Aurangabad
  • Mirainxt Innovation Center
  • JSS Business Incubator
  • Target Accelerator
  • Maersk Accelerator
  • Huddle
  • a-IDEA
  • BHU BioNest
  • HDFC Bank
  • Icebreaker VC
  • YES Bank
  • RBL Bank
  • Chennai Angels Network
  • TiE Chennai
  • ah! Ventures
  • Redington
  • Roche
  • Societe Generale
  • TATA Steel
  • Intel
  • Hindalco Industries
  • Faurecia
  • ITC Ltd
  • Bajaj Finserv
  • Ansys
  • Advantage Austria
  • Victorian Government Trade and Investment
  • Dubai Chamber of Commerce & Industry
Funding support has also been received from the following organizations for the activities of CREST:
  • Small Industries Development Bank of India (SIDBI) is India’s apex regulatory organisation for licencing and regulating micro, small, and medium enterprise finance firms. It is governed by the Ministry of Finance of the Government of India, has offices all around the country. Its mission is to provide refinance facilities to banks and financial organisations, as well as engage in term lending and working capital finance to industries, and it serves as the MSME sector’s primary financial institution.
  • Chiratae Ventures, formerly IDG Ventures India, is a technology venture capital firm focused on growth-stage startups in the Indian market.

University Engagement


Innovation-Venturing and Entrepreneurship in India Network (iVEIN) is a consortium of the top IITs and IIMs - IIT Madras, IIT Bombay, IIM Bangalore, IIM Calcutta and IIM Kozhikode that aims to boost the Indian Entrepreneurship Ecosystem. The iVEIN network will facilitate high-quality research in the fields of Innovation, Venturing and Entrepreneurship, some of the significant areas that define the economic growth of the country, among the academic fraternity and disseminate knowledge with conferences and journals. iVEIN will create a strategic bridge between various stakeholders and strengthen the ecosystem within different groups to create a stronger platform so as to take a lead in promoting a few neglected research activities.

“Shifting Orbits: Decoding the Trajectory of the Indian Start-up Ecosystem” a book co-edited by Prof. Thillai Rajan A., from the Department of Management Studies, IIT Madras is the first iVEIN publication and was launched by Shri. Amitabh Kant, Chief Executive Officer, NITI Aayog, on July 23, 2021. The book also gives insights on current trends and practices as well as challenges and course corrections needed for the future.


NSRCEL is a start-up hub at IIMB. It brings together startups, industry mentors, and eminent academicians from its parent institution Indian Institute of Management Bangalore and researchers who thrive on continuous interaction of theory and practice. NSRCEL is also the first incubator with a program tailored for social entrepreneurs and their unique challenges. IIMB - NSRCEL has evinced interest in joint activties with CREST. NSRCEL also extended financial support for the publication of the book “Shifting Orbits.”

The Private Capital Research Institute (PCRI):

Private Capital Research Institute is a non-profit organization that seeks to further the understanding of private capital and its impact through independent academic studies. PCRI’s primary goal is to produce and disseminate high quality academic research, based in large part on the comprehensive academic databases of private capital activity that the PCRI is building.

The Private Capital Research Institute has a partnership with YNOS, a digital information platform, to provide researchers with access to high quality information on start-ups, founders, angels, incubators, and venture capital investors in India. YNOS database is also featured in the PCRI website’s Research section.

Other University Collaborations:

YNOS Venture Engine is the technology implementation partner of Centre for Research on Start-Ups and Risk Financing (CREST).

The following academic institutions using the Start-up database:

  • IM Vishakhapatnam.
  • CIIE CO (IIM – Ahmedabad).
  • IIM – Kozhikode.
  • IIT Patna.
  • IIT Indore.
  • IIM Udaipur.
  • Crescent Innovation Incubation Council.
  • School of Design Thinking.
  • VelTech.
  • VIT University.
  • Karunya University.
  • PSNA.
  • IIM Visakhapatnam.


Relevant Updates:

American Express established Data Analytics, Risk & Technology (DART) Lab in IIT Madras. As part of DART Lab’s operational processes, CREST is involved in a project named “Alternate Approaches for Valuing Start-Ups: Investigating The Effectiveness Of Risk Neutral And Cascade Neural Network Approaches” lead by Professor P. Krishna Prasanna and Professor Thillai Rajan A., Dept. of Management Studies, IIT Madras.