Startup financing mechanism: essential characteristics

Abstract

The shift of the global economy towards an innovation-driven model has elevated the role of startups as a key driving force of economic progress. This has necessitated a revision of approaches to their financing amidst constant changes in business practices and entrepreneurial ecosystems. Unlike established companies with predictable cash flows, startups operate in an environment characterized by high uncertainty, limited initial revenue, and reliance on innovative ideas, rendering traditional approaches inadequate for justifying their funding sources, forms, and instruments. The purpose of this investigate is to deepen the theoretical foundations of the startup financing mechanism by synthesizing various scientific points of view and clarifying the key attributes that define the specifics of its financing.  Methods. In the investigate, the methods of analysis, synthesis, comparison, logical deduction, and theoretical generalization were used. Results. The article examines the theoretical principles of a startup by analyzing its economic nature and operational characteristics. The distinctions between a startup and a traditional company are explored, highlighting its focus on innovation and rapid growth. It is established that a startup is a multifaceted phenomenon characterized by innovativeness, rapid growth, and high risk, necessitating the application of specific forms, sources, and instruments of financing. Scientific approaches to interpreting the startup financing mechanism are analyzed, and its perception as a system with dynamic processes is substantiated. The integration of a systemic approach, which structures the startup financing mechanism, with a process approach, which reflects its iterativeness and dynamics, is investigated. The startup financing mechanism is examined through its constituent elements, identifying their interrelationships with startup financing processes across life cycle stages and funding round". The conclusions summarize the theoretical foundations for revealing the essence of the startup financing mechanism, considering systemic and process approaches, and determine the harmony of their combination through the structuring of elements and the dynamics of movement.