Knowledge-based capital is progressively becoming a significant source of economic growth worldwide. The asset structure of some of the major companies, globally, reveals that knowledge assets are becoming more valuable than physical assets in today’s world. India’s knowledge economy continues its steady progress, supported by increasing Intellectual Property Rights (IPR) awareness at the grassroots level. As innovation-driven startups are scaling up, they require increased access to capital and market to monetize their IPRs for business development and thus to create maximum social impact. The present study has noted that startups in India face difficulties in raising the necessary capital for their growth due to insufficiency of tangible assets for collateral purpose. Though certain commercial banks are supporting startups, it is done mainly through venture capital route (equity financing). Debt financing of IPRs is an untapped market in India, though SARFAESI Act (2002) has clearly defined knowledge capital as assets. Financial market imperfection in India is leading to suboptimal investments in knowledge capital. Improper valuation mechanism is a major constraint restricting financial institutions from providing debt finance support to IPR-based companies. The provision of debt finance to knowledge-based startups will bring a win-win situation for banks, startups and economy. A well-defined institutional mechanism for bringing out transparency and reliability through the introduction of disclosure requirements or measures to foster clarity in patent claims would go a long way in securitizing IPRs in India. Securitization of IPRs would boost market confidence and acceptance of IPRs as collaterals. Government support to the development of IPR market in the form of valuation, securitization and risk-sharing are necessary to support the capital-starved knowledge-based startups.