Sam Pitroda-headed National Knowledge Commission has recommended setting up of a stock exchange for small companies and creating various instruments to help these firms raise initial capital as they face difficulties in doing so.
Such a stock exchange would help small companies in getting additional capital, broaden shareholder base and create a market with a public value for shares, the commission said in a study.
"Every one complaints of not having enough sources for getting funds, especially small companies. Banks are there but often small companies are not able to meet their funding needs from these banks. All we want by this secondary market is to provide them with an option," Sam Pitroda, Chairman National Knowledge Commission, said at a CII function on entrepreneurship in New Delhi.
Pointing out that various investors like angel investors, venture capitals and private equity are becoming more active, particularly in knowledge intensive sectors, the commission said they need incentives for greater involvement.
The study 'Entrepreneurship in India' suggested creation of a secondary market for smaller firms, creating new instruments for start-up funding and providing financial literacy to start-ups.
The findings of the commission pointed that 63 per cent of entrepreneurs interviewed were self-financed, while others were financed by banks, venture capitals, angel investors etc.
Angel investors are high net worth individuals who have often been entrepreneurs and they re-deploy their wealth in next-generation businesses.
Pitroda also said the Knowledge Commission would help in establishing a portal focusing on young generation entrepreneurs for providing information about venture capital, bank funding etc.
The commission also suggested that financiers need to be more proactive in assessing the business opportunities generated by entrepreneurs in the country.
According to the study, there is a strong perception among entrepreneurs that start-up funding is very difficult in the country. Along with the problem of getting funds, the entrepreneurs also face skill-shortages and find it difficult to get the right candidate for the jobs, the commission found.
Referring to the problems experienced by the entrepreneurs, the study said around 50 per cent of them had difficulties while seeking statutory clearances and licences.
Filing taxes and corruption are the few other things that the commission has pointed to.
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