**Abstract**

Innovation and technology-based startups are crucial for converting knowledge into wealth and boosting economic development. Many countries are investing heavily in science, high technology, and innovation to strengthen their national innovation capacities. In Mongolia, there has been a recent increase in capacity-building initiatives and programs for startups. However, investment-related issues remain unsolved and significantly hinder the further growth of these businesses. This study aims to provide an overview of the present condition of startup businesses in Mongolia and the challenges they face. Secondary data is used to analyze the limited funding opportunities and the traditional methods used in fundraising that prevent businesses from growing. The major challenges faced by these businesses include recruiting new employees, fundraising, attracting customers and increasing sales, developing teams, developing new products and services, and penetrating the international market. To overcome these challenges, there is a need to create a legal environment that supports startup economic development and enhances the enforcement of the Law of Innovation through developing sound policy instruments. This chapter concludes by highlighting the need for sustainable funding sources for startups and the importance of establishing a supportive legal environment to ensure the smooth implementation of policies that promote startup growth in Mongolia.

**Keywords:** sup business, startup funding, types of startup business investment, case of Mongolia, investment sources
