Ent Mgmt Q&A

8/13/2019 Ent Mgmt Q&A

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Definition of

a. Entrepreneurship

Enterprise: Place where with joint efforts of land, labour, capital and management production is

undertaken for commercial gain or profit.

Entrepreneur: The word has French origin and it means risk bearer, organizer and innovator. Richard Cantillonwas the first person to coin this French word in the 18 thcentury. He

defined them as agents who buys factors of production at certain prices and combinesthem into a product with a view of selling it at an uncertain price in future.

The term entrepreneur is often interchanged with entrepreneurship yet they are conceptuallydifferent. The relationship between the two are just like the two sides of the same coin.

What is entrepreneurship? Doing new things or doing things that are already being done in a new way is the simple

definition of entrepreneurship. The idea of new products and services often originate from unexpected quarters. The

entrepreneurs are quick the possibilities for achievement or in other wordsentrepreneurs are the first ones to embark on innovative ideas.

b. Qualities of Entrepreneur

(http://ezinearticles.com/?Essential-Qualities-Of-An-Entrepreneur&id=398886)

Qualities of a Successful Entrepreneur:

Entrepreneurs are persevering, are lovers of challenges, are action oriented and are

quick to learn, and adopt techniques to perform better as well as improve their business.

They are independent extroverts who have the ability to lead people, manage them

effectively, and steer their business toward its success. They are intelligent and able to

utilize their skills, time, resources, and energy effectively. They set reasonable, realistic

goals and determine the ways to achieve the goals without fuss, have good

communication skills as well as the ability to judge people and trust them accordingly.

They have business acumen even without attending any business school and have the

right instinct to make the right decision at the right time. They have the ability to makemaximum use of the available resources and do not fear failure and are able to solve

problems and seek solutions to existing problems easily.

Some Other Traits of Entrepreneurs:

Leadership:An entrepreneur is a natural leader with the vision and the drive to

do things right and steer his company toward success with ease.
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Confidence: He has to be self-confident, confident in his plans as he has

carefully researched them and has mastered the skills necessary to implement

them carefully.

Energetic: They have amazing capacity for hard work and are energetic,

motivating those that come in contact with them on account of their drive and

determination.

Creative And Innovative: This will be an essential criterion to design and sell

products that are interesting which offer several benefits and have a competitive

edge, making sure they capture the target market on launch without much

difficulty.

Organized: Entrepreneurs have to be highly organized and systematic, making it

possible to achieve things in a much shorter time. The ability to deliver anything

that has been promised on time and the ability to stick to schedules are

necessary for a person to be a successful entrepreneur.

Have Trouble Being Subordinates: They usually are strong-willed and have

trouble working under someone else. Highly Competitive: They are very competitive and will strive offer better

services and products than the competition.

Will Not Hesitate To Take Risks: Risks are part of any business, and a

successful entrepreneur will have the knack of taking calculated risks that will

only benefit the business.

Will Not Hesitate To Seek Help When Necessary: They will hire necessary

staff to help them in areas where they are not very confident.

These are some of the traits of entrepreneurs, which can be used as a checklist to

determine if someone has the capability to be an entrepreneur. If you do start your own

business, be sure to use the services as well as products offered by some firms to help

new entrepreneurs like you succeed.

Characteristics and attributes essential for a successful entrepreneur:1) Risk taking2) Innovator3) Organiser4) Hard working5) Independence of thoughts and action6) Ability to perceive or spot opportunities and threats7) Realistic approach to planning8) High level of motivation9) Self confident with positive self image10) Good business acumen, foresight and vision11) Excellent leadership qualities12) Managerial competence13) Problem solving attitude14) Flexibility and adaptability


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d. Social Entrepreneur

e. Women Entrepreneur

Weakness of Women Entrepreneurs / Problem of Women Entrepreneurs

Women lack certain skills that limit their abilities as entrepreneurs. There are two sets ofproblems namelygeneral problems and problems specific to women entrepreneurs.

1) Emotional in business decisionsbecome emotional while taking decisions, cannot beruthless enough which may be required while taking business decisions.

2) Lack of exposure(early in life, shielded from decisions/unpleasantness, etc)3) Lack of assertiveness women lack assertiveness and this hinders their ability to

market and sell new ideas. This leads to failures. The cultures prevailing in our country the women from childhood are brought up to be submissive and hence they do notexhibit assertive characteristics.

4) Limited understanding on legal issues5) Male dominated society

6) Women have limited mobility compared to men7) Problem with finance(Eg when women approach a bank, they do not lend that freely,

women are not seen at par with men entrepreneurs by the banks)

Woman En trepreneur Dohad

But the Indian women entrepreneurs are facing some major constraints like

a) Lack of confidence In general, women lack confidence in their strength and competence.

The family members and the society are reluctant to stand beside their entrepreneurial growth.To a certain extent, this situation is changing among Indian women and yet to face a

tremendous change to increase the rate of growth in entrepreneurship.

b) Socio-cultural barriers Womens family and personal obligations are sometimes a great

barrier for succeeding in business career. Only few women are able to manage both home and

business efficiently, devoting enough time to perform all their responsibilities in priority.

c) Market-oriented risks Stiff competition in the market and lack of mobility of women make

the dependence of women entrepreneurs on middleman indispensable. Many business women

find it difficult to capture the market and make their products popular. They are not fully aware

of the changing market conditions and hence can effectively utilize the services of media and

internet.


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d) Motivational factors Self motivation can be realized through a mind set for a successful

business, attitude to take up risk and behavior towards the business society by shouldering the

social responsibilities. Other factors are family support, Government policies, financial

assistance from public and private institutions and also the environment suitable for women to

establish business units.

e) Knowledge in Business Administration Women must be educated and trained constantly

to acquire the skills and knowledge in all the functional areas of business management. This

can facilitate women to excel in decision making process and develop a good business

network.

f) Awareness about the financial assistanceVarious institutions in the financial sector extend

their maximum support in the form of incentives, loans, schemes etc. Even then every woman

entrepreneur may not be aware of all the assistance provided by the institutions. So the

sincere efforts taken towards women entrepreneurs may not reach the entrepreneurs in rural

and backward areas.

g) Exposed to the training programs - Training programs and workshops for every type of

entrepreneur is available through the social and welfare associations, based on duration, skill

and the purpose of the training program. Such programs are really useful to new, rural andyoung entrepreneurs who want to set up a small and medium scale unit on their own.

h) Identifying the available resourcesWomen are hesitant to find out the access to cater their

needs in the financial and marketing areas. In spite of the mushrooming growth of

associations, institutions, and the schemes from the government side, women are not

enterprising and dynamic to optimize the resources in the form of reserves, assets mankind or

business volunteers.

Highly educated, technically sound and professionally qualified women should be encouraged

for managing their own business, rather than dependent on wage employment outlets. The

unexplored talents of young women can be identified, trained and used for various types of

industries to increase the productivity in the industrial sector. A desirable environment is

necessary for every woman to inculcate entrepreneurial values and involve greatly in business
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dealings. The additional business opportunities that are recently approaching for women

entrepreneurs are:

Eco-friendly technology, Bio-technology, IT enabled enterprises, Event Management, Tourism

industry, Telecommunication, Plastic materials, Vermiculture, Mineral water, Sericulture,

Floriculture, Herbal & health care, Food, fruits & vegetable processing

Empowering women entrepreneurs is essential for achieving the goals of sustainable

development and the bottlenecks hindering their growth must be eradicated to entitle full

participation in the business. Apart from training programs, Newsletters,mentoring, trade fairs

and exhibitions also can be a source for entrepreneurial development. As a result, the desired

outcomes of the business are quickly achieved and more of remunerative business

opportunities are found. Henceforth, promoting entrepreneurship among women is certainly a

short-cut to rapid economic growth and development. Let us try to eliminate all forms of gender

discrimination and thus allow women to be an entrepreneur at par with men.

f. Techno-preneur

Technopreneur is come from 2 words Technologhy and Entrepreneur. It means a business

that using technology as their business model.This term only use by Asian countries especially

Malaysia and Singapore.

The difference is that technopreneurship is either involved in delivering an innovative hi-tech

product (e.g. Intel) or makes use of hi-tech in an innovative way to deliver its product to the

consumer (e.g. eBay), or both (e.g. most pharmaceutical companies).

What is Technopreneurship?

It is the process and formation of a new business that involves technology. Technopreneurs

use technological innovations and translate such technology into successful produces orservices.

Starting a Technopreneurial Venture:

Before you start a technological business, you need to assess your understanding of the

business as well as your readiness and ability to manage the proposed venture.

It is important to possess the following:a. Some previous work experience or skills appropriate to your business.
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b. Knowledge of your products/service and the market for it.c. Understanding of the relationship between product knowledge of technologicalgoods and the disciplines of marketing, production, finance and administration.

g. Opportunity based Entrepreneurship

Apparently, it can be said that the starting point of entrepreneurship would define its type. Thetwo types of entrepreneurship may be classified as:

1. Opportunity-based entrepreneurship- an entrepreneur perceives a business opportunity andchooses to pursue this as an active career choice.

2. Necessity-based entrepreneurship- an entrepreneur is left with no other viable option to earna living. It is not the choice but compulsion, which makes him/her, choose entrepreneurship asa career.

Opportunity-based entrepreneurship involves those who choose to start their own business by

taking advantage of an entrepreneurial opportunity. Necessity-based entrepreneurshipinvolves people who start a business because other employment options are either absent orunsatisfactory.

The opportunity entrepreneurs are more prevalent in high-income countries (such as France,the United Kingdom and the United States), while necessity entrepreneurs are more commonin the low-income countries (such as Hungary and Poland). Accordingly, it may be argued thatin developed countries opportunity entrepreneurship is linked to economic growth, while inmost developing countries necessity entrepreneurship exists because of low growth. It may bethat because richer countries are characterized by a more developed labor market or access tostronger safety nets (social welfare), there is a lower need for starting up a business and that

therefore these countries exhibit lower necessity based entrepreneurial activity rates

Opportunity entrepreneurs are influenced by pull factors to start a business, while necessityentrepreneurs are affected by push factors

2) Differences & similarities between Entrepreneurs and Managers

Differences:

Entrepreneur Manager

1. Will perceive an opportunity, assemble ateam, locate resources for his newbusiness idea, raise the needed capital andstart the business

Comes in only after the foundation hasbeen laid and the business established.What this mean in essence is; withoutentrepreneurs, the managers will have nobusiness to manage

2. More concerned with the launching andsustainabilityof a business in the face ofuncertainty

More concerned with the effective andefficient operationof an ongoing business

3. Managers are business management Entrepreneurs are generalist. Product


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specialist. development and design, law, mktg, raisingfinance, etc

4. Entrepreneurs are street smarts. They learneverything by trial and error, they learn fromtheir own mistakes and the mistakes ofothers.

Managers are school smarts. They aremainly degree holders, MBAs to be precise.Managers go to school to becomeprofessionals

5. Freedom is their utmost priority - to do whatthey want, to live the kind of life they love.

Security is their utmost priority - steadypaycheck, bonus and entitlements.

6. An entrepreneur owns the business A manager owns a job. A manager is paidto run the entrepreneurs business

7. Reward - capital gain, asset acquisition,cash flow, dividends and excessive cash

Reward - salaries, pay offs, promotion, jobtitle, bonus and incentives

8. Entrepreneurs thrive on risk anduncertainty.

Managers detest risk. They simply avoid it

9. Entrepreneurs learn more from mistakes Managers avoid mistakes because it willcost them their job. They are being paid toavoid mistakes.

10. Entrepreneurs come together to poolresources or network, they form a team. When managers who are usuallyemployees come together, they form aunion

11. Entrepreneurs are committed to thebusiness from its launching till they achievetheir goal. The time frame may be 5 15years.

Managers are committed till the nextpaycheck. Their time frame is usually 25 30 years.

Parameter Entrepreneur Company executive / manager

Risk bearingBeing the owner of enterpriseassumes all the risk anduncertainty involved in running

the enterprise

Being servant of a company doesnot bear any risk involved in the

enterprise

RewardReward for bearing the risk

involved is the profit generated

Gets salary as reward for hisservices. The salary of executive

is certain and fixed

Status He is the owner of the enterpriseHe is the servant of the enterprise

owned by the entrepreneur

Motive

To start the venture by settingup the enterprise. Entrepreneur

understands the venture forpersonal gratification

To render his services in anenterprise already setup by the

entrepreneur

Innovation

Entrepreneurs themselves thinkover on how to produce goods

to meet the changing demand ofthe customers. They act as

innovators or change agents.

He is just to simply execute theplans prepared by the owner ofthe company i.e. to translate theentrepreneurs idea into practice

QualificationNeeds to possess qualities andqualifications like risk bearing,organizing, vision, foresight,

Needs academic qualifications inaddition to sound knowledge in

management theory and


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3) Intrapreneurship

Intrapreneurship is development of entrepreneurs within a large corporation to produce newproducts, new markets, new technology by employing the enterprise resources in a uniqueway. Intrapreneurship gives professional managers of the corporation the freedom to takeinitiatives and try out new ideas hence is it entrepreneurship within an existing business. Bigcompanies and corporations recognize that individuals can make major contributions withoutbecoming entrepreneur or by investing in the company financially. Intrapreneurship hasbrought major transformation in developed countries of the world. E.g. DuPont, 3M, Xerox, GE,

Apple Computers. Indian corporate like Ranbaxy, Dr. Reddys, Mahindra and Mahindra, ArvindMills, TCS, Godrej, Infosys encourage intrapreneurship. Intrapreneuship is therefore corporateentrepreneurship.

Advantages of intrapreneurship:An intrapreneur is a person focusing on innovation and creativity. He transforms a dream r anidea into a profit venture by operating within the organizational environment. The entrepreneurdoes the same outside the organizational setting.

1) Intrapreneurs ideasoften help to build or improve the corporate business.2) Capital for ideas is easy to come from internal sources within the corporate identity.3) The established corporate image helps to boost the chances of success of an

intrapreneurship idea.4) Intrapreneurship activies make the organization technology to stay competitive.5) Intrapreneurs get the boost as corporate offer unique advantages of multidisciplinary

teamwork. The intrapreneur retains the job security and also enjoys freedom andprosperity.

Profile / Characteristics of an intrapreneur:1) Vision:

Intrapreneurs possess the ability to visualize the steps form idea generation toactualization (commercialization). They ride to the discovery of successful ventures onthe strength of their vision.

2) Motivation:Intrapreneurs want freedom. They are self motivated but respond to corporate rewardsand recognition. Money is not the only incentive for their efforts but the measure of theirsuccess.

3) Business skills:Intrapreneurs understand the business intimately. They have technology or marketingbackground and in the role of intrapreneurship, they take the responsibility of allaspects of business.

4) Action Oriented:All intrapreneurs are action-oriented.

5) Risk:They are moderate risk-takers. They dislike uncontrolled risk and avoid as far aspossible. Because of self-confidence, they are willing to accept that risk which dependsdirectly on their skill. They are sensitive to the needs to appear orderly in theorganization. They risk their career and reputation if they fail in their mission.

6) Status:


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Intrapreneurs do mundane jobs that is a part of every new project. Instead of delegationthey often do things by themselves. (Eg: they will do every little things themselves likeapplying stamps, going to post office etc, because they want to be 100% assured; theydo not like delegation).

Comparison between entrepreneurs and intrapreneurs:

Parameter Entrepreneurs Intrapreneurs

Primary Motives They want freedom. They aregoal-oriented, self-reliant andself-motivated.

They have access corporateresources they are proactive

Risk Preference Entrepreneurs accept higherrisk, has money and is notworried about reputation atleast in the initial stages.

Intrapreneurs acceptmoderate risk. They put theircareers, job and reputation onthe line of fire.

Attitude to Status Entrepreneurs are willing toaccept long periods of lowstatus.

Intrapreneurs considerscorporate symbols (Eg:designation VP, CEO, MD,etc)

Decision Entrepreneurs, they make theirown decisions and are notwilling to compromise. (Notworried about what others sayor think about him)

Intrapreneurs need to getothers to share their vision.They are willing to acceptcompromise. (he needs topull people towards and alongwith him)

Resources It is acquired and assembledfrom the market or families ofthe entrepreneurs.

Intrapreneurs utilizes theresources available within theorganization.

Attitudes towardbureaucracy

Entrepreneurs may have donewell in the system but has leftthe organization to start hisown individual enterprise.

Intrapreneurs dislikes thesystem but has learnt to dealwith and later on startsmanipulating it.

Failures andmistakes

Entrepreneurs learn frommistakes but have to pay forthe errors committed. All theerrors are visible and public.

Intrapreneurs are sensitive tocorporate attitudes. Oftenattempts to hide errors. Theylearn from their mistakes.

Skill andexperience

For both of them it is same For both of them it is same

Intrapreneurship is the practice of entrepreneurship by employees within an organization.

An intrapreneur is an individual employed by an organization for remuneration, which is based

on the financial success of the unit he is responsible for. Intrapreneurs share the same traits as

entrepreneurs such as conviction, zeal and insight. As the intrapreneur continues to expresses

his ideas vigorously, it will reveal the gap between the philosophy of the organization and the


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employee. If the organization supports him in pursuing his ideas, he succeeds. If not, he is

likely to leave the organization and set up his own business.

Features of Intrapreneurship:

An intrapreneur thinks like an entrepreneur looking out for opportunities, which profit the

organization. Intrapreneurship is a novel way of making organizations more profitable where

imaginative employees entertain entrepreneurial thoughts. It is in the interest of an

organization to encourage intrapreneurs. Intrapreneurship is a significant method for

companies to reinvent themselves and improve performance.

Another important factor that led to the choice between entrepreneurship and intrapreneurship

was age. The study found that people who launched their own companies were in their 30s

and 40s. People from older and younger age groups were risk averse or felt they have no

opportunities, which makes them the ideal candidates if an organization is on the lookout for

employees with new ideas that can be pursued.

Entrepreneurship appeals to people who possess natural traits that find start ups arousing theirinterest. Intrapreneurs appear to be those who generally would not like to get entangled in start

ups but are tempted to do so for a number of reasons. Managers would do well to take

employees who do not appear entrepreneurial but can turn out to be good intrapreneurial

choices.

4) Indian family Business

5) Cross-cultural trends in Entrepreneurship

An entrepreneur would like to set up in another country because of Push factor or pull factor.Eg: Africa higher margins, here margins lower hence would want to set up a plant in

Africa; similar in case of a region where sales registered will be significantly higher; attracted tobusiness opportunities seen therePull Factor

Push Factorforced to go international / global. If I dont go outside the country, my businesswill get killed. //

The concept of international or global entrepreneurship

Global entrepreneurship is a process in which the entrepreneur conducts business activitiesacross national boundaries. This activity of identifying and satisfying the needs and wants oftarget customers in more than one country is called global entrepreneurship.

Entrepreneurs willing to expand their business globally are motivated by two factors

1. Pull Factor they are motivated to internationalise their business because of theattractiveness of the foreign market (proactive factors)


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2. Push Factor the push factors are reactive reasons for going global because ofcompulsion and rigidity in the domestic market.

Entrepreneurs decide to go global for the following reasons.1. To expand sale (top line)2. Profit advantage (bottom line)3. Domestic market constraints4. Minimize competitive risk (Eg: saturated markets, too much competitions, etc)5. Government policies and regulation6. Spin-off benefits7. it may be a strategic mission of the companythe stimulus for globalization comes from

the urge to grow, the need to become competitive, the need to diversify and finally togain strategic advantage of globalization.

The factors entrepreneurs should consider before going global

Political & Legal Environment1. Stability of the country / government

2. Fear of military invasion (Eg: Uganda where Idli Amin took over)3. Existing laws for contract4. Taxation Rate5. Favoured Trading Partners (MFNMost Favoured Nation)6. Wages, Legislation & Employment Rulesminimum wages, etc7. Intellectual Property Rights8. Industrial Safety Regulation9. Product Labelling Requirementseg: labelling products for calories contained

Technological Environment1. Impact of technology on product offeringa new technology can make your products

obsolete2. Impact on cost structureEg: watches from China sold at Rs 50 each but bought at Rs.

10 / kg3. Impact on value chain

Social Environment1. DemographicsAge, etc2. Education3. Culture4. Attitude & Leisure interests

Economic Environment1. Type of economic system in operation2. Government interventionlevel of interference3. Advantages of business to the host country4. Exchange Rate and stability of currency5. Efficiency of financial market - liquidity, ability to sell and move out6. Economic growth rate7. Inflation rate


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6) Various steps involved in Business Idea development

Opportunity is a business concept. Which when turned into a tangible product or service by theenterprise results into profits. Opportunity assessment is a continuous process of gatheringdata, reviewing the proposition and reformulating the business concept.

Sources of New Ideas

The frequently used sources of ideas are

1. Employees2. Dissatisfied customers - he can be a source for new products. People who are in the

habit of expecting more and complain will be a source for new ideas.3. Improvements in existing products and services4. Distribution channels5. R&D of the company, they also make new technology6. Government of the company the laws and regulations stated by the country,

government protects certain ideas which are then called patents.

Methods of Generating Ideas

Several methods are used by entrepreneurs to generate and test ideas:1. Focus Groupa moderator leads a group of individuals (8,10,12,14) through an open,

in-depth discussion rather than simply asking questions to understand responses in astructured format.It leads to conceptualising and developing a new product idea to fulfil a market need.Besides generating ideas, the focus group is an excellent method for screening ideas

and concepts.2. Brainstormingnormally conducted in far away location to avoid distractions like phone

calls, etc. the brainstorming method allows a group to be stimulated to greater creativityby meeting and participating in organised group experiences focussing on parameters.

3. Reverse brainstormingthe process usually involves identification of everything wrongof an idea (focussing only on the negative) followed by discussion of the ways toovercome these expected troubles.

4. Brain writingbrain writing is a form of written brainstorming.The method 6-3-5 is very popular. 6 persons, 3 ideas, 5 minutes. Can be done by emailor on internet and need not be physically present, saving airfare and is convenient.

5. Problem Inventory Analysis //it is very similar to dissatisfied customer. The problems

are listed (inventory of problems) and you try to solve the problem from which you getnew ideas.// A method for obtaining new ideas and solutions by focussing on theproblems encountered.

The Product Selection

A product is capable of satisfying the needs and wants of customers. Every products renderssome service.


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How does one select the right product?

It involves research, careful evaluation and sound judgement.

This activity is called product selection analysis technique and consists of te following eightwell defined steps:

1. Idea Generation(Already described in introduction)The following parameters should however be kept in mind.

a. understanding the changing needs and expectations of the customer.b. Visualising the emerging trends in society.c. Good understanding of the economy.

//(new products can be found in magazines, trade fairs, discussions with people,interacting with trade/distribution channels, power of observation, exhibitions, retailers, readingbooks, journals, newspapers, publications of research organisations)//

2. Idea ScreeningThe following exploratory questions should be asked:

a. Are the customers satisfied with what they are getting presently?b. Can we identify a better alternative?c. Can the basic design be changed?d. Is it agreeable with the companys objective, strategies and resources of the

company?

//this is an elimination round to cut out ideas//

3. Idea Evaluation (Concept development & testing)

//Comparing the pros and cons/ positives and negatives of the ideas left after ideascreening//

The product evaluation is done objectively on the following factors:

a. Stabilityb. Growth factorc. Marketabilityd. Company positione. Production facilities

a. Stabilityi. Permanence of Marketthe demand for that product will always be there for

a significant period of time (10-15 years)ii. Breadth of Marketiii. Difficult to copydifficult to copy by othersiv. Stability in recessionsimilar situation as to what exists just now when there

is a greater demand for white goods


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b. Growth Factori. DemandSupply Relationshipii. Export possibilitiescausing increasing in sales

c. Marketabilityi. Ease of distributionii. Freedom of seasonal fluctuationiii. Minimum after sales service requirement

d. Company Position / Enterprise Factorsi. to get establishedgestation periodii. availability of raw materialsiii. availability of skilled labouriv. transportation facilities

4. Marketing Strategy Developmenti. to find a cost effective and affordable marketing strategy

//Fredrick Smithair cargopassenger aircraft - space5. Preliminary Business Analysis

a. estimating total salesb. estimating total profitc. estimating total market growth

6. Product Development

The product till now existed as a word description, drawing or prototype. In this step the

product idea is translated into a technically and commercially feasible product inside the

enterprise.

7. Test Marketing and Formal Business Planning

Controlled Test Marketing

Test markets

a. How many cities for test marketing (2,4,6,8; minimum 2) ?b. Which cities? (Select cities like Baroda, Indore, Pune where it is easy to get the

feedback)c. Length of test / How long is the test? (No of weeks, months, quarters)

d. What information (usage, attitude, satisfaction is to be gathered) ?e. What action needs to be taken?Formal Business Planning

a. Controlling the product in the introductory Stageb. Using critical path method (CPM)c. Program evaluation and review technique (PERT)

8. Commercialisation

1. WhenTiming is critical


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a. first entry (first mover advantage)b. parallel entry (coinciding with competition)c. late entry (Saves cost of educating customers, rectifying mistakes and faults

of the first mover and parallel entry)2. Where (geographical locationsingle, multiple, national, international)

3. To whom (target / potential customers identified)

4. How (marketing strategy adopted for the purpose)

7) Business plan

The business plan is often criticised (perhaps this is supposed to read described instead of

criticised, but he stuck to his guns on the basis that every plan or idea need not result in profit

or a successful company) as the dreams of glory of an entrepreneur. The business plan helps

to maintain a perspective for the entrepreneurs on what needs to be accomplished.

Potential investors are not likely to consider investing in the new venture until the businessplan is completed.

What is a business plan?

The business plan is a written document prepared by the entrepreneur describing all relevant

external and internal elements involved in starting or running a business activity.

The business plan is an integration of the functional plans such as the marketing plan, finance

plan, manufacturing plan, human resources plan, etc.

Business plan addresses both, the long term and short term decision making for at least thefirst 3 years of operation.

The business plan is also called as the road map or game plan. In the business plan or road

map the following questions need to be answered correctly:

a. Where am I now?b. Where am I going?c. How will I get there?

Why you need a business plan?

An entrepreneur needs a business plan for the following reasons

a. for starting a new businessb. diversification, expansion of his existing businessc. buying another businessd. for getting government grants and other incentives from government financial bodies

Who prepares the business plan?


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A. Production process / technologyB. Physical plantC. Machinery & EquipmentD. Raw Materials (& their suppliers)

VI. Operational PlanA. Description of the companys operationB. Flow of orders for goods and servicesC. Technology utilisation (paperless office, electronic communication)

VII. Marketing PlanA. PricingB. DistributionC. PromotionD. Product ForecastsE. Controls (Eg: Inventory control, promotion control)

VIII. Organisational PlanA. Form of ownership (Pvt Ltd, Public Ltd., Partnership, Under guarantee /

no shareholding eg: BCCI)B. Identification of partners / principal shareholders

C. Authority of the principalsD. Management team backgroundE. Roles and responsibilities of members of the organisation

IX. Assessment of RiskA. Evaluate weakness of the businessB. New technology making others obsoleteC. Contingency plan

X. Financial PlanA. Capital cost

1. Long Term2. Short Term

B. Income StatementC. Cash Flow ProjectionD. Break Even AnalysisE. Sources & application of funds

XI. Benefits of business to community (Not Compulsory)A. Employment generationB. Import substitution (thereby saving foreign exchange)C. AncillarisationD. Environmental protection

XII. Appendix (Not Compulsory)Contain back-up material

A. Market Research DataB. Contracts & leases entered by the companyC. price list from suppliersD. letters and documents received from government and other bodies

Business planning is about results. You need to make the contents of your plan match your

purpose. Dont accept a standard outline just because its there.


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This section is very important as it provides a summary explaining why the plan will succeed.

You could have a good marketing plan, an excellent management team, sufficient capital and

a strong product, but what makes all the things you have to offer different. You need a unique

selling point or points for your plan. What do you have that will make it succeed?

These factors could be very different, for example:

Strong initial advertising

The ability to offer low prices

Quality of service

A product or products with their own unique selling points

Pre-agreed channels and volumes

Capacity to innovate or modify products quickly

Exclusive distribution channels

All businesses, from fruit shops to car manufacturers, cafes to banks have their own success

factors and in many cases there is only one factor that creates this success. For a hairdresser

it could be the quality and price, or just the quality; for easyJet it is the price; for Rolls Royce

the quality and status; for a builder a specialist area of expertise. The secret is to identify these

points and then to highlight them.

TIPS

Write only the important points

Get to the point and be brief, each sentence is important. If a sentence does not hold

important information, delete it.

Success factors in business

(http://www.the-success-factor.com/success_factors_business.htm)

Success factor Have a Business Plan

A successful Business Plan will consist of

market trends

financial planning

competitive analysis

exit strategies

marketing and promotional options

everything about your goal.

Success factor - Plan your plan
http://www.the-success-factor.com/success_factors_business.htmhttp://www.the-success-factor.com/success_factors_business.htmhttp://www.the-success-factor.com/success_factors_business.htmhttp://www.the-success-factor.com/success_factors_business.htm


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You should construct a plan to include goal, milestones, deliverables such as contracts,

business plans, etc., and accomplishments. This will provide you with a visual as to what you

are working for, what milestones you have successfully met, and where you need to do better.

Being successful also means keeping to a schedule. In addition, you need to learn how much

is too much. Good time and resource management will help you ensure that you use your time

wisely and that you are not adding third portions onto a plate still overflowing with seconds.

Success factor - Know your Customers

You should know, really know, your customers, especially your top ten. Find out what they like

and dislike. What other products or services would be of value to them?

These very relationships are what will keep your business going. It is crucial to consider your

customers desires all of the time.

Success factor - The Right Marketing

When you get ready to start marketing your business or idea, never rely on one method of

marketing. It is important to look at several options since nothing will last forever.

Success factor - Timing is Everything

You have probably heard it before timing is everything. Especially when it comes to opening a

business, there is a right and a wrong time to start a business.

This would be extremely important if your business has cycles or is seasonal. For example, if

you are starting a business to do landscaping, the winter months when snow is on the ground

is not the right time.You can be working toward your Business Plan, marketing ideas, finding investors, if required,

etc., during those cold months, but you certainly would not want to open your doors for the first

time in the heart of winter.

Success factor - Plan your Costs

Unbelievably, there are thousands of entrepreneurs that start a business without the foggiest

idea of what their costs are going to be. Either there is an estimation that is way overstated or

understated.

From the very beginning, you need to have a strong handle on knowing what you will need to

get your business started and keep it running. Additionally, you need to have projections for

your future success. Know your numbers and make sure they are accurate.

Success factor - Conduct Research

It is important to know what you are getting into.


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First, you will want to conduct research as far as the business, industry, or interest

associated with your particular success.

Second, the research will help you stay up to date on trends, which may or may not

require you to make adjustments in your own goal.

For example, if you were interested in opening a particular business focusing on a specific

technology and that technology took a turn to another direction, new advancements, you may

need to change the direction you were going for your own business.

Unless you kept up on research, you would not know when a change was needed and

therefore, would end up building a business already headed for failure.

Success factor - Keep it Lean

Start-up businesses do not have room for dead weight. As an example, when first starting out,

if you need some assistance, rather then hiring a permanent employee that will involve salary,

insurance, other benefits, etc., consider a temporary employee until the business grows.

Keep improving the bottom line before you start adding on more expenses to your business.

Success factor - Get the Word Out

If your success is focused on a business, when you get ready to open your doors, make sure

you get the message out.

This will include marketing promotions, advertising, sending out a press release. There are

many marketing opportunities available and to make your marketing spend a success, ensure

your marketing is aligned with your target market.The more people know about your business, the better chance of you have of reaching

success.

Success factor - Customer Relations

Keep your line of communication open with your customers.

If your customers have a problem, show them the deserved respect and resolve the issue

quickly. Make occasional phone calls to see if they have any needs.

This will let your customers know that you are there for them and care about their business.This relationship is what is going to keep you on the road to success.

After all, the customer is your link between failure and success.

Success factor - Watch for Scams

Whether you are just starting out or expanding an existing business, unfortunately, there are

thousands of people waiting to defraud you out of money.


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If something appears too good to be true IT IS! Always conduct thorough research and never

jump into opportunities that look perfect.

If someone becomes pushy, wanting you to make a quick decision on any type of investment,

do not walk away RUN away!

Success factor - Offer a Guarantee

If you have created a business that offers either products or services, in order to get and keep

customers coming back, they have to know that you stand behind what you offer.

Providing a guarantee will help your business grow and reach the highest level of success.

9) Why do some business plan fails

According to the Small Business Administration, two-thirds of new businesses survive for at

least two years, and only 44 percent survive at least four years. Why some businesses fail and

why some succeed is a matter of debate, although there are some common mistakes that can

sink a business in no time.

A. Marketing AspectMarketing helps the product selling and money flowing into the business. Hence, it is acrucial operation for the company.

1. Ignoring Competition is a strategy that will enable competitors to swallow upyour company, your strategy should enable you to sustain the environment with acompetitive edge

2. Ineffective Customer Service3. Failing to validate your customers4. Lack of internal marketing (employees themselves)

B. Financial AspectFinance is the life blood of any business and its management effectively is the most

important factor for success. Poor financials can lead to disasters ultimately proceeding to

the closure of business. The most important factors in the financial aspect are:

1. Lack of foresightleads toa. Unfavourable gearing and leveragesb. Inappropriate diversion of capitalc. Over tradingd. Improper tax planning

2. Cash Flow Problemit is essential to track the money coming into and going outof your business. Even a profitable venture can fail if it runs short of cash.The entrepreneur must learn to make cash flow projections that will help indeciding how much more money can be spent and also provide a warning intimes of trouble.

3. Personnel Aspectproblems encountered are:

a) Lack of cohesion

b) Inability to cope up with fast changes in business environment


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c) ineffective management and feedback

4. Technology Aspect: the problems encountered are:

a) technology becoming obsolete

b) lack of awareness

c) quality standards

d) lack of sufficient networking

e) benchmarking

5. Planning Aspect: An organisation can fail if the planning is not correct:

a) unrealistic and non-precise targets or goals

b) no strict deadlines

c) lack of re-evaluation when reaching a milestone

d) no systematic and step-by-step formulation of plans

6. Personal aspects of the entrepreneur: business can also fail due to improper handling of thepersonal issues

a) mixing personal and professional issues

b) close-mindedness

procrastination

Give your new business venture a fighting chance by taking care to avoid these fatal errors:Overexpansion. Wanting to be the first to market with a new product, taking on addedoverhead, and the need to demonstrate revenue growth to anxious investors can all inducebusinesses to overextend themselves financially. Rather than head down this path, start withrealistic goals and allow yourself to grow as needs dictate. Let your revenue, not pie-in-the-skyprojections, dictate your hiring practices.Poor capital structure.Look at the businesses that fail and you'll find that many of them tookon too much debt. Learn to pay strict attention to your finances and keep careful records of allmoney coming in and going out. Even if everything's coming up roses today, trouble can stillbe right around the corner.Overspending.Many startups spend their seed money before cash has begun to flow in at apositive rate. This often happens because of misconception about how business operates. Ifyou're just starting out in business, seek out seasoned veterans you can bounce your ideas offof prior to making big financial commitments.Lack of reserve funds. Failing to prepare for volatile markets and uncontrollable costs likeenergy-rate increases, materials, labor, natural disasters, and the like is another top reasonmany businesses fail. Make sure you protect your investment and keep enough reserve cashto carry you through market downtrends and seasonal slowness.Bad business location. Don't let a cheap lease tempt you into opening your doors in thewrong neighborhood if your gut is telling you it's not right. Key factors to consider includecompetition (how many other similar businesses are located nearby?) and accessibility (is thearea well served by freeways, public transportation, and foot traffic?).


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Poor execution and internal controls. Poor customer service, accounting controls, andoverall employee incompetence can all combine to bring down the ship. Make sure you andyour employees place a premium on customer service to generate repeat business, establishprotocols for how tasks should be accomplished, and remain continually in the know on allthings accounting.An inadequate business plan. Your business plan is your blueprint for success. A well-thought-out business plan forces you to think about the future and the challenges you'll face. Italso forces you to consider your financial needs, your marketing and management plans, yourcompetition, and your overall strategy for coming out on top.Failure to change with the times. The only constant in business is change. Once mightybehemoths fall to earth while unknown upstarts rise to prominence. The ability to recognizeopportunities and be flexible enough to adapt to changing times is a key ingredient to survivingand even prospering in the toughest business climate. Therefore, learn how to wear multiplehats and to generate new interests and areas of expertise.Ineffective marketing and self-promotion.Customers can't walk through your front door ifthey don't know you're there. Learn how to cost-effectively advertise and promote yourbusiness through such tried-and-true methods as direct mail, ads in local newspapers, Websites, blogs, even by sponsoring a local little league team. The number of advertising and

promotional ideas that exist is only limited by your own creativity.Underestimating the competition.Consumer loyalty doesn't just happen; you have to earn it.If you don't take care of your customers, your competition will. Watch your competition asclosely as you do your own employees.

Entrepreneurs should avoid following mistakes while planning for their new venture:1. Creating products in a vacuum:

Do not be a product searching for a market. Do the "market research" up front. Test theidea. Talk to potential customers, at least a dozen of them. Find out if anyone wants to buyit. Do this before anything else.

2. Equal partnerships:Suppose you and your new partner split the company 50/50. That seems fine and fair rightnow, but as your personal and professional interests diverge, it is a sure recipe for disaster.Either party's veto power can stall the growth and development of your company. 51/49works much better than 50/50.

3. Low prices:Set your prices as high as your market will bear. Even if you can sell more units andgenerate greater dollar volume at the lower price (which is not always the case) you maynot be better off. Make sure you do all the math before you decide on a low price strategy.Figure all your incremental costs. Figure in the extra stress as well.

4. Not enough capital:Be conservative in all your projections. Make sure you have at leastas much capital as you need to make it through the sales cycle, or until the next plannedround of funding. Or lower your burn rate so that you do.

5. Out of Focus:Concentrating your attention in a limited area leads to better-than-average results, almostalways surpassing the profits generated from diversification. Al Reis, of Positioningfame,wrote a book that covers just this subject. It's called Focus.


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Sales grow slowly at first, but then shoot up boldly with huge growth rates, as soon as'something' happens. Have projections that are conservative so you can defend them.

17. Unrealistic Costs:Prospective small business owners may not be realistic about costs associated with thecash flow plan. Cost estimates, especially build-outs, are usually incomplete, notresearched, not based on at least three estimates, dont allow for contingencies, and often

include too much startup inventory.

18. Vague Pricing:Entrepreneurs may not have a good handle on estimating pricing of their product/service.This affects the break-even sales projections (if they do these at all) and other financialprojections.

19. No Exit Strategy:Too many business plans have no exit strategy. This applies especially when large amountof money has to be borrowed. The financing people want to know what happens to thebusiness if something happens to the owner.

10) Quick-start route to Entrepreneurship

Refer Vijay Ovhals notes

11) Small Scale Industries & their problems

Small Scale Industriesmay sound small but actually plays a very important part in the overall

growth of an economy. Small Scale Industries can be characterized by the unique feature of

labor intensiveness. The total number of people employed in this industry has been calculated

to be near about one crore and ninety lakhs in India, the main proponents of Small scale

industries.

The importance of this industry increases manifold due to the immense employment

generating potential. The countries which are characterized by acute unemployment problem

especially put emphasis on the model of Small Scale Industries. It has been observed that

India along with the countries in the Indian continent have gone long strides in this field.

Adv antages associated w ith Smal l Scale Indu str ies

This industry is especially specialized in the production of consumer commodities.

Small scale industries can be characterized with the special feature of adopting thelabor intensive approach for commodity production. As these industries lack capital, so

they utilize the labor power for the production of goods. The main advantage of such a

process lies in the absorption of the surplus amount of labor in the economy who were

not being absorbed by the large and capital intensive industries. This, in turn, helps the

system in scaling down the extent of unemployment as well as poverty.


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It has been empirically proved all over the world that Small Scale Industriesare adept

in distributing national income in more efficient and equitable manner among the various

participants in the process of good production than their medium or larger counterparts.

Small Scale Industries help the economy in promoting balanced development of

industries across all the regions of the economy.

This industry helps the various sections of the society to hone their skills required for

entrepreneurship.

Small Scale Industries act as an essential medium for the efficient utilization of the skills

as well as resources available locally.

Small Scale Industriesenjoy a lot of help and encouragement from the government through

protecting these industries from the direct competition of the large scale ones, provision of

subsidies in the form of capital, lenient tax structure for this industry and many more.

Difficulties faced by small scale industries in india

The production problems include raw material availability, capacity utilization, and storage

problems.

The marketing problems arises because of dealing in only one product, cut throat

competition, adopting cost oriented method of pricing, lack of advertisement, not

branding their products etc.

The financial problems include investment risks, procurement of loan from banks and

their repayment, meeting day to day expenses and the like.

The labour problems include highly demanding employees, absenteeism lack of skilled

workers and transportation of workers.

Infrastructure problems also add coal to the fire. Unless and until you have the

infrastructure in its place the rest of the efforts are futile.

Personal problems like spending less time with family and for the whole sweat exerted

the rewards have not been favorable.

PROBLEMS OF SMALL SCALE INDUSTRIES

SSI units face a number of problems. A large number of SSI units are sick of weak. It isestimated that about 99% of the total sick/weak units in the country belong to the SSI

sector. The sick or weak position of SSIs is due to the various problems faced by them

The problems faced by SSI units can be broadly divided into four groups as shown inthe following chart:

Production

Problems

Financial

Problems


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I. PRODUCTION PROBLEMS

1. Problem of Raw Materials :SSI units face the problem of raw materials. The problems

may be:

Shortage of raw material :SSI units face the problem of shortage of raw material, and

as such , the production cycle gets affected, which in turn create problems for delivery

of goods in the market.

Poor Quality of Raw Materials :At times, SSI units have to face the problem quality of

raw materials and other inputs. As a result of this , the quality of production getsaffected, which in turn affects sales and revenues

2. Use of Outdated Technology :SSI units use outdates technology. A good number

them purchase second hand machinery . the use outdated technology affects

Quality and quantity of production .

Increase the costs, due to increase in wastage, loss due to breakdowns , high

maintenance of machines etc.

3. Lakh Research & Development :SSI units hardly place emphasis on R & D. Theycontinue to manufacture the same type of goods year after year. There is hardly any

innovation in product features, packaging, and so on . Lack of R & D not only affects

the quality of products, but also the units continue to make goods at higher costs

therefore, in order to improve quality, product features, and to reduce the costs, there is

a need to undertake R & D

4. Problem of Infrastructure:SSI units a number of infrastructural problems especially in

the area of transport and power. The small sector units in the rural and semi-urban areas

face the worst of infrastructural shortage. As a result of poor infrastructure , the overall

sector units gets affected .

5. Poor Quality Control :Some of the SSI units do not place much emphasis on quality

control. As a result of this the quality of product gets affected. This in turn affects good

will of the units. Due to problem of quality the sale of the SSI units do get affected which

in turn may affected their profits, and at times they have face huge losses

Marketing

Problems

Other

Problems


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10. Lack Professionalism in Management :One of the major problems of SSI units is the

lack of professionalism on the part of management. They often lack management and

technical skills. The lack of professionalism is reflected in the following

Dependence on outdated technology

Lack of emphasis on R & D

Improper personnel policies

Emphasis on only profits etc.

11. Adverse Effects of Liberalization and Globalization : Since the post-reform period

SSI units face a tough competition both from cheap imports (due to reduction in

customs duties and removal of quantitative restrictions) and also from within the

country. The Government started the process of dereservation of items reserved for

SSI ( on a large extent ) since 2002. As a result, the reserved for SSI units have come

down to 239 in Jan 2007.

The dereservation intended to improve the overall performance of SSIs. However in

reality a number of SSI units have become weak or sick , and several of them have

closed down their operations after the post-reform period


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12) Gov. concessions and incentives to SSI

The responsibility of development of small scale industries rests with the government of India.

In the pre-liberalised era the small scale industries enjoyed various advantages. However, with

the opening up of the economy, the situation has taken a different turn.

1. Reservation of items for exclusive manufacture in the small scale sector (Open GeneralLicenseOGL, etc)

2. Reservation of items for exclusive purchase from SSI (DGS&D Director GeneralSupplies & Disposal buys for the government, they buy some items only from SSI onbasis of govt directives)

3. Foreign Direct Investment (FDI)SSI sector 24% allowed4. Export Promotion Councilhelp entrepreneurs exhibit products in foreign locations, etc;

to overcome the problems of marketing of the SSI products in the overseas market, theExport Promotion Council helps its members

a. Direct Marketingb. Developing Vendor Relationsc. Opening Sales Outlets in foreign destinations

5. Incentive Schemes for ISO 9000 certificationgovt of India gives incentive to SSI foracquiring ISO 9000 certification to the extent of the cost incurred subject to a max of Rs.75000. This scheme is implemented by small industrial development bank of India(SIDBI) for the government of India which takes care of MSMEs in India.

6. Investment limit in plant & machinery lowered to 100 lakhs.7. Integrated technology upgradation and management programme (Uptech)8. Technology Bureau for Small Enterprises9. Small Enterprise Information & Resource Centre Network (SENET)10. Relaxation under Environmental laws11. Common Effluent Treatment Plants12. Industry related Research institutes CSIR (Council for Scientific and Industrial

Research) has a pool of scientists capable of providing research & developmentsolutions relating to the industry sector.

13. Exemption & Preferential Treatment from excise dut ies (Upto 150 lakhs you dont haveto pay excise duty)

14. Priority in Credit Policynationalised banks have been instructed accordingly15. Initiative for Credit RBI to ensure adequate and timely credit to small scale

entrepreneurs has directed the commercial banks to provide working capitalrequirements to the extent of 20% of the annual sales turnover subject to a limit of 100lakhs.

16. Interest on Delayed Payments Act was enacted in 1993 by the Indian Parliament totackle the problem of settlement of dues from big companies to the SSI units.


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13) Support Organizations

Refer Vijay Ovhals notes

SIDBI (Small Industries Development Bank of India)

Established in April 2,1990

Principal Development Financial Institution for :

-- Promotion

-- Financing and

-- Development of Industries in the small scale sector and

--Co-ordinating the functions of other institutions engaged in similar activities.

SIDBI was established on April 2, 1990. The Charter establishing it, The Small IndustriesDevelopment Bank of India Act, 1989 envisaged SIDBI to be "the principal financial institutionfor the promotion, financing and development of industry in the small scale sector and to co-ordinate the functions of the institutions engaged in the promotion and financing or developingindustry in the small scale sector and for matters connected therewith or incidental thereto.

The business domain of SIDBI consists of small scale industrial units, which contributesignificantly to the national economy in terms of production, employment and exports. Smallscale industries are the industrial units in which the investment in plant and machinery doesnot exceed Rs.10 million . About 3.1 million such units, employing 17.2 million persons accountfor a share of 36 per cent of India's exports and 40 per cent of industrial manufacture. Inaddition, SIDBI's assistance flows to the transport, health care and tourism sectors and also tothe professional and self-employed persons setting up small-sized professional ventures.

Mission

To empower the Micro, Small and Medium Enterprises (MSME) sector with a view tocontributing to the process of economic growth, employment generation and balancedregional development

Vision

To emerge as a single window for meeting the financial and developmental needs of theMSME sector to make it strong, vibrant and globally competitive, to position SIDBIBrand as the preferred and customer - friendly institution and for enhancement of share

- holder wealth and highest corporate values through modern technology platform


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The venture capitalist may be capable of providing additional rounds of funding should it

be required to finance growth.

Venture capital (VC) is a type of private equity capital typically provided for early-stage, high-potential, growth companies in the interest of generating a return through an eventualrealization event such as anIPO ortrade sale of the company. VC investments are generally

made as cash in exchange for shares in the invested company. It is typical for VC investors toidentify and back companies in high technology industries and start ups.

VC typically comes from institutional investors and high net worth individuals and is pooledtogether by dedicated investment firms. VC is also associated with job creation, the knowledgeeconomy and used as a proxy measure of innovation within an economic sector or geography.

A core skill within VC is the ability to identify novel technologies that have the potential togenerate high commercial returns at an early stage. By definition, VCs also take a role inmanaging entrepreneurial companies at an early stage, thus adding skills as well as capital(thereby differentiating VC from buy out PE which typically invest in companies with proven

revenue) and thereby potentially realizing much higher rates of returns.

The distinguishing feature of VC and non-VC investee companies is one of focus. Theprospective VC investee company needs to have a convincing product or line of businesspotential and an accomplished management team. If the company is generating a cash flow,this will likely be an incipient development. In fact, these two aspects product andmanagement team are what the VC investor and his group are ultimately betting on,irrespective of whether the company is generating cash yet or not. Companies with well-established sales and profitability track records generally tend to involve PE financing thatmore appropriately falls into one of the other non-VC categories of PE unless they are takingon a new business venture under their corporate umbrella.

A Venture Capitalist is a person or investment firm that makes venture investments and theseVenture Capitalists are expected to bring managerial and technical expertise as well as capitalto their investments.

VC is most attractive for new companies with limited operating history that are too small toraise capital in the public markets and have not reached the point where they are able tosecure a bank loan or complete a debt offering. In exchange for the high risk that venturecapitalists assume by investing in smaller and less mature companies, venture capitalistsusually get significant control over company decisions, in addition to a significant portion of thecompany's ownership (and consequently value).

Structure of VC Firms

VC firms are typically structured as partnerships, the general partners of which serve as themanagers of the firm and will serve as investment advisors to the VC funds raised. VC firmsmay also be structured as LLC, in which case the firm's managers are known as managingmembers. Investors in venture capital funds are known as limited partners. This comprisesboth high net worth individuals and institutions with large amounts of available capital, such asstate and private pension funds, university financial endowments, foundations, insurancecompanies, andpooled investment vehicles, called fund of funds ormutual funds.
http://en.wikipedia.org/wiki/Private_equityhttp://en.wikipedia.org/wiki/Growth_investinghttp://en.wikipedia.org/wiki/Initial_public_offeringhttp://en.wikipedia.org/wiki/Mergers_and_acquisitionshttp://en.wikipedia.org/wiki/Institutional_investorshttp://en.wikipedia.org/wiki/High_net_worth_individualshttp://en.wikipedia.org/wiki/Loanhttp://en.wikipedia.org/wiki/Debthttp://en.wikipedia.org/wiki/Partnershipshttp://en.wikipedia.org/wiki/General_partnerhttp://en.wikipedia.org/wiki/Limited_liability_companyhttp://en.wikipedia.org/wiki/Limited_partnerhttp://en.wikipedia.org/wiki/Pension_fundhttp://en.wikipedia.org/wiki/Financial_endowmenthttp://en.wikipedia.org/wiki/Insurancehttp://en.wikipedia.org/wiki/Pooled_investmenthttp://en.wikipedia.org/wiki/Mutual_fundshttp://en.wikipedia.org/wiki/Mutual_fundshttp://en.wikipedia.org/wiki/Pooled_investmenthttp://en.wikipedia.org/wiki/Insurancehttp://en.wikipedia.org/wiki/Financial_endowmenthttp://en.wikipedia.org/wiki/Pension_fundhttp://en.wikipedia.org/wiki/Limited_partnerhttp://en.wikipedia.org/wiki/Limited_liability_companyhttp://en.wikipedia.org/wiki/General_partnerhttp://en.wikipedia.org/wiki/Partnershipshttp://en.wikipedia.org/wiki/Debthttp://en.wikipedia.org/wiki/Loanhttp://en.wikipedia.org/wiki/High_net_worth_individualshttp://en.wikipedia.org/wiki/Institutional_investorshttp://en.wikipedia.org/wiki/Mergers_and_acquisitionshttp://en.wikipedia.org/wiki/Initial_public_offeringhttp://en.wikipedia.org/wiki/Growth_investinghttp://en.wikipedia.org/wiki/Private_equity


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Depending on the business type, the VC firm approach will differ. When approaching a VC firmfollowing aspects must be considered:

1. Business Cycle: Do they invest in budding or established businesses?2. Industry: What is their industry focus?3. Investment: Is their typical investment sufficient for your needs?4. Location: Are they regional, national or international?5. Return: What is their expected return on investment?6. Involvement: What is their involvement level?

Targeting specific types of firms will yield the best results when seeking VC financing. It isimportant to note that many VC firms have diverse portfolios with a range of clients. If this isthe case, finding gaps in their portfolio is one strategy that might succeed.

Specialisation by stage

Venture capitalists differentiate themselves not only by sector and geography but also in termsof the point at which they will invest in a start-up. Some VC companies provide first-stage orseed capital. Others wait until the company has been established and is either maki ng salesor generating cash flow. Seed financing is usually in the range of US$0.5m to US$1m. Firststage VC firms tend to be small because larger firms cannot afford the labour-intensive care

required at this stage on relatively small investments. However, feeder funds are a new nichewhereby a large VC firm provides funding for first-stage VC firms in return for the opportunity tomake a later-stage investment if the start-up is successful. Another niche is the turnaround VCfirm, which will, for example, buy out the founder of an insolvent start-up at a fire sale price,usually with an opportunity for the founder to remain with the company in an executive positionas a paid employee. The turnaround VC will then offer the companys creditors a price fo r theirdebt holdings with a significant haircut.


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Roles within VC Firms

Within the VC industry, the general partners and other investment professionals of the VC firmare often referred to as "venture capitalists" or "VCs". Although the titles are not entirelyuniform from firm to firm, other positions at VC firms include:

Venture partners - Venture partners are expected to source potential investmentopportunities ("bring in deals") and typically are compensated only for those deals withwhich they are involved.

Entrepreneur-in-residence(EIR) - EIRs are experts in a particular domain and performdue diligence on potential deals. EIRs are engaged by VC firms temporarily (six to 18months) and are expected to develop and pitch startup ideas to their host firm (althoughneither party is bound to work with each other). Some EIR's move on to executivepositions within a portfolio company.

Principal- This is a mid-level investment professional position, and often considered a"partner-track" position. Principals will have been promoted from a senior associateposition or who have commensurate experience in another field such as investmentbanking ormanagement consulting.

Associate- This is typically the most junior apprentice position within a VC firm. After afew successful years, an associate may move up to the "senior associate" position andpotentially principal and beyond. Associates will often have worked for 1-2 years inanother field such asinvestment banking ormanagement consulting.

Structure of the funds

MostVC funds have a fixed life of 10 years, with the possibility of a few years of extensions toallow for private companies still seeking liquidity. The investing cycle for most funds isgenerally three to five years, after which the focus is managing and making follow-oninvestments in an existing portfolio. In such a fund, the investors have a fixed commitment tothe fund that is initially unfunded and subsequently "called down" by the VC fund over time asthe fund makes its investments.

It can take anywhere from a month or so to several years for venture capitalists to raise moneyfrom limited partners for their fund. At the time when all of the money has been raised, the fundis said to be closed and the 10 year lifetime begins. Some funds have partial closes when onehalf (or some other amount) of the fund has been raised. "Vintage year" generally refers to theyear in which the fund was closed and may serve as a means to stratify VC funds forcomparison.

VC fundin g

Venture capitalists are typically very selective in deciding what to invest in; as arule of thumb,a fund may invest in one in four hundred opportunities presented to it. Funds are mostinterested in ventures with exceptionally high growth potential, as only such opportunities arelikely capable of providing the financial returns and successful exit event within the requiredtimeframe (typically 3-7 years) that venture capitalists expect.
http://en.wikipedia.org/wiki/Due_diligencehttp://en.wikipedia.org/wiki/Investment_bankhttp://en.wikipedia.org/wiki/Investment_bankhttp://en.wikipedia.org/wiki/Management_consultinghttp://en.wikipedia.org/wiki/Investment_bankhttp://en.wikipedia.org/wiki/Management_consultinghttp://en.wikipedia.org/wiki/Private_equity_fundhttp://en.wikipedia.org/wiki/Rule_of_thumbhttp://en.wikipedia.org/wiki/Rule_of_thumbhttp://en.wikipedia.org/wiki/Rule_of_thumbhttp://en.wikipedia.org/wiki/Rule_of_thumbhttp://en.wikipedia.org/wiki/Private_equity_fundhttp://en.wikipedia.org/wiki/Management_consultinghttp://en.wikipedia.org/wiki/Investment_bankhttp://en.wikipedia.org/wiki/Management_consultinghttp://en.wikipedia.org/wiki/Investment_bankhttp://en.wikipedia.org/wiki/Investment_bankhttp://en.wikipedia.org/wiki/Due_diligence


40/40

Because investments are illiquid and require 3-7 years to harvest, venture capitalists areexpected to carry out detailed due diligenceprior to investment. Venture capitalists also areexpected to nurture the companies in which they invest, in order to increase the likelihood ofreaching an IPOstage when valuationsare favourable. Venture capitalists typically assist atfour stages in the company's development:

Idea generation; Start-up; Ramp up;and Exit

There are typically six stages of financing offered in Venture Capital, that roughly correspondto these stages of a company's development.

1. Seed Money: Low level financing needed to prove a new idea (Often provided by "angelinvestors")

2. Start-up: Early stage firms that need funding for expenses associated with marketingand product development

3. First-Round: Early sales and manufacturing funds4. Second-Round: Working capital for early stage companies that are selling product, but

not yet turning a profit5. Third-Round: Also called Mezzanine financing, this is expansion money for a newly

profitable company6. Fourth-Round: Also called bridge financing, 4th round is intended to finance the "going

public" process

The need for high returns makes venture funding an expensive capital source for companies,and most suitable for businesses having large up-front capital requirements which cannot befinanced by cheaper alternatives such as debt. That is most commonly the case for intangible

assets such as software, and other intellectual property, whose value is unproven. In turn thisexplains why VC is most prevalent in the fast-growing technology and life sciences orbiotechnologyfields.

If a company does have the qualities venture capitalists seek including a solid business plan, agood management team, investment and passion from the founders, a good potential to exitthe investment before the end of their funding cycle, and target minimum returns in excess of40% per year, it will find it easier to raise venture capital.

15) Discuss PESTEL factors that make or mar the entrepreneurial climate w.r.t.

contemporary India

Refer Vijay Ovhals Notes
http://en.wikipedia.org/wiki/Illiquidhttp://en.wikipedia.org/wiki/Illiquidhttp://en.wikipedia.org/wiki/Due_diligencehttp://en.wikipedia.org/wiki/Due_diligencehttp://en.wikipedia.org/wiki/IPOhttp://en.wikipedia.org/wiki/IPOhttp://en.wikipedia.org/wiki/Valuation_(finance)http://en.wikipedia.org/wiki/Valuation_(finance)http://en.wikipedia.org/wiki/Business_ideahttp://en.wikipedia.org/wiki/Business_ideahttp://en.wikipedia.org/wiki/Startup_companyhttp://en.wikipedia.org/wiki/Startup_companyhttp://en.wikipedia.org/wiki/Ramp_uphttp://en.wikipedia.org/wiki/Ramp_uphttp://en.wikipedia.org/wiki/Exit_Strategyhttp://en.wikipedia.org/wiki/Angel_investorhttp://en.wikipedia.org/wiki/Angel_investorhttp://en.wikipedia.org/wiki/Angel_investorhttp://en.wikipedia.org/wiki/Angel_investorhttp://en.wikipedia.org/wiki/Mezzanine_financinghttp://en.wikipedia.org/wiki/High-techhttp://en.wikipedia.org/wiki/High-techhttp://en.wikipedia.org/wiki/Life_scienceshttp://en.wikipedia.org/wiki/Life_scienceshttp://en.wikipedia.org/wiki/Biotechnologyhttp://en.wikipedia.org/wiki/Biotechnologyhttp://en.wikipedia.org/wiki/Biotechnologyhttp://en.wikipedia.org/wiki/Life_scienceshttp://en.wikipedia.org/wiki/High-techhttp://en.wikipedia.org/wiki/Mezzanine_financinghttp://en.wikipedia.org/wiki/Angel_investorhttp://en.wikipedia.org/wiki/Angel_investorhttp://en.wikipedia.org/wiki/Exit_Strategyhttp://en.wikipedia.org/wiki/Ramp_uphttp://en.wikipedia.org/wiki/Startup_companyhttp://en.wikipedia.org/wiki/Business_ideahttp://en.wikipedia.org/wiki/Valuation_(finance)http://en.wikipedia.org/wiki/IPOhttp://en.wikipedia.org/wiki/Due_diligencehttp://en.wikipedia.org/wiki/Illiquid

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