Marathwada Mitra Mandal’s Polytechnic

Thergaon, Pune – 411033

Institute
Vision: To nurture proficient technicians with sound ethical a

Mission: We take ardent efforts to inculcate technical skills,

social, and ethical values among students along with Theoretical,
Analytical and Practical Knowledge through an excellent harmony
among academia, professional and extra-curricular activities.

COMPUTER ENGINEERING DEPARTMENT

Vision:
To develop technically proficient and competent professional’s
with latest technology and ethical values to serve society.

Mission:
• To impart latest and sound technical education

• To provide strong theoretical and practical knowledge of

computer engineering branch with an emphasis to maintain
software and hardware systems.

• Groom students with necessary skills and ethical values.

Program Specific Objectives ( PSO's)

 PSO1: Foundation of Computer System: Ability to interpret the

fundamental principles, concepts and methodology of computer system.
 PSO2: Ability to develop, maintain and test computer systems on the basic
of programming languages, computer network and hardware.

 PSO3: Professional Skills: Ability to communicate effectively, recognize

ethical values and responsibility towards society.
MARATHWADA MITRA MANDAL’S POLYTECHNIC
THERGAON, PUNE 411033

A
PROJECT REPORT
On

Startup Profit Prediction System Using Machine Learning

Submitted by

Tejal Patil
Sarthak Musale
Shriyash Patki

in partial fulfillment for the award

of

DIPLOMA
In

Computer Engineering

UNDER THE GUIDANCE OF

Mrs.Dhalpe S.B.

FOR THE ACADEMIC YEAR

2024- 2025
 MAHARASHTRA STATE
BOARD OF TECHNICAL EDUCATION

CERTIFICATE
This is to certify that,
Mr. Tejal Patil Roll No 220386
Mr. Sarthak Musale Roll No 220376
Mr. Shriyash Patki Roll No 220386
of
Sixth Semester
of
Diploma in Computer Engineering
have completed
the Project entitled Startup Profit Prediction System Using Machine Learning
satisfactorily for the academic year 2024 to 2025 as prescribed in the curriculum
of MSBTE at Marathwada Mitra Mandal’s Polytechnic, Thergaon, Pune 411033 .
Place : Pune Enrolment No.: 2209890212
2209890213
2209890202
Date : Exam. Seat No.:

Project Guide Head of the Department

External Examiner Principal

Seal of
Institution
M. M. Polytechnic,
Thergaon, Pune, 411033.
 ACKNOWLEDGEMENT

Perseverance, Inspiration & Motivation have always played a key role in the success
of any venture.

At this level of understanding it is difficult to understand the wide spectrum of

knowledge without proper guidance and advice, Hence we take this o to express our
sincere gratitude to our respected Project Guide Mrs.Dhalpe S.B who as a guide
evolved an interest in us to work and select an entirely new idea for project work. He
have been keenly co-operative and helpful to us in sorting out all the difficulties. We
would also like to thank our Principal MRS. GEETA S. JOSHI NAME, for their continuous
advice and support. My deep sense of gratitude to startup investors, business institute
for their timely advice and encouragement in our project development .I would also
thank my Institution and my faculty members without whom this project would have
been a distant reality.

Tejal Patil
Sarthak Musale
Shriyash Patki
 INDEX

Chapter Title Page

NO No
1 Introduction 1
1.1 Need for the system 3
1.2 Detailed Problem definition 4
1.3 Viability of the System 4
1.4 Presently Available Systems for the same 4
1.5 Future Prospects 5
1.6 Organization of the Report 5
2 Analysis 6
2.1 Project Management 6
2.2 Requirement Analysis 6
2.2.1 Data Mining 7
2.2.2 Machine Learning 9
2.2.3 Previous research on acquisition prediction 11
3 Design 14
3.1 Software Requirements Specification 14
3.2 Risk Assessment 15
4 System Modeling 16
4.1 UML Diagrams 16
4.2 Database Design 21
5 Coding 23
5.1 Hardware Specification 23
5.2 Additional hardware components used 24
5.3 Platform 24
5.4 Programming languages used 25
5.5 Software tools used 25
5.6 Coding style followed 26
5.7 Prediction Function 27
6 Testing 29
6.1 Formal and technical review 30
6.2 Test plan 33
6.3 Test cases and results 35
7 Conclusion 38
8 Bibliography 40
 ABSTRACT

In today’s rapidly growing entrepreneurial ecosystem, startups play a crucial role in driving
innovation and economic development. However, one of the most significant challenges faced by new
businesses is the uncertainty of profit and sustainability in competitive markets. To address this issue,
we have developed a Startup Profit Prediction System using Machine Learning (ML) techniques that
aims to accurately forecast potential profits based on various business parameters.

The system takes critical factors such as initial investment, operating costs, market sector, location,
revenue model, and other relevant inputs to generate a profit prediction. In addition to this, the system
integrates a database of government schemes designed to support startups across different sectors,
providing users with valuable insights into the financial aids and benefits they may qualify for.

By leveraging powerful ML algorithms and data-driven methodologies, this system helps

entrepreneurs and investors make informed decisions, reduce financial risks, and strategically plan
their business operations. The platform is designed to be user-friendly, scalable, and adaptable to
different startup categories, ensuring its relevance in real-world applications.

This project demonstrates the potential of technology in solving practical business problems,
ultimately contributing to a more sustainable and prosperous startup ecosystem.

Keywords
Startup Profit Prediction, Machine Learning, Government Schemes, Financial Forecasting,
Investment Analysis, Predictive Model, Business Intelligence, Data Analytics, Risk Management,
Entrepreneur Support.

i
CHAPTER 1

1. Introduction
Startups are rapidly emerging as a key driver of economic growth, innovation, and employment
generation, particularly in developing countries like India. However, the startup ecosystem faces
multiple challenges, primarily concerning financial planning and sustainability. Many startups fail
within the first few years of their establishment due to a lack of accurate profit estimation and
inadequate knowledge about financial support available from the government. To address these issues,
there is a growing need for intelligent systems that can predict startup profits based on multiple
business factors and suggest relevant government schemes to maximize the success potential of
startups. This project aims to develop a Startup Profit Prediction System using Machine Learning
(ML), integrated with a Government Schemes Recommendation System. The system will analyze
startup-related data, predict future profitability using ML algorithms, and provide a curated list of
government schemes applicable to the specific startup based on its industry and location. This will
assist entrepreneurs in making data-driven decisions and Start-ups are booming everywhere as more
colleges, governments and private companies invest and stimulate people to pursue their ideas
throughout these ventures. Companies are raising millions with ease and achieving unicorn status (i.e.,
a one-billion-dollar valuation) in a matter of years. Slack, a messaging app, achieved it after operating
for 1.25 years (Kim, 2015). Examples like Uber and Airbnb are changing societies in such impactful
ways that regulation had to be created to keep pace with a new reality. Start-ups are having such
impact that, ultimately it becomes every investor’s ambition to be part of a large acquisition such as
Facebook acquiring WhatsApp (another messaging app) for nineteen billion dollars which allowed
Sequoia (a Venture Capital fund) to have a 50x return on investment (Neal, 2014). But there is a catch,
start-ups are companies with an estimated 90% probability of failure, which means a lot of
investments without proper returns (Patel, 2015).

Predicting the success of a start-up is commonly defined as two-way strategy that makes a large
amount of money to its founders, investors and first employees, as a company can either have an IPO
(Initial Public Offering) by going to a public stock market (i.e. Facebook going public, allowing
everyone to invest in the company by buying shares being sold by its insiders in the U.S stock market)
or, be acquired by or merged (M&A) with another company (i.e. Microsoft acquiring LinkedIn for

1
$26B) where those who have previously invested receive immediate cash in return for their shares.
This process is often denominated as an exit strategy (Guo, Lou, & Pérez-Castrillo, 2015). This
study will therefore, consider both an IPO (Initial Public Offering) and a process of M&A
(Mergers & Acquisitions) as the critical events that classify a start-up as successful.

With a focus on how a start-up or an investor could explore all this knowledge for a better decision
making in investment strategy and monetary gain, the study intends, by applying data mining and
machine learning techniques, to create a predictive model that has as the dependent variable a label
to classify whether a start-up is (already) successful or not.

Improved areas of our society are already being improved by the application of machine learning.
From healthcare, where by applying segmentation and predictive modelling it is possible to identify
different types of treatment (from preventive to life-style changes) for a patient or even diagnose him
(Raghupathi & Raghupathi, 2014), to marketing personalization where companies benefit from
knowing as much as possible from their clients to create customer-centric experiences all around.
Fraud detection, financial services, insurance and even smart cars are all industries creating value, in
a short to medium term, through the application of machine learning (Marr, 2016). It is possible to
bring similar advantages to investors in start-ups, by giving these players information about which
start-ups are closer to a successful event in their near future they can better choose where to put their
chips and have higher returns on their investments.

To generate the predictive model, three supervised machine learning algorithms were tested: Support
Vector Machines, Logistic Regression and Random Forests. All these algorithms fit the characteristics
of the dataset (147 features and more than 140 000 observations), provide a fast and

simple technical implementation. The creation of a predictive model to explain this specific
phenomenon is an excellent indicator of how the level of exploitation of Data Mining techniques
allows analysts to extract the full potential of the available data to reach all proposed goals. Being
able to accurately classify if a start-up had this event in its progress is not only incredibly valuable for
all the players in the start-up world (entrepreneurs, angels and investors of Venture Capital) but also,
the application of different techniques and features to build models with higher predictive accuracy
represents a step forward to not only the academic literature but also the industry.

2
Although there are a lot of studies about predicting processes of M&A, most focus on financial and
managerial features with Logistic Regression being the most common predictive algorithm used (Ali-
Yrkkö, Hyytinen, & Pajarinen, 2005; Altman, 1968; Gugler & Konrad, 2002; Karels & Prakash, 1987;
Meador, Church, & Rayburn, 1996; Ragothaman, Naik, & Ramakrishnan, 2003). There is still space
for an approach focused on venture capital (or other type of investment) features and different machine
learning algorithms to company acquisition and with a platform as rich as CrunchBase it is an
interesting challenge to explore and compare achieved results with previous approaches (Liang &
Daphne Yuan, 2012; Xiang et al., 2012).

Considering the improvements achieved with the current approach, from 61% to 96% compared with
44% to 80% for different company’s categories and an overall TPR (True Positive Rate) of 94%, it is
important to reinforce the advancements achieved in this study.

The following dissertation is divided in three sections: first section explores the study relevance and
its importance, the objectives, a literary review of the thematic including previous studies of company
acquisition and an overview of baseline articles. Secondly, the process to generate a final dataset from
CrunchBase data. This includes pre-processing, creation of new variables, problems faced and its
solutions. Finally, the application of machine learning algorithms to generate the proposed predictive
model through supervised learning – the experiment setup, its results and final conclusions.accessing
financial support, ultimately contributing to the long-term growth of startups.

1.1 Need for the New System

The traditional approach to profit forecasting in startups is largely manual and based on assumptions
rather than data analysis. Most startups lack experience in projecting accurate profits, which leads to
poor financial management, failed investments, and business closures. Additionally, while there are
numerous government schemes designed to support startups financially and operationally, many
entrepreneurs are unaware of these schemes or find it difficult to identify those that apply to their
specific business domain and location. Therefore, there is an essential need for a system that can
automatically predict startup profits based on operational and financial data and simultaneously
recommend suitable government schemes. Such a system can help startups minimize risks, improve
profitability, and take full advantage of government incentives, ensuring a higher chance of success
in a competitive market.

3
1.2 Detailed Problem Definition

The current startup ecosystem lacks a unified solution that can help founders predict future profits
accurately while also guiding them towards beneficial government programs. Startups often struggle
with uncertain revenues, fluctuating expenses, and unpredictable market conditions, all of which make
profit prediction a complex task. Moreover, the information about government schemes is often
scattered across multiple platforms, making it difficult for startups to find and apply for the right
scheme at the right time. This project aims to solve these problems by creating a system that uses
machine learning algorithms to analyze various financial parameters such as R&D expenditure,
marketing costs, administration expenses, investment amount, and geographical factors to predict
potential profits. Based on the startup's industry type and location, the system will also suggest a list
of available government schemes, thereby providing a dual solution to the problem of profit
uncertainty and lack of financial support information.

1.3 Viability of the System

The proposed system is highly viable in the current scenario, as it is built on real-world financial and
operational data, making the profit predictions more reliable and accurate. Machine learning models,
such as Linear Regression or Random Forest Regressor, are well-suited for analyzing complex
relationships between various business factors and profits. Furthermore, the integration of a
government schemes database ensures that the system remains updated with the latest financial
support options available for startups. The system's modular architecture allows easy updates and
scalability, so more industries, regions, and schemes can be added over time. By providing meaningful
insights and practical recommendations, the system will not only save time and effort for
entrepreneurs but also enhance their decision-making capabilities, making it a sustainable and
valuable tool for long-term use.

1.4 Presently Available Systems for the Same

Currently, the market offers a few fragmented solutions to address startup financial planning and
government scheme awareness, but none of them offer a complete package. Traditional financial
calculators or accounting software help in basic budget management but lack predictive capabilities.
The Startup India Portal and similar government websites provide lists of schemes but do not offer
personalized recommendations based on startup type or location. Private consultancy services offer

4
guidance on profitability and government schemes but can be costly and time-consuming, making
them inaccessible to early-stage startups with limited budgets. As a result, startups either operate
without any predictive financial tools or rely on manual processes, which are prone to errors and
inefficiencies. The proposed system aims to bridge this gap by offering an all-in-one platform that
provides automated profit prediction and tailored government scheme recommendations, thus filling
a critical void in the existing startup support infrastructure.

1.5 Future Prospects

The future scope of the Startup Profit Prediction System is vast and promising. With continuous
advancements in machine learning and the growing availability of startup data, the system can evolve
to include advanced features such as risk assessment, competitor analysis, and investment
recommendations. Real-time data integration, such as live market trends, taxation updates, and
regional economic factors, can further enhance the accuracy of profit predictions. Additionally,
incorporating automated notifications about new government schemes, subsidies, or policy changes
will make the system even more valuable to startups. There is also potential to expand the system into
a mobile application, making it accessible to a broader range of entrepreneurs, including those in rural
or remote areas. Furthermore, integrating multi-language support can make the system more inclusive,
catering to users from different linguistic backgrounds. These future enhancements can transform the
system into a comprehensive financial advisory tool for startups.

1.6 Organization of the Report

This report is structured to provide a comprehensive understanding of the Startup Profit Prediction
System using Machine Learning. Following the introduction in Chapter 1, Chapter 2 presents a
literature survey, reviewing existing systems, research papers, and methodologies related to startup
profit prediction and government scheme recommendations. Chapter 3 details the system analysis
and design, including the proposed architecture, data flow diagrams, and module descriptions.
Chapter 4 covers the implementation of the system, describing the machine learning models used,
data preprocessing techniques, and system development process. Chapter 5 focuses on results and
evaluation, showcasing the performance of the profit prediction model and the effectiveness of the
government scheme recommendation system. Finally, Chapter 6 provides the conclusion and
outlines future work, summarizing the project's contributions and proposing potential enhancements
for subsequent versions of the system.
5
CHAPTER 2
2. Analysis
The success of any software system depends on a thorough and well-planned analysis phase, which
helps identify the problem, define the requirements, and ensure smooth project execution. The Startup
Profit Prediction System aims to solve two major problems faced by startups: the uncertainty of profit
estimation and the lack of awareness of government schemes. A careful analysis is necessary to define
the project's scope, identify the resources needed, and ensure that the system meets its goals
efficiently.

2.1 Project Management

Project management is a critical aspect of developing this system as it ensures the timely delivery of
the project while meeting all functional and non-functional requirements. This project follows the
Agile Model of development, which is highly suitable for projects that require continuous updates,
such as integrating new government schemes and refining machine learning models with more data.
The project is divided into multiple phases, including requirement gathering, system design,
development, testing, and deployment. Each phase is managed through regular sprints, allowing
feedback and improvements at every stage. The team structure consists of a project manager
overseeing development, data engineers handling dataset collection and preprocessing, machine
learning specialists building and training the predictive model, and frontend developers working on
the user interface. Effective resource allocation, timeline management, and regular project review
meetings are crucial elements to track progress and ensure the successful completion of the system.

2.2 Requirement Analysis

Requirement analysis involves understanding what the system should achieve and gathering all the
necessary data to define how the system will operate. The primary functional requirements of the
Startup Profit Prediction System include the ability to collect startup financial data (such as R&D
expenditure, marketing costs, administrative expenses, and geographical location), process this data
through machine learning algorithms to predict profits, and recommend suitable government schemes
based on the startup's category and region. Non-functional requirements include system scalability,
data security, ease of use, and high accuracy in predictions. During the requirement analysis phase,
potential users of the system, such as startup founders, financial advisors, and

6
government officials, were consulted to identify the features they expect. Data sources, including
government portals, financial reports, and previous startup datasets, were analyzed to determine the
data needed to train the machine learning models effectively. These requirements were documented
to guide the system's design and development.

2.2.1 Data Mining

We are currently living in a society where all our business, scientific and government
transactions are computerized but also in a world where digital devices, social media and bar
codes are generating data. Data scientists have been facing a challenge to rapidly increase our
ability to generate and collect data through new techniques and automated tools, aiming to
transform the ever-growing databases into useful information and most importantly, knowledge
(Han & Kamber, 2006; Kantardzic, 2003).

Ian Witten and Eibe Frank define Data Mining as the process of extracting implicit and
previously unknown information with potential use from a dataset (Witten, Frank, & Eibe,
2000). By building programs that look through databases, there is the potential to find strong
patterns which, if found, will be able to generalizable complex problems and make accurate
predictions on future data. Witten and Frank provide an example, the weather problem, to
illustrate how by using only a set of four features – outlook, temperature, humidity and windy,
one can find a pattern and predict if there are conditions to play outside. Through a simple set
of rules, they can accurately classify an observation as a place with conditions to play outside
or not (Witten et al., 2000). Machine learning provides the technical basis for data mining. It is
used to extract information from the raw data in databases. The process of discovering patterns
in data must be automatic or semiautomatic (which happens more frequently), and the
discoveries must be “meaningful” in that they lead to some advantage. Since both terms are
frequently associated, It is also important to understand machine learning as the mathematical
algorithms used to create models and Data Mining as the entire process of knowledge extraction
(which may or may not have machine learning techniques in its process) (Witten et al., 2000).

Berry & Linoff have a more business-centric definition, defining data mining a collection of
technological tools and techniques required to support companies by providing useful
knowledge. Their rational revolves around the notion that companies need to make decisions
based on data (informed decisions) as opposed to assumption-based ones (uninformed
decisions) and that companies need to measure all results which will always be beneficial to the
business (Berry & Linoff, 2004). Christopher Clifton, with a similar definition, considers data
mining as an interdisciplinary subfield of computer science with the overall goal of extracting
information from large volumes of data, discovering patterns and transforming it into
understandable knowledge.

7
To make sense of data and aiming to address the problem of data overload, data scientists came
up with a process concerned with the development of methods and techniques to standardize the
application of Data Mining – Knowledge Discovery in Databases (or, in more recent
approaches, Data). It is defined by Fayyad, Piatetsky-Shapiro and Smyth as the application of
specific data-mining methods for pattern discovery and knowledge extraction. Jiawei Han and
Micheline Kamber added, more recently, the notion that this data can be provided by different
sources such as multiple databases, data warehouses, web or any data stream. The original
definition of a KDD process is a 5- step framework that every Data Mining problem should
follow: (1) Selection, data into target data;
(2) Pre-processing, target data into processed data; (3) Transformation, processed data into
transformed data; (4) Data Mining, transformed data into patterns 2; (5)
Interpretation/Evaluation; interpretation of patterns into knowledge (Fayyad, Piatetsky-
Shapiro, & Smyth, 1996).

While this definition is considered the standard for KDD, Jiawei Han and Micheline Kamber
propose a more modern approach: (1) Data cleaning, removing noise, outliers, missing values;
(2) Data integration, combining different data sources; (3) Data selection, retrieving relevant
data from the database; (4) Data transformation, data is transformed as new features are created;
(5) Data mining, mathematical algorithms are applied to extract meaningful patterns;
(6) Evaluating results; (7) Knowledge presentation, where visualization and knowledge
representation techniques are used to present results (Han & Kamber, 2006).

Applications of data-mining can be seen in healthcare as data mining is becoming increasingly

essential in this field. Evaluating treatment effectiveness by comparing causes, symptoms and
courses of treatment to the outcomes of patient groups treated with different drug regimens for
the same disease allows to determine which treatments work best and are most cost-effective
for each group (Kudyba, 2014). Also, to aid healthcare management, data mining applications
can be developed to better identify chronic disease states and high-risk patients, design
appropriate interventions, and reduce the number of hospital admissions and claims (Chye Koh
& Tan, 2011). Other applications of data mining in healthcare are detection of fraud, customer
relationship management and, even, predictive medicine.

Marketing also attracts a lot of development in this field. The most common application of data
mining in marketing is through segmentation, which by analyzing customer databases allows
the definition of different customer groups and even forecast their behavior. The amount of data
gathered has so much potential that one time, Target (a US retailer), segmented a young woman
as pregnant even before the father knew about the pregnancy (Hill, 2012). Another marketing
application of data mining is through market-basket analysis systems, which find patterns in
customers consumption habits (Fayyad et al., 1996). This allows a better management of stock,
and distribution of shelve space in supermarkets.

8
 2.2.2 Machine learning
Over the last 50 years, machine learning evolved from the efforts of scientists like Arthur L.
Samuel exploring whether machines could learn to play games like checkers (Samuel, 1962) to
a broad discipline taught in scientific schools all over the world and to be applied in all our
interactions with technology. With computational power rapidly increasing over the past few
decades it became possible to use these techniques in more practical ways than before. Using
technologies like regressions and support vector machines, Google created PageRank, Google
News and even Gmail spam classifier in its way to become one of the most powerful companies
in the world. These algorithms became easy to distribute making new applications that rely on
these techniques, more and more common (Beyer, 2015).

Kirk Borne, Principal Data Scientist at Booz Allen, clearly defines “machine learning as the
basis set of mathematical algorithms that learn the models that describe the patterns and features
in data” and “data mining as the application of those algorithms to make discoveries from large
data sets” (“Artificial Intelligence and Machine Learning: Top 100 Influencers and Brands,”
2016; Onalytica, 2016).

Tom M. Mitchell, Department Head of machine learning at Carnegie Mellon University in his
“The discipline of machine learning”, starts his exploration on the thematic by defining the
question the field of machine learning seeks to answer:

“How can we build computer systems that automatically improve with experience, and
what are the fundamental laws that govern all learning processes?”

The answer is broad as machine learning covers learning tasks ranging from autonomous robots,
to the data mining of consumer records to predict their behavior, to search engines that
automatically learn its users’ preferences but idea is: machine learning, a natural outgrowth of
the intersection of Computer Science and Statistics, is the ability to make a machine learn
something through experience (data) and original settings (algorithms and its parameters)
(Mitchell, 2006).

Rob Schapire, formerly the Professor of computer science at Princeton University and currently
at Microsoft, defines ML very simply as: “machine learning studies computer algorithms for
learning to do stuff”. Machine learning is the capacity of telling a computer how to complete a
task, make accurate predictions or even learn on how to act properly upon a determined
scenario. It always starts with previous observed data and a set of instructions on how to analyze
it. “So in general, machine learning is about learning to do better in the future based on what
was experienced in the past”, Rob Schapire adds (Schapire, 2008).

We live in a world where machine learning applications are present in (almost) every sector of
our daily lives:Banks and other businesses in the financial industry who use it primarily to
identify investment opportunities, or help investors know when to trade. Using data mining can
also identify clients with high-risk profiles, or pinpoint warning signs of fraud (Schapire, 2008).

9
Uber, Lyft and other car sharing services use these algorithms to make routes more efficient or
to predict potential problems to increase profitability. Even self-driving cars need machine
learning to predict accidents or optimize routes (“10 Million Self-Driving Cars Will Be On The
Road By 2020 - Business Insider,” 2016; NGUYEN, 2015).

The health industry uses it as tool to help medical teams carry out pattern recognition of
damaged tissue (structural health monitoring) to correctly diagnose patients. And more recently,
wearable devices use sensors to monitor people’s health in real time (Farrar & Worden,
2012).Machine learning can be divided in four different categories: supervised, unsupervised,
semi supervised and reinforcement learning. Being supervised and unsupervised learning the
most widely used.

Supervised learning algorithms make predictions based on a set of examples. A supervised

learning algorithm is, having x input variables and an output variable y. The algorithm learns
to map the function (y=f(x)) and can (correctly) predict/classify any new output y after getting
new input data x. The possible answers from the output are known. All data is labelled, and the
algorithms learn to predict the output from the input data. Supervised algorithms can be grouped
into regression and classification problems: A regression function is a type of model when the
output variable is a real value, i.e., 88, 130, 0%. A classification function generates models
where the output is a category, i.e., “red”/ “blue”, “acquired”/ “not acquired”.

Unsupervised learning algorithm is when we only have input variables/features and no output
(target variable). It is in the learning process that the algorithm will discover and classify
possible outcomes. Here, we don’t know the possible answers. As all data is unlabeled, the
algorithm should learn to create patterns from the input data. Typically, unsupervised learning
can be grouped into clustering and association analysis. A clustering problem is the discovery
of groups with heterogeneous characteristics between them and homogeneous characteristics
between the observations of each group. A frequent application of cluster techniques is in the
segmentation of clients for a company (marketing). An association rule problem is when you
want to discover n rules that describe large portions of data, such as people that acquire A also
tend to buy B (usually used in supermarket chains) (Aggarwal, 2015; Berry & Linoff, 2004;
Han & Kamber, 2006; Kantardzic, 2003; Mitchell,
2006;).

Frequently mistaken with machine learning, Data Mining is the set of different techniques to
produce knowledge from data. It can involve statistical inference and machine learning
algorithms to identify patterns in large datasets. Machine learning on the other hand is the
specific set of mathematical algorithms running through computers to understand the structure
of data being analyzed (Christopher Clifton, 2009). Machine learning can be defined as the set
of methods and techniques used to discover patterns in data, it is a step in a broader discipline
which is Data mining. An in-depth exploration of the topic is present in 2.2.1. Data Mining.

Being machine learning the ability to make computers learn through past information to provide
present or future context, it is natural to see the potential for company acquisition studies using
these techniques. We now have an immense historic information regarding acquisitions,
IPOs, investment and others, that should be explored.
10
 2.2.3 PREVIOUS RESEARCH ON ACQUISITION PREDICTION
Most research focused on predictions by analyzing common quantitative financial variables for
corporate companies as firm size, market to book value ratio, cash flow, debt to equity ratio
and price to earnings ratio (Ali-Yrkkö, Hyytinen, & Pajarinen, 2005; Gugler & Konrad, 2002;
Meador, Church, & Rayburn, 1996). With some adding managerial features as industry
variations (Meador et al., 1996), management inefficiency (Ali-Yrkkö et al., 2005; Meador et
al., 1996) and resource richness (Meador et al., 1996). Most of the analysis methods used to
build M&A prediction models have been Logistic Regressions (or Multinomial Logistic
Regressions) (Ali-Yrkkö et al., 2005; Gugler & Konrad, 2002; Meador et al., 1996;
Ragothaman, Naik, & Ramakrishnan, 2003).

Hyytinen and Ali-Yrkko reported “how multinomial logic estimations show that if a Finnish
firm owns a number of patents registered via the European Patent Office (EPO), the patents
increase the probability that the firm is acquired by a foreign firm.”. The authors took under
consideration other variables for their model as firm size, cash flow ratio to total assets and ROI
(return on investment) to simulate managerial performance (Ali-Yrkkö et al., 2005). A relevant
finding in Hyytinen and Ali- Yrkko’s work is that size (as a logarithmic function of total assets
owned) matters. The larger the firm, the more likely it is acquired. However, their sample of
815 Finnish companies is too small to test with more powerful techniques.

Wei, et al., also studied the importance of patents a company has and its importance supporting
Merger and Acquisitions prediction. Through a Naïve Bayes model to classify a company as
whether the candidate target company would be acquired or merged by the bidder company or
not, they defined a set of features such as number of patents granted to a company, number and
impact of recent patents and the company’s technological quantity. Their results, with a set of
2394 acquisitions, vary between a precision rate of 42.93% and 46.43% (Wei et al., 2009).
Although making a relevant step in predicting M&A’s by including technological variables they
limited their results by excluding all other categories such as management and financial features.

ACTARGET is a tool to classify firms into acquisition and non-acquisition target categories
and uses discriminant analysis and rule induction in its model. They developed the tool with a
database of 97 acquired and 97 non-acquired firms, achieving 81.3% of the acquisitions and
65.6% non-acquisition companies as correctly classified (Ragothaman et al., 2003). Although
promising, the small dataset and the use of only eight financial features limit their results.

There has also been a large focus on studies about business failures and bankruptcies over the
last fifty years (Xiang et al., 2012). Professor Edward Altman, best known for the development
of the (Altman) Z-score, proposed several financial ratios as the features of a multivariate
statistical analysis in his study to predict bankruptcy. Altman extended his first study into the
prediction of railroad bankruptcies in America by using a set of 21 railroads that went bankrupt
between the years 1939- 1970. Specifically, Altman with a five-variable model using multiple
discriminant analysis, analyzed ratios like, common liquidity measures, solvency and leverage
measures, and profitability measures plus efficiency indicators with a very accurate
classification at one and two years prior to bankruptcy (achieving an accuracy of 97.7%)
(Altman, 1968; Zhang & Zhou, 2004).

11
 More recently Ravisankar et al., used six machine learning algorithms, Multilayer Feed Forward
Neural Network (MLFF), Support Vector Machines (SVM), Genetic Programming (GP), Group
Method
of Data Handling (GMDH), Logistic Regression (LR), and Probabilistic Neural Network (PNN) to
understand the differences between a set of 202 companies listed in various Chinese stock markets,
using 35 financial features. The dataset consisted of 101 non-fraudulent companies and 101 that
were. Their Probabilistic Neural Network outperformed all other classifiers with a True Positive
Rate of 98.09% predicting which companies were fraudulent (Ravisankar et al., 2011). Their
numbers are impressive but the use of a small sample of 202 companies and a lack of exploratory
analysis of the features used allows the assumption that significant differences between fraudulent
and non- fraudulent companies exist and would be “easily” distinguished in their learning task.
Their approach has the highest results analyzed but the scope of their investigation is not
specifically company acquisition but more oriented to fraud prevention.

Investments behavior of venture capital firms and other investors in start-ups is also a subject
of study. Liang & Daphne Yuan (2012) used the CrunchBase dataset to predict investor behavior
using social network features and a supervised learning approach. They modelled the investment
behavior through a classic link problem as they compare every pair of Investor and Company to
predict if the Investor will invest in a Company based on how similar or different in terms of
their social relationship. As of May 2012, their dataset comprised 89’370 companies and 28’108
investment rounds. Using Decision Trees as their learning algorithm, they achieved a TPR (True
Positive Rate) of 87.53% with an AUC (Area Under Curve) of 0.77%. Although not directly
predicting acquisitions their study still signals successful companies (Liang & Daphne Yuan,
2012)

Using the same dataset but with a focus on start-up acquisition and investments from venture
capital, Xiang et al. (2012), predicts company acquisition combining both the structured data
from CrunchBase database and the application of text-mining on scrapped news from the
website TechCrunch. Their model’s TPR ranges between 60% and 79.8% for different
company’s category using Bayesian Network (BN) as their machine learning algorithm. FPR
(False Positive Rate) ranging between 0 and 8.3% over categories with less missing values in
the CrunchBase corpus. Their result is much better than the previously state-of-art article, Wei
et al. (2009), who achieved a precision rate of 42.9% and 46.4%. Also, their final dataset
consisted on 59 631 observations and with more than 6 000 acquisitions, this study far exceeded
the 2 394 cases analyzed by Wei et al. (2012). Additionally, they proved that their text-mining
component improves overall results.

Except for studies using CrunchBase database, most have small and specific datasets for the
task at hands, and although achieving promising results, the nature of the data limits expansions
on their work. Also, most works tend to focus on managerial features which doesn’t tell the full
scope of a company’s status or potential to be acquired. Studies using CrunchBase database also
do not take full potential of the data available opting for not creating several features related
with the impact of venture capital such as number of investors, rounds of investment, amount
raised among many others..

12
Authors Title Yea ML Results Baseli
r ne
Ragothaman, S., Naik, Predicting 200 discriminant 81.3% nan
B., & Ramakrishnan, corpora 3 analysis for acquired
K. te acquisitions: An a companies;
application of uncertain nd rule 65.6%
reasoning using rule induction for
induction n
on-
acquired
companies
Ravisankar, P., Ravi, Detection of financial 201 Probabilistic 98% nan
V., Raghava Rao, G., statement fraud and 1 Neural T
& Bose, I. feature selection using Network rue
data mining techniques. Positive
Rate
-
fraudulent
companies
Wei, C. P., Jiang, Y. S., Patent analysis 200 Naive Bayes ~ nan
& Yang, C. S. for 9 45
supporting merger and %
acquisition Precis
(M ion
&A) prediction: A data Rate
mining approach.
Liang & Daphne Yuan Investors are Social 201 Decision Trees 87% Partly
Animals: Predicting 2 True
Investor Behavior using Positive
Social Network Features Rate
via Supervised Learning

Xiang et al. A Supervised Approach to 201 Bayes 69.4% X

Predict Company 2 ian (average)
Acquisition with Factual Netw True
and Topic Features Using ork Positive
Profiles and News Rate
Articles
on
TechCrunch

13
CHAPTER 3
3. Design

The design phase transforms the project requirements into a blueprint for the system
architecture, ensuring the smooth development of all components. This phase focuses on
structuring the software, identifying key modules, assessing potential risks, and defining
the technological stack required for implementation.

3.1 Software Requirements Specification (SRS)

The Software Requirements Specification (SRS) is a comprehensive document that

describes the expected behavior and functionalities of the system. The SRS for the Startup
Profit Prediction System outlines the following major modules:

 User Authentication Module: Allows users to create accounts and securely log
in to the system.
 Data Input Module: Collects startup-specific data like expenditure on various
operational categories, location, and industry type.
 Profit Prediction Module: Uses machine learning algorithms to analyze input
data and forecast expected profits.
 Government Schemes Recommendation Module: Matches startups with
government schemes based on their profiles.
 Results Visualization Module: Displays profit predictions, recommended
schemes, and analytical charts to the user.

The system is designed to be developed using Python for machine learning tasks, Flask
or Django for backend services, and HTML/CSS/JavaScript for the frontend interface.
The database (such as MySQL or MongoDB) stores user data, input records, prediction
results, and government scheme information.

14
3.2 Risk Assessment
Risk assessment is a crucial part of the design phase, as it identifies potential challenges
that may arise during the development and deployment of the system. Some of the key
risks involved in this project include:

 Data Availability and Quality: A significant risk is ob taining clean, accurate,

and sufficient historical startup data for training machine learning models. Poor
data quality can lead to inaccurate predictions.
 Government Scheme Updates: Government policies and schemes change
frequently, so keeping the database of schemes up-to-date is essential to maintain
the relevance of the recommendations.
 Model Accuracy: Machine learning models may not always deliver high- accuracy
predictions due to the unpredictable nature of startups. Continuous model training
and validation are necessary.
 User Privacy and Data Security: Since the system handles sensitive financial
data, ensuring data encryption and compliance with data protection regulations is
critical.
 Scalability Issues: As the number of users grows, the system must handle increased
loads without compromising performance.

15
CHAPTER 4
4. System Modeling
System modeling is a crucial part of the software development process that helps in visually
representing the structure, behavior, and flow of the system. By creating system models,
developers, stakeholders, and users gain a clear understanding of how the system will
function, what components are involved, and how they interact with each other. For the
Startup Profit Prediction System, system modeling involves the use of UML (Unified
Modeling Language) diagrams to illustrate the architecture and processes, along with a
well-defined database design to efficiently manage and store the necessary data.

4.1 UML Diagrams

UML diagrams provide a graphical representation of the system, making it easier to

understand the interactions between users and the system components. For this project, the
following key UML diagrams are considered:

 Use Case Diagram: This diagram identifies the different users (such as startup
founders and administrators) and shows their interactions with various features of
the system, including login, data entry, profit prediction, and government scheme
recommendations.

16
Fig 4.1.1 . Use case diagram

17
 Class Diagram: The class diagram displays the major entities of the system like
User, StartupData, PredictionModel, and GovernmentScheme, along with their
attributes and methods. It helps in understanding the structure and relationships
between different classes.

18
 Sequence Diagram: This diagram illustrates the step-by-step process of how the
system handles a profit prediction request, starting from data input, passing through
the machine learning model, and finally presenting the prediction and suitable
schemes to the user.

19
 Activity Diagram: The activity diagram visualizes the workflow of the system,
such as the sequence of actions involved in submitting startup details, performing
predictions, fetching relevant schemes, and showing the final output.

20
These UML diagrams help in breaking down complex processes into simple,
understandable flows, allowing the development team to design a more organized and
efficient system.

4.2 Database Design

A robust database design is essential for storing and managing the large amount of data
required for this system. The database must handle user information, startup data,
prediction results, and government scheme details efficiently. For the Startup Profit
Prediction System, a relational database like MySQL or PostgreSQL can be used to
organize the data into structured tables.

Key Database Tables:

 Users Table: Stores user credentials, personal details, and access roles.
o Fields: UserID, Name, Email, Password, Role, RegistrationDate.
 StartupData Table: Contains the financial and operational details submitted by
the startup for profit prediction.
o Fields: StartupID, UserID, IndustryType, Location, R&D_Spend,
Marketing_Spend, Administrative_Spend, SubmissionDate.
 Predictions Table: Saves the profit prediction results generated by the machine
learning model.
o Fields: PredictionID, StartupID, PredictedProfit, PredictionDate.
 GovernmentSchemes Table: Holds information about various government
schemes relevant to startups.
o Fields: SchemeID, SchemeName, IndustryType, Region, Description,
EligibilityCriteria, LastUpdatedDate.
 SchemeRecommendations Table: Logs the recommended schemes for each
startup after the prediction process.
o Fields: RecommendationID, StartupID, SchemeID, RecommendationDate.

The database is designed to ensure data integrity, efficient querying, and secure storage.
Relationships between tables, such as foreign keys connecting startups to users

21
and predictions to startups, help maintain consistency and ensure that all records are linked
properly. Additionally, indexing and optimization techniques are applied to handle large
volumes of data as more startups use the system over time.

22
CHAPTER 5
5. Coding
The coding phase is one of the most crucial parts of the Startup Profit Prediction System.
In this phase, the theoretical design and model are transformed into an executable product.
Coding involves the development of the machine learning model for profit prediction, the
integration of government schemes, and the creation of a web interface where users can
enter their startup details and view the results. The system has been built with a
combination of machine learning algorithms, frontend development for the user interface,
and backend development for processing and prediction. Proper coding standards, the right
hardware, and efficient tools have been used to ensure smooth operation and high
performance.

5.1 Hardware Specification

The hardware used for developing and testing the Startup Profit Prediction System is a
standard computer system capable of handling machine learning operations, data
processing, and web application hosting. The system requires the following hardware
specifications for optimal performance:

 Processor: Intel Core i5 or higher (or AMD equivalent), with a clock speed of at
least 2.4 GHz to support multiple parallel processes.
 RAM: Minimum of 8 GB for smooth data handling and model training, with 16
GB preferred for handling larger datasets.
 Storage: 256 GB SSD (Solid State Drive) or higher, to ensure faster data retrieval,
loading times, and software execution.
 Graphics: Integrated GPU is sufficient for basic tasks, though dedicated graphics
(such as NVIDIA or AMD GPUs) can accelerate certain machine learning
operations.
 Internet Connection: A stable connection is required for downloading datasets,
libraries, and deploying the web application on cloud platforms.

23
5.2 Additional Hardware Components Used

For this software-based project, there is no significant requirement for external hardware
components. However, depending on deployment and scalability needs, the following
optional hardware can be considered:

 External Hard Drives: For backups of datasets, trained models, and large files.
 Cloud Servers: Services like AWS, Google Cloud, or Microsoft Azure can be used
to host the web application, store large amounts of data securely, and provide
greater computing power.
 High-Performance Computing (HPC): In the case of extremely large datasets or
real-time prediction demands, cloud-based HPC resources can be utilized for faster
processing.

5.3 Platform

The project is built on widely used, reliable platforms that support easy development,
testing, and deployment of machine learning-based web applications. The primary
platforms used are:

 Operating System: Windows 10/11 is used for development, though the application
is compatible with Linux-based operating systems such as Ubuntu during server
deployment.
 Development Environment: Visual Studio Code (VS Code) is the main Integrated
Development Environment (IDE) used for writing and debugging code.
 Database Platform: MySQL is used to store user details, prediction records, and
information about government schemes.

24
  Deployment Platforms: Cloud platforms such as Heroku, DigitalOcean, or AWS
may be used for deploying the web application to ensure it is accessible to end users
online.

5.4 Programming Languages Used

A variety of programming languages are used to ensure proper functionality and an

interactive user experience:

 Python: The primary language used for backend development and machine
learning. Python is widely used in data science due to its powerful libraries and
simplicity.
 HTML (HyperText Markup Language): Used to build the structure of the web
pages, allowing users to interact with the system.
 CSS (Cascading Style Sheets): Provides styling and design to the web interface,
ensuring that the system is visually appealing.
 JavaScript: Adds interactivity and dynamic features to the frontend, making the
website responsive.
 SQL (Structured Query Language): Used for managing the relational database,
storing user inputs, predictions, and scheme details.

5.5 Software Tools Used

Several tools and libraries were employed to ensure the system's success by simplifying
development and streamlining workflows:

 Python Libraries:
o Pandas and NumPy for data handling and manipulation.
o Scikit-learn for machine learning model creation and evaluation.
o Matplotlib and Seaborn for data visualization.

25
  Web Framework:
o Flask, a lightweight Python web framework, is used to connect the
machine learning backend with the frontend interface.
 Database Tools:
o MySQL Workbench for database design, management, and querying.
 IDE:
o Visual Studio Code (VS Code) for writing, testing, and debugging code.
 Version Control:
o Git and GitHub to manage code versions and collaborate efficiently.
 API Testing Tools:
o Postman to test the REST APIs that connect the frontend with backend
logic.
 Design Tools:
o Optional tools like Figma or Canva can be used for prototyping and
designing the user interface.
 Deployment Tools:
o Heroku CLI, Docker, or GitHub Actions (optional) for automating
deployment and containerization.

5.6 Coding Style Followed

Maintaining a high-quality, clean, and organized codebase is essential for the success of
any software project. The following coding practices and guidelines were followed during
the development of this system:

 PEP 8 Compliance: All Python code follows the PEP 8 guidelines, ensuring
consistency in formatting, naming conventions, indentation, and overall readability.
 Modular Coding: The project is broken into multiple modules, each handling
specific tasks such as data preprocessing, machine learning, database operations,
and user interface rendering.

26
  Descriptive Naming: Variables, functions, and classes are named meaningfully to
make the code self-explanatory.
 Code Documentation: Each function and class is accompanied by appropriate
docstrings and comments to explain its purpose and usage.
 Error Handling: Comprehensive error handling is implemented using try-except
blocks to ensure the system can manage invalid inputs and unexpected behaviors
gracefully.
 Version Control: Regular commits are made with clear commit messages, and
branching strategies are used to manage features and fixes efficiently.
 Security Practices: Security measures like password hashing, input validation, and
SQL injection prevention are incorporated to protect user data and system integrity.
 Reusable Components: Functions and classes are designed to be reusable and
adaptable for future extensions or changes in the system.

5.7 Pridiction Function

def predict_startup_profit(r_d_expenses, administration_expenses,
marketing_expenses, state):
r_d_expenses = float(r_d_expenses)
administration_expenses = float(administration_expenses)
marketing_expenses = float(marketing_expenses)

if r_d_expenses < 0 or administration_expenses < 0 or

marketing_expenses < 0:
return "Invalid input: expenses cannot be negative"

if r_d_expenses == 0 and administration_expenses == 0 and

marketing_expenses == 0:
return {
'r_d_expenses': r_d_expenses,
'administration_expenses': administration_expenses,
'marketing_expenses': marketing_expenses,
'predicted_profit': 0
}

with open('models/startup_profit_prediction_lr_model.pkl', 'rb') as f:

model = pickle.load(f)

with open("models/columns.json", "r") as f:

data_columns = json.load(f)['data_columns']

# Find the index corresponding to the state feature

27
try:
state_index = data_columns.index('state_' + str(state).lower())
except ValueError:
state_index = -1

x = np.zeros(len(data_columns))
x[0] = r_d_expenses
x[1] = administration_expenses
x[2] = marketing_expenses
if state_index >= 0:
x[state_index] = 1

predicted_profit = round(model.predict([x])[0], 2)

return {
'r_d_expenses': r_d_expenses,
'administration_expenses': administration_expenses,
'marketing_expenses': marketing_expenses,
'predicted_profit': predicted_profit
}

28
CHAPTER 6
6. Testing
Testing is a vital phase of the software development life cycle that ensures the developed
system meets its functional and non-functional requirements while also identifying any
defects or bugs. For the Startup Profit Prediction System, thorough testing was performed
to verify that the machine learning model provides accurate predictions and that the overall
system operates smoothly from data input to result generation. Testing also ensures the
seamless integration of government schemes, user interface functionality, and backend
processing. Various testing strategies, including unit testing, integration testing, and system
testing, were applied to ensure reliability and efficiency. Additionally, formal reviews were
conducted to validate the technical soundness of the project before deployment.

Types of Testing Applied

1. Unit Testing

Unit testing was conducted to ensure that individual components of the system function
correctly. This included:

 Testing data preprocessing modules.

 Evaluating the accuracy of the machine learning model.
 Verifying database interactions for data insertion and retrieval.

2. Integration Testing

Integration testing was performed to check whether different modules of the system
communicate seamlessly. Key areas of focus included:

 The connection between the frontend interface and the backend APIs.
 The proper functioning of the profit prediction model when integrated with user
input data.
 Database operations, ensuring data consistency and integrity.

3. System Testing

System testing was conducted to evaluate the complete workflow of the Startup Profit
Prediction System. This included:

 Running test cases to validate the overall performance.

 Simulating real-world startup data to analyze system response.
 Identifying any unexpected behavior in the system's output.

29
 4. Performance Testing

Performance testing was carried out to assess how the system behaves under various
conditions. This included:

 Testing the system’s response time with different data loads.

 Evaluating resource utilization during peak operation.
 Identifying potential bottlenecks affecting scalability.

5. Security Testing

Security testing was an essential part of the quality assurance process, focusing on:

 Ensuring that user authentication mechanisms were implemented correctly.

 Checking for vulnerabilities such as SQL injection and data breaches.
 Validating data encryption and protection of sensitive startup information.

Testing Outcomes and Improvements

After rigorous testing, several improvements were made to enhance the system’s
efficiency and reliability:

 Model Optimization: The profit prediction model was fine-tuned to improve

accuracy.
 Bug Fixes: Detected defects were addressed to ensure smooth operation.
 Enhanced User Experience: The UI was refined based on test feedback for
better usability.
 Security Reinforcement: Additional measures were implemented to strengthen
data protection.

6.1 Formal Technical Reviews

Formal Technical Reviews (FTR) are an essential quality assurance activity designed to
detect errors in design, logic, and coding at an early stage. In this project, regular FTRs
were conducted by the development team and faculty guides to assess each phase of the
system. These reviews played a crucial role in identifying and resolving potential issues
before the final deployment, ensuring that the system met both technical and user
expectations.

30
Key Aspects of Formal Technical Reviews:

1. Requirement Verification

Ensuring that all functional and non-functional requirements were properly implemented
was a primary focus of the reviews. This included:

 Confirming that the machine learning model effectively predicted startup

profitability.
 Validating the integration of government schemes based on user input.
 Ensuring that user authentication and data security protocols were in place.
 Reviewing compliance with industry best practices and applicable regulations.

2. Design Validation

A systematic review of system architecture, database design, and software structure was
conducted to validate:

 The modularity and scalability of the system design.

 The correctness and efficiency of UML diagrams, including class diagrams,
sequence diagrams, and data flow diagrams.
 The feasibility of integrating additional features in future system updates.

3. Code Reviews

Regular peer reviews of the codebase were conducted to uphold coding standards and
ensure:

 Adherence to clean coding principles, modular programming, and best practices.

 Proper error handling and debugging mechanisms.
 Optimization of machine learning algorithms for performance efficiency.
 Elimination of redundant or inefficient code snippets.

4. Model Accuracy Assessment

To verify the reliability of the profit prediction model, evaluations were conducted using:

 Key performance metrics such as accuracy, precision, recall, and F1-score.

 A/B testing of different machine learning algorithms to compare prediction
effectiveness.
 Testing against real-world startup financial data to validate model performance.
 Continuous refinement of the model based on feedback and performance
evaluation.

Phases of Review and Their Outcomes

31
 Phase 1: Initial Design Review

 Focused on validating the system requirements and feasibility.

 Identified potential design flaws and areas requiring improvement.
 Recommended optimizations in database schema and data flow models.

Phase 2: Mid-Development Code Review

 Evaluated implemented modules for logical consistency and maintainability.

 Ensured adherence to programming standards and optimized data handling.
 Detected and resolved early-stage bugs in data processing and UI components.

Phase 3: Pre-Testing System Review

 Conducted a holistic review of the system’s functionality before testing.

 Addressed performance bottlenecks and improved computational efficiency.
 Validated seamless integration between frontend, backend, and the machine
learning model.

Phase 4: Post-Testing Review & Refinement

 Analyzed test results to identify critical areas for improvement.

 Reviewed security measures to protect sensitive user data.
 Assessed system responsiveness under varying workloads.
 Ensured alignment with usability guidelines to enhance user experience.

Benefits of Formal Technical Reviews in This Project

1. Early Bug Detection: Issues were identified and resolved at early stages,
reducing rework efforts.

2. Improved Code Quality: Peer reviews ensured adherence to best coding

practices, improving maintainability.

3. Enhanced System Reliability: Comprehensive reviews ensured that the system

performed accurately and efficiently in diverse scenarios.

4. Optimized Performance: The machine learning model and system architecture

were refined through systematic evaluations.

32
 5. Better User Experience: Usability improvements and interface enhancements
were recommended through formal assessments.

6. Scalability and Future Enhancement Readiness: The reviews provided insights

into potential future upgrades and integrations.

6.2 Test Plan

The test plan is a systematic approach to validating the complete functionality of the
system. The test plan for the Startup Profit Prediction System outlines the objectives,
scope, approach, and types of testing to be performed. The main objectives of the test
plan include verifying:

 The correct functioning of the machine learning model under various startup data
inputs.
 Accurate fetching and display of government schemes relevant to the user's input.
 Reliable data handling through the frontend, backend, and database.
 Secure and user-friendly interaction on the web platform.

Scope of Testing:

 Validation of input forms.

 Backend processing of startup details.
 Machine learning model predictions.
 Database insertion and retrieval of data.
 User interface navigation and display.

Types of Testing Applied:

1. Unit Testing: To check individual components such as data preprocessing,

prediction functions, and database connections.
o Start Date: 1/11/2024
o End Date: 10/11/2024
2. Integration Testing: To ensure modules like the frontend, backend, and database
work together seamlessly.
o Start Date: 11/11/2024
o End Date: 20/11/2025

33
 3. System Testing: To evaluate the entire system's workflow from input to
prediction output.
o Start Date: 21/11/2024
o End Date: 28/11/2024
4. Performance Testing: To check the system's behavior under load and with large
datasets.
o Start Date: 30/11/2024
o End Date: 10/1/2025
5. Security Testing: To verify that user inputs are validated and stored securely
without exposing sensitive information.
o Start Date: 11/1/2025
o End Date: 15/1/2025

Detailed Testing Strategy:

1. Functional Testing:

Functional testing will focus on ensuring that each feature of the system works as
expected. Test cases will include:

 Input validation for various types of startup details.

 Model accuracy testing with different financial and market scenarios.
 Ensuring that government schemes are correctly retrieved and displayed based on
user input.

2. Usability Testing:

Usability testing will evaluate the system’s interface for ease of use and accessibility.
This includes:

 Testing navigation flow to ensure an intuitive user experience.

 Checking that feedback messages guide users effectively.
 Ensuring responsiveness across different devices and browsers.

3. Load and Stress Testing:

To test how the system performs under heavy usage, scenarios such as:

 Concurrent user requests.

 Processing large datasets.
 Handling multiple model predictions simultaneously.

4. Security Testing:

Security testing is critical to ensure data protection. Key tests include:

 SQL injection and cross-site scripting (XSS) prevention.

 Data encryption verification for sensitive user inputs.
 Authentication and authorization checks.

34
Expected Outcomes:

 The system should process startup data and generate accurate profit predictions
with minimal latency.
 Government schemes should be correctly fetched and displayed for relevant
startup categories.
 The user interface should be intuitive, with smooth navigation and error handling.
 The backend should efficiently process data, ensuring secure interactions between
the database and the application.
 The system should handle concurrent user requests effectively without
performance degradation.

Future Enhancements in Testing:

As the system evolves, additional testing methodologies can be integrated, such as:

 AI-driven test automation for continuous testing and validation.

 Real-time monitoring tools to assess system performance dynamically.
 Extended dataset validation to include a wider variety of startup profiles.

6.3 Test Cases and Test Results

To validate the system, multiple test cases were designed covering various inputs,
functionalities, and expected outputs. Each test case was executed to ensure the system
responded correctly. Below are a few sample test cases and their outcomes:

Test Test Description Input Expected Actual Status

Case Output Output
ID
TC_01 Validate startup Empty startup Display error Error message Pass
name field name message displayed
TC_02 Validate numerical Alphabetical Display Validation Pass
input in investment input in validation error
amount amount field Error displayed
TC_03 Predict profit for Valid financial Display profit Profit Pass
valid input data prediction predicted
accurately

35
TC_04 Fetch applicable Sector = Display list of Correct Pass
government Agriculture schemes schemes
Schemes displayed
TC_05 Check database Valid form Data saved Data saved Pass
entry after form data successfully and verified
submission
TC_06 Test reset button Filled form, All fields Fields reset Pass
Functionality click reset cleared successfully
TC_07 Verify sector Select sector Sector selected Sector saved Pass
selection from and saved correctly
dropdown dropdown
TC_08 Handle large Large Processed Handled Pass
financial data numerical without crash successfully
inputs values
TC_09 Verify accurate Standard input High accuracy Prediction Pass
model prediction dataset prediction within
acceptable
range
TC_10 Check invalid Email = Show invalid Error Pass
email format in "abc.com" email error displayed
contact field
TC_11 Test login Valid Redirect to Dashboard Pass
Authentication credentials dashboard loaded
TC_12 Test login with Wrong Show login Error message Pass
invalid credentials password failed message displayed
TC_13 Test profit Investment = 0 Show warning Warning Pass
prediction for zero or low profit message
investment alert displayed
TC_14 Test file upload Upload invalid Show file Correct error Pass
validation (if file format format error message
applicable) displayed
TC_15 Test government Location = Display state- Correct Pass

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 scheme filter by Maharashtra specific schemes
location schemes shown
TC_16 Check API API call for Response Response Pass
response time prediction within 2 time
Seconds acceptable
TC_17 Validate special Input = Display Warning Pass
characters in "@#Startup" invalid displayed
startup name character
Warning
TC_18 Test multiple users Two users No data Handled Pass
accessing the logged in conflict, successfully
system smooth
Simultaneously performance
TC_19 Verify logout Click on Redirect to Logout Pass
Functionality logout login page successful
TC_20 Check historical Request Display Data retrieved Pass
data retrieval previous historical successfully
startup entries startup data

Test Results Summary:

 All major functionalities were tested successfully.

 The machine learning model provided accurate and reliable predictions within an
acceptable range.
 Government schemes were accurately retrieved and displayed based on startup
criteria.
 The system handled incorrect inputs gracefully by displaying relevant error
messages.
 No critical bugs were identified during final testing, and minor issues were
resolved during the development phase.

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CHAPTER 7
7. Conclusion
The Startup Profit Prediction System represents a significant advancement in leveraging
Machine Learning to support entrepreneurs, investors, and policymakers in making data-
driven decisions. By integrating financial forecasting with predictive analytics, the system
provides an efficient and reliable means of evaluating the potential profitability of startup
ventures. This innovation not only reduces the complexities associated with traditional
profit analysis but also enhances the overall decision-making process by offering precise,
data-backed insights.

One of the most valuable contributions of this system is its ability to minimize human
errors in financial forecasting. Conventional methods of profit prediction often rely on
subjective assessments, historical trends, and manual calculations, which can be prone to
inaccuracies. By automating the process using sophisticated Machine Learning algorithms,
this system ensures greater precision, consistency, and objectivity in predicting startup
success. The ability to handle large volumes of structured and unstructured data further
enhances its accuracy, making it a dependable tool for entrepreneurs seeking informed
financial planning.

Moreover, the integration of government schemes within the system adds an additional
layer of value by providing startups with insights into available financial support, grants,
tax incentives, and policy benefits. This feature empowers businesses to align their
strategies with government initiatives, thereby maximizing their chances of receiving
assistance that can facilitate growth and sustainability. As a result, startups can capitalize
on these benefits while minimizing risks and financial burdens.

From an investor’s perspective, the Startup Profit Prediction System serves as a powerful
analytical tool to assess potential investment opportunities. By leveraging real-time
financial indicators and industry trends, investors can make well-informed decisions
regarding resource allocation, risk assessment, and portfolio diversification. This system
enhances transparency in investment strategies and mitigates uncertainties associated with
startup funding.

38
Additionally, the interactive user interface and data validation mechanisms incorporated
into the system contribute to a seamless and efficient user experience. Entrepreneurs and
investors can easily input relevant business details and receive actionable insights within
minutes, streamlining the entire decision-making process. The system’s ability to validate
inputs, detect inconsistencies, and ensure data security further strengthens its reliability and
credibility.

The scalability and modularity of this system provide opportunities for future
enhancements. As technology continues to evolve, the integration of more advanced
Machine Learning algorithms, real-time data sources, and enhanced predictive models can
further refine the system’s accuracy and usability. For instance, incorporating deep learning
techniques and natural language processing could enhance the system’s ability to analyze
textual data, such as market reports, consumer feedback, and competitor analysis.
Additionally, real-time market updates can be integrated to keep predictions aligned with
dynamic industry trends.

Furthermore, expanding the system to cater to diverse industries and international markets
can increase its applicability. The global startup ecosystem is vast, with unique challenges
and opportunities in different regions. By incorporating localized economic factors,
currency fluctuations, and region-specific regulations, the system can provide more
tailored insights for startups operating in different geographies.

In conclusion, the Startup Profit Prediction System is a transformative tool that has the
potential to reshape how startups and investors approach financial forecasting and decision-
making. By harnessing the power of Machine Learning, this system provides a structured,
data-driven approach to evaluating startup viability and profitability. Its integration of
government schemes, user-friendly interface, and scalability make it a valuable asset for
entrepreneurs, investors, and policymakers alike. Moving forward, continued research and
development in this domain will further enhance the system’s capabilities, making it an
indispensable resource for the evolving startup landscape. As the startup ecosystem
becomes increasingly competitive, tools like this will play a crucial role in ensuring
smarter, more strategic decision-making and ultimately contributing to the success
of innovative ventures worldwide.

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CHAPTER 8

8. Bibliography

1. Chandola, V., Banerjee, A., & Kumar, V. (2009). Anomaly detection:

A survey. ACM Computing Surveys (CSUR), 41(3), 1–58.
o Discusses data anomalies, which can affect startup profit predictions.

2. Hyndman, R. J., & Athanasopoulos, G. (2018). Forecasting: Principles

and Practice. OTexts.
o Covers time-series forecasting, which can be useful in predicting startup
profits.

3. Bishop, C. M. (2006). Pattern Recognition and Machine Learning. Springer.

o A foundational book on machine learning techniques relevant for
prediction models.

4. Friedman, J., Hastie, T., & Tibshirani, R. (2001). The Elements of

Statistical Learning. Springer.
o Explores regression techniques used in financial forecasting.

5. Zhou, X., Pan, S. J., & Wang, Z. (2020). Machine learning for financial
modeling: A survey. IEEE Transactions on Knowledge and Data Engineering.
o Reviews machine learning applications in financial predictions, including
startup profitability.

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6. Altman, E. I. (1968). Financial Ratios, Discriminant Analysis, and the
Prediction of Corporate Bankruptcy. The Journal of Finance, 23(4), 589–609.
o Early work on financial prediction models that can be adapted to startups.

7. Kohavi, R., & Provost, F. (1998). Glossary of terms. Machine Learning,

30(2-3), 271–274.
o Defines key ML concepts related to predictive modeling.

8. Hoffman, D. L., & Fodor, M. (2010). Can you measure the ROI of your
social media marketing? MIT Sloan Management Review, 52(1), 41.
o Discusses how social media data can impact startup profitability
predictions.

9. Geurts, P., Ernst, D., & Wehenkel, L. (2006). Extremely randomized

trees. Machine Learning, 63(1), 3–42.
o Discusses tree-based models, often used for financial prediction.

10. Kingma, D. P., & Ba, J. (2014). Adam: A method for stochastic
optimization. arXiv preprint arXiv:141

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