TECHNOLOGY-BASED SMEs SMEs whose products or services depend largely on the application of scientific or technological knowledge. Or SMEs whose activities embrace a significant technology component as a major source of competitive advantage. Tech-based SMEs are the growth drivers of the economy
1.Uniquely positioned as pioneers, strong entry barrier
2.Require substantial capital exceeding the internally generated cash flows.
3.Have long gestation period
4.Growth requires customer adoption, scalability through systems and process standardization.
5.Growth potential linked to value/ difficult to apprise viz. scientific knowledge and intellectual property.
6.Requirement of highly skilled, professional manpower
Risk Types in Tech based SMEs
Lack of collateralizable assets , intangible assets with a high proportion of human capital, which is difficult to retain and prone to moral hazard. Other assets may be highly specific.
Focus as certain set of technologies and processes that are interested in market.
Acceptance/Development of customer market ,focus on small/niche market segment raises vulnerability concerns.
Long gestation period raises period for which funding is needed.
Operations subject to stringent process controls.
FINANCIAL TECH-BASED SMEs
Specific financing needs and risks in different phases of SME life cycle.