The Backbone of Startup Fundraising: Financial Modeling, Due Diligence & the Role of CA's and CS's
- Dr. Praveen Chandra Tiwari
- Jun 11
- 3 min read
India’s startup ecosystem has witnessed an unprecedented boom over the last decade. From bootstrapped ventures solving hyperlocal problems to unicorns disrupting global markets, startups are reshaping India's economic landscape. With over 100,000 recognized startups and a robust support infrastructure comprising incubators, accelerators, angel networks, and VC firms, India is now the third-largest startup ecosystem in the world.
However, the journey from ideation to funding is anything but simple. Behind every successful fundraising round lies a foundation built on compliance, credibility, and clarity—an area where Chartered Accountants (CAs) and Company Secretaries (CSs) play a pivotal role.
1. The Evolving Indian Startup Ecosystem
The Government of India’s Startup India initiative, reforms in company law, and a rising appetite for innovation have contributed to an entrepreneur-friendly environment. Key trends shaping this ecosystem include:
Increased early-stage funding activity
Sectoral innovation in fintech, healthtech, edtech, agritech, and climate tech
Global investor interest in India as a high-growth market
Strong policy support for DPI (Digital Public Infrastructure)
Despite these tailwinds, securing funding remains one of the most challenging aspects for any startup. And this is where financial and compliance professionals step in as strategic enablers.
2. Role of CAs & CSs in Startup Funding Journey
a. Structuring the Startup Right
Choice of Entity: Advising founders on whether to go for a Private Limited Company, LLP, or other forms, based on scalability and investor preferences.
Equity Structuring: Setting up cap tables, ESOPs, and founder vesting schedules in an investor-friendly manner.
b. Ensuring Regulatory Compliance
ROC Filings & FEMA Compliance: Ensuring startups are ready for FDI or overseas investments with clean statutory filings.
Startup India Recognition: Guiding through DPIIT recognition to avail tax exemptions and other benefits.
c. Financial Due Diligence
Before any funding, investors conduct due diligence to evaluate financial health, tax liabilities, and internal controls. CAs ensure:
Clean financial statements
GST, TDS, and income tax compliance
Identification of red flags (if any) that could jeopardize the deal
CSs ensure:
Secretarial due diligence
Shareholder agreement vetting
Board and statutory records in order
d. Financial Modeling & Valuation
A compelling financial model can make or break a pitch. Experienced CAs help with:
Building robust 3-5 year projections
Scenario analysis (base, best, and worst case)
Valuation justification using methods like DCF, VC Method, and Comparable Transactions
This makes startups funding-ready and helps investors assess risk and ROI more accurately.
3. Post-Funding Support: A Continuous Journey
Even after funding is secured, CAs and CSs stay relevant:
MIS and Investor Reporting
ESOP management and ROC compliance
Foreign remittance tracking under FEMA
Financial governance and board advisory
As startups scale, these professionals become embedded in their growth story—not just as service providers but as partners in building resilient, fundable businesses.
Conclusion: Strategic Catalysts in a Growing Ecosystem
The Indian startup ecosystem is rich with opportunity but equally demanding in expectations. Investors don’t just back ideas—they back compliant, financially-sound, and well-structured ventures.
At Infosential LLP, we take pride in enabling startups through this entire journey—right from formation and financial modeling to due diligence, deal structuring, and post-funding compliance. With a team led by experienced Chartered Accountants and Company Secretaries, we serve as your strategic advisors at every stage of the funding lifecycle.
If you’re a startup founder looking to raise funds or an investor conducting diligence, let’s talk.
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