Entrepreneurship developmen 21_sep_2010

Entrepreneurship
Development
Dr M S Mamik

Overview

 Entrepreneurship Development
Perspective
 Creating Entrepreneurial Venture
 Project Management
 Entrepreneurship Development and
Government
 Why do Entrepreneur’s fail- Four
Entrepreneurship pitfalls
 Women Entrepreneurs

Entrepreneurship Development
Perspective
 Concept of Entrepreneurship Development
 Evolution of the concept of Entrepruneur.
 Entrepreneur vs Intrapreneur,
 Entrepreneurship, Entrepreneur Vs
Manager
 Attributes and Charactership of a successful
entrepreneur
 Role of Entrepreneur in Indian economy
and developing economies with special
reference to Self Employment
Development.
 Entrepreneurial culture.

Definition(Robert Ronstand)
 Dynamic process of creating incremental wealth
 by individuals who assume the major risk
 in terms of equity, time and /or career
commitment
 or provide value for some product or service,
 which may or may not be new or unique
 but value must be infused by the entrepreneur
 by receiving and locating the necessary skill and
resources

Venture Capital
 Early stage funding is avoided by most
funds apart form ICICI Ventures, SIDBI.
Funding growth or mezzanine funding till
pre IPO stage
 Size of Investment – Upto $10 mn
 Value Addition –Hands on (Draper) or
hands off approach (Chase). Seed and
start up funding sees closer interaction and
advice on strategy
 Concessions on Capital gains tax and
dividends for technology and only for HNIs.
Can invest upto 40% of paid up capital of
invested co and 80 % inequity shares of
unlisted cos.

Tax Concessions -SSI
 Tax Holiday –on profits upto 6% of invested capital for
five years from start (unit not formed by splitting
another exiting unit and employ 10 or more workers
with power and 20 without power.
 Depreciation – on block of assets at prescribed rate on
actual cost of plant and machinery upto a max of Rs
20 lakhs.If working in double or triple shift “Extra Shift
Allowance” is available
 Rehabilitation Allowance in case of natural calamiies
 Expenditure on Scientific Research –revenue or capital
expenditure or amount paid to a university or institution
for research

Tax Concessions

 Amortisation of preliminary expenses
- write off of expense for feasibility
report, engineering expenses, legal
charges in ten annual instalment
 Deduction on Profits upto 20% if in
Backward Areas or Rural Areas for 10
years
 Expenditure on Acquisition of Patents
and Copyrights is deductible form
income

Tax Concessions

Business of Publication of Books – 20%
of profits deductible form gross total
income

Types of Lease Agreements
 Capital lease – for life of an asset
 Operating lease – open end leasing
arrangement but shorter than life of
equipment and can be terminated at option
of lessee with prior notice. Caters for
technology obsolescence
 Sale and Lease back –firm sells to other
party and gets cash and then pay rental for
use
 Leveraged lease – when three parties
involved lessor ,lessee and lender. Lessor
provides an equity investment say 25% and
lenders provide the other 75%

Advantages of Leasing

 Alternate use of funds
 Beneficial for small firms

 Free from restrictive clauses of debt
financing.
 Tax shielding- part of the tax benefit is
passed on the lessee
 India’s requirement for leasing for next
ten years estimated at $18.9 bn.

Hire Purchase

 Agreement in which an owner called
hire vendor gives delivery of goods
to the buyer called hire purchaser who
pays the price in certain number of
instalments.
 Hire vendor retains ownership till last
instalment is paid
 The amount of instalments paid till the
last instalment is treated as hire
charges.
 Right to terminate agreement at any

Support System- Incentives

 Fiscal
 Reservation
 Preference
 Infrastructure
 Entrepreneurship Development
 Collaborative programmes
 NGOs
 Quality Certification
 Technology Development Trust Fund
 Credit Policies

Market Research

 Understanding of size, groups
,buying behaviour , decision making of
potential and existing customers and
the marketplace to allow effective
targeting of customers
effectively,compete successfully and
locate newer opportunities and gaps
 Measures customer loyalty,
satisfaction levels

Credit Policies

 Lending to SSIs considered a Priority sector
 Concessional/Fixed rates for working capital
loans upto Rs 2 lakhs
 Liberal treatment for working capital loans
by banks
 Working capital limits minimum 20% of
annual projected turnover upto Rs 100
lakhs
 100 Special SSI branches set up in
identified districts
 Powers delegated to sanction loans to
managers for SSI at regional and branch

Credit Policies

 Sample surveys to check credit satisfaction,
composite loans (term plus working capital),
meetings with entrepreneurs at zonal and
regional levels
 Sensitising managers to needs of the SSI
sector
 Procedural formalities simplified
 National Equity Fund Scheme to fund upto
25% of project cost as soft loan upto Rs 2.5
lakhs for a project cost of Rs 10 lakhs

Support Organisations
 SIDO – Also known as Development Commissioner
(SSI) under Dept of Small Scale, Agro and Rural
Industries in Ministry of Industries.
 NIESBUD (National Institute of Institute for
Entrepreneurship and Small Business development ) –
Apex Body for coordinating and overseeing
enrepreneurship development.
 EDI –Entrepreneurship Development Institute
 TCOs (Technical Consulting Organisations)
 STATE LEVEL ORGANISATIONS
 KVIC
 SIDBI
 NSTEBD –National Science and Technology
Entrepreneur ship Development Bment Board

SIDO

 Small Industries Service Institutes/Branch
Institutes (Economic consultancy, Trade
and market information, project profiles,
State/District Potential survey, study in
modernisation of plant , training and
workshop facilities
 Regional Testing Centers – testing and
training facilities
 Tool Rooms/Tool Design Institutes
 Process –Cum Product Development
centres – R& D facilities in specified
clusters

State level Institutions

 Commissioners and Directors of
Industries
 District Industries Centres

 State Industrial Development
Corporation
 State Small Scale Industries
Development/Export Corporations

Incentives (Haryana)
 Sales Tax Concessions – Upto 125% of investment for
small and 100% for medium
 Exemption for Payment of Electricity Duty – Exempt
for 5 years
 Incentives to Tiny units in Rural Areas – Exemption
from electricity duty, price preference of 10%,
marketing assistance.
 Small and Medium Enterprises Renewal Fund.- for
technology upgrade, quality consciousness, brand
promotion, improved management practices, capacity
building
 Incentives to Sick units – No penal interest in case of
default

Incentives

 Tax reforms and Fiscal Discipline – Self
assessment, abolition of forms,
computerisation.
 Rebate in cost of Land – Upto 20% if
started in 3 years from date of possession.
 Exemption for payment of electricity duty –
all new units other than negative list for 5
years
 Customised Package for prestigious project
– projects above Rs 30 crs
 Incentives for IT Industry – preferential
allotment of land in industrial estates

Incentives (Haryana)
 Continous Uninterrupted Power Supply -
endeavour for IT industry and exempt them
for power cuts
 Facilities on Generator sets –captive power
plants of IT industry will be exempt from
electricity duty without any time limit.
 Change of Land Use – no charges for
change of land use levied for IT
/industry/parks for three years.Licence for
setting up STPs given liberally and on easy
payment terms.
 Floor Area Regulations – Relaxation upto
100% in areas notified by state govt for IT
units and in all IT parks

Incentives for Industry

 Registration and Stamp Duty Applicable – Rebate on
registration and transfer of property and exemption on
stamp duty on a tapering scale given for sale /lease of
built up space to the IT industry establishing facilities
in private STPs/ IT parks.
 Applicable Rate of Sale Tax - IT software industry
exempt from payment of sale tax. The applicable rate
of sales tax on computers and computer peripherals
shall be reduced to 0.25%

 Exemption from Pollution Control – IT software
industry shall be exempted from the purview of the
Haryana Pollution Control Act except in respect of
power generation sets of more than 10KVA capacity.

SIDBI

 Refinancing of loans and advances
extended by primary lending
instituions
 Discounting and resdiscounting of bills
 Extending financial support to SSIDC
and NSIC (Natl Small Ind.Corp)
 Technological upgradation and
modernisation services to the
industries
 Promotes employment oriented
industries especially in the semiurban

Procedure for Borrowing from
Various FI
 Letter of Intent or provisional registration certificate
 Permission from govt. agencies
 Affidavit
 Prescribed loan application form
 Statement of industries financial standing
 Tax clearance certificate
 Partnership Deed
 Memorandum and Art.of Association in case of Co
 Registration Certificate
 Form A and C issued by registrar of firms
 Three years audited balance sheet and P& L ac
 Special qualification and experience certificate
 Power sanction letter from SEBs

Procedure for Borrowing
loans
 Copy of letter addressed to bank
 Allotment letter of land
 Agreement on Industrial sheds
 NOC form Local authorities
 Sketch of site offered as securities
 Approved plans by concerned authorities
 Qoutations and catalogues from suppliers of
machinery
 Copies of import lcence
 Assurance letter of marketing agreement
 A copy of feasibility report covering market study
report
 Photographs of promoters
 Projected financial statements

Govt. Support

 Office of Development Commisioner
( Micro, Small and Medium Enterprises)
MSME takes care of entrepreneur
ship and small industries as generally
enterprises start small.
 Small Industries Development
Organisation SIDO – nodal
development agency for small
enterprises estd. 1954

Role of SMEs

 MSME sector contibutes 45% of he
total manufacturing output
 33% of the total exports

 Employs 60 mn persons in

 Over 28 mn units across the country

SIDO
 Assists Ministry of Small Industries in evolving
policies and programmes and coordinates policies and
programmes of State govts.
 Provides a comprehensive range of extension services
through its Field offices and allied institutions and
monitors or implements large number fo
Govt.sponsored programmes
 Following glabalisation and requirment of
competitiveness,it provides support in the field of
credit, marketing,technology and infrastructure to
SMEs

How

 30 Small Industries Service Institutes in
state capital and other cities
 28 Branch SISIs in other industrial cities
 4 Regional Testing Centers in metros
 7 Field testing Units
 21 Autonomous bodies – 11 Tool Rooms
and Tool Design Institutes
 4 Production Cum Process development
centers located in UP towns

SIDO

 2 Footwear Training Institutes in Agra and
Chennai
 I Electronice Service and Training Institute
in RamNagar
 ! Institiute of Design and Electrical
measuring Instruments in Mumbai
 2 National Level Training Institutes in and 1
dep Level trg institute in ND,Hyd and
Guwahati
 Production center in Tiruvalla

Enterprises Classification

 Manufacturing or Service
 Investment based classification
Manufacturing/Service
 Micro – investment upto Rs 25
Lakhs/10 lakhs
 Small – From Rs 25 lakhs to Rs 5 crs/
Rs 10 lakhs to Rs 2 crs
 Medium – from Rs 5crs to Rs10 crs/
Rs 2 to 5crs

Other Classification

 Ancilliary – 50% output to another unit
and investment upto Rs 1crs
 Tiny enterprises –upto Rs 25 Lakhs

 Women Entrepreneurs – share of
women owners at least 51%
 Small Scale Service and Business
(Industry Related ) Enterprises
(SSSBEs)- investment upto Rs 10
lakhs in fixed assets minus land and
building

Facilities

 Small Industry Cluster Development
Programme
 Credit Linked capital Subsidy Scheme
for Technology Upgradation -15 %
cost capital subsidy
 Credit Guarantee Scheme- Collateral
free loans upto Rs 25 lakhs for
individual SSI’s.
 ISO 9000 Certification
Reimbursement Scheme- lower of

Financial Support
 Commercial banks
 FIs
 IDBI
 IFCI
ICICI
 IRBI
LIC
UTI
SFC
 SIDC
 SIDBI
EXIM BANK

Institutional Support
 Need
 National Small Industries Corporation
(NSIC)
 Small Industries Development Organisation
(SIDO)
 Small Scale Industries Board(SSIB)
 Small Scale Industries Development
Corporations (SSIDC)
 Small Industries Service Institutes(SISI)
 District Industries Centers (DICs)
 Industrial Estates
 SEZs

Specialised Institutions

 Central Institute of Tool Design, Hyderabad
 Central Institute of Hand Tool,Jalandhar
 Central Tool Room Training Centers-
Bangalore, Calcutta ,Ludhiana and New
Delhi
 National Institute of Entrepreneurship and
Small Business development (NISEBUD),
New Delhi
 National Institute of Small Industries
Extension Training,Hyderabad

Sources of Finance

 Self
 Family and friends
 Suppliers and trade credit
 Commercial banks
 Govt.loans programs
 R&D Limited partnerships –contract limited
 Venture Capital
 Private equity placements
 Public equity offerings
 Other govt. programs

Requirements of Finance

 Start up expenses
 Operational Expenses

 Personnel Expenses

 Contingency expenses

Venture Capital

$ $
Venture Investment
Entrepreneurs
Capitalists bankers
IPO
Ideas

$
$ $
$ $

Corporation Private Public markets
& Government Investors & corporations

Venture Capital

 Money provided by professionals who
invest alongside the management in young
,rapidly growing companies that have the
potential to develop into significant
economic contributors.
 Professionally managed pool of equity
capital formed from the resources of
wealthy limited partners- pension
funds, endowment funds, institutions
including foreign investors
 Investment made in exchange for a
percentage of the gain realised on the

Promoters of Venture Funds

 ICICI – TDICI renamed as ICICI Venture
Funds Management Co or ICICI Venture
 IFCI – IFCI Venture Capital Funds
Limited(IVCF)
 IL & FS – Pathfinder
 GIC- Gujarat Venture Capital Finance
(GVCFL) with all India coverage
 APIDC- APIDC Venture Capital Ltd with
coverage as Andhra Pradesh
 Canara Bank – Canfina VCF with focus on
southern states

Angel Investors

 Angel investors are affluent high net
worth individuals who provide capital
for business start ups usually in
exchange for convertible debt or
ownership equity
 Now angel investors organising
themselves into angel networks or
angel groups to share research and
pool their investment capital.
 Actual entity providing funds could be
a trust or a business investment fund.

Angel Investors
 Fills the gap between friends and family
financing who provide seed funding and
venture capital.
 Most investment of the size of upto
$500,000 and in Healthcare services,
medical devices and equipment, software,
and biotechnology
 Bear very high risk and require very high
return on investment –potential to return at
least 10 or more times the capital invested
in five years through a defined exit strategy
such as an IPO or an acquisition
 In such cases cheaper source of financing
are not available

Venture Capitalists Requirements
from Business Plan

 Finance new and rapidly growing co’s.
 Purchase equity securities

 Assist in the development of new
products and services
 Add value to the company through
active participation
 Take higher risks with the expectation
of higher rewards.

Attributes sought by VCs

 Business Plan – complete, fluid and market
driven
 Competition Analysis – Doing things
competitor is not doing, and understanding
that what you are doing is needed
 Industry Knowledge- to finding a gap in the
market, knowledge is required through
experience and extensive industry research.
 Team – Team assembled would be crucial
to its success. Team consist of industry
experts, technologists and domain specialist

Analysis of Venture
Investments
 VC/PE funds invested about $1.1 bn in 66
Indian cos and exited about 30 cos during
2004
 Investments in BPOs declined sharply
compared to 2003
 ICICI Ventures emerged as the most active
VC
 Cos based in South India cornered 50% of
the investments
 Six venture backed cos pulled off
successful IPOs during the year
 Contract electronics manufacturers
emerged as a major investor in and acquirer
of Indian technology cos.

Exit Route for Venture
Capital
 IPOs – go public through stock
exchange
 Trade Sale –sells to a strategic buyer
who has a similar business
 Promoter Buy back – buys back at a
predetermined price
 Company Buy back – cos buys back
the VC stake
 Management Buy back – operating
mgt buys promoters equity

Comparison of Domestic and
Offshore Funds

 Base
 Guidelines –SEBI with registration

 Corpus Size- Small/large

 Invested Cos- SME/ Large

 Investment Size – Rs 0.5 to 2.5 crs/
Avg Rs 8 crs
 Structure- Regd. As trust under India
Trust Act 1882.

Venture Funds in India

 Financial Institutions Led by ICICI
Ventures, ILFS
 Private venture funds like Indus
 Regional funds like Warburg Pincus, JF
Electra (operating out of Hong Kong)
 Regional Funds dedicated to India like
Draper, Walden etc
 Offshore Funds like Baring, HSBC
 Corporate ventures like Intel
 Sivan Securities

Venture Capital
 Early stage funding is avoided by most
funds apart from ICICI Ventures or SIDBI.
Funding growth or mezzanine funding till
pre IPO stage
 Size of Investment – Upto $10 mn
 Value Addition –Hands on (Draper) or
hands off approach (Chase). Seed and
start up funding sees closer interaction and
advice on strategy
 Concessions on Capital gains tax and
dividends for technology and only for HNIs.
Can invest upto 40% of paid up capital of
invested co and 80 % in equity shares of
unlisted cos.

Entrepreneurship

Incremental
Wealth
Creation NEW or OLD
Product/Service

VALUE
CREATION

RISK
EFFORT
SKILLS
VALUE RESOURCES
ADDED

Entrepreneurship
PRODUCT
RISK
SERVCE

FIN
NEW TIME
REWARD
VALUE + EFORT MONEY
PROCESS PSY SATISFACTION
INDEP
OLD MONEY

SOCIAL

EVOLUTION Occupation to
Person
 MIDDLE AGES -Trading
 17thCent –Projects Cleric

 18th Cent –Contractor Fixed price

 19th Cent- Capital provider

 20th Cent –Manger

 21st -Innovator

Why Entrepreneur?

 Leave present career or lifestyle
 Desire to do something

 External and internal factors helping
to make it possible

ENTREPRENEURSHIP
DECISION PROCESS STEPS

PUSHING
PULLING
(UNFULFILLED NEED)
LEAVE PRESENT
CAREER DESIRE EXTERNAL
TO DO &INTERNAL FACTOR
OR LIFESTYLE -
SOMETHING MAKING POSSIBLE

DISSATISFACTION CULTURE/SUB SOURCE OF GOVT SUPPORT
WORK ENVRT FAMILY GOOD IDEA
DISRUPTION TEACHERS EDUCATION
LAYOFF PEERS SKILLS
RELOCATION OF BACKGROUND RESOURCES
PARTNER KNOWLEDGE
ROLE MODELS

WHY STUDY

 PRODCT EVOLUTION –
KNOWLEDGE TO SOCIAL NEEDS
 HELPS ENTREPRENEUR MEET SOC
NEEDS
 ECONOMIC CONTRIBUTION
 NATIONAL INCOME GROWTH
 EMPLOYMENT

Why Study
Entrepreneurship?(2)
 GOVT AS INNOVATOR- ORDINARY,
TECHNOLOGICAL ,BREAKTHROUGH
 BRIDGE INNOVATION AND MARKET
PLACE
 R&D TRANSFER TO PRODUCT AND
SKILLS
 BRING EXTRAORDINARY SKILLS
TO DEVELOP INNOVATION

Role of Entrepreneurship in
Economic Development
 Increase output and income through
change in structure of business and
society, increase in wealth and better
distribution.
 Innovation is the key in developing new
products and markets and stimulating
investment interest in new ventures
 Increased investment expands capacity
(supply) and results in new spending
utilising new capacity (demand).

Economic Development

 Product Evolution Process – developing
and commercialisation of an innovation
 Iterative Synthesis – the intersection of
knowledge and social nbeed that starts
the product development process
 Ordinary innovations – new products
with l;ittle technological change
 Breakthrough Innovations – New
products with major/some technological
change

TYPE OF FIRMS (BASED
ON DECISIONS STEPS)
 LIFESTYLE –SUPPORT OWNERS
AND NOT GROW
 FOUNDATION –FROM R&D AND DO
NOT GO PUBLIC
 HIGH POTENTIAL – GREATER
INVESTOR INTEREST

Types of Start Ups
 Lifestyle Firm- A small venture that usually
supports the owners and does not grow.
Privately held, , modest growth and objectives,
limited money for R& D.
 Foundation Co – A type of co formed from
research and development that usually does
not go public. Lays foundation for a new
business area can grow from 40 to 400 in 5-10
years and revenues from $10 mn to $ 20 million
per year in revenues, rarely goes public and
draws interest of private investors only and not
start up venture capitalists.


Type of Firms

 High potential venture- greatest
investment and publicity, may start as
foundation but growth more rapid. Can
be upto 500 employees in 5 years with
revenues growing upto $30 –60 mn.
 Gazelles – very high growth ventures

Requirement of
entrepreneur

 CREATION OF VALUE
 INITIATIVE

 RISK

 REWARD

INNOVATION

 GOVT AS INNOVATOR-TECH
TRANSFER
 INTRAPRENEURSHP

 ENTREPRENEURSHIP

OBJECTIVES OF STUDY

 ROLE OF SMALL FIRMS
 STRENGTH WEAKNESS OF DIFF
ENTREPRISES
 ENT PROCESS
 ASSESS OWN ENT. SKILLS
 METHODS OF IDENTIFYING AND
EVALUATING BIZ OPPORTUNITIES
 ABILITY TO FORM ORGANISATION AND
WORK IN TEAMS

Objectives of Study

 MAKING A BUSINESS PLAN
 ENTRY STRATEGIES, SUCCESS AND
FAILURE
 IDENTIFYING AND OBTAINING
RESOURCES
 PLANNING –
MARKETING,FINANCIAL,OPERATIONS,
ORGANISATION,VENTURE LAUNCHING
 ROLE IN EXISTING ORGANISATIONS

SKILLS REQUIREMENT
FOR ENTREPRENEUR
 TECHNICAL
 BUSINESS MANAGEMENT

 PERSONAL & ENTEPRENEURUIAL

TECHNICAL

 TECHNICAL BUSINESS
MANAGEMENT
 TECHNOLOGY

ORGANISATIONAL AND
COMMUNICATION SKILLS
 WRITING
 ORAL
 MONITORING ENVRT
 INTERPERSONAL
 LISTENING
 ORGANISING ABILITY
 NETWORK BUILDING
 MANAGEMENT STYLE
 COACHING
 TEAM PLAYER

BUSINESS MANAGEMENT
SKILLS
 PLANNING AND GOAL SETTING
 DECISION MAKING
 HUMAN RELATION
 MARKETING
 FINANCE
 ACCOUNTING
 MANAGEMENT CONTROL
 NEGOTIATION
 VENTURE LAUNCH
 MANAGING GROWTH

PERSONAL
ENTREPRENEURIAL
ATTRIBUTES
 INNER CONTROL/DISCIPLINE
 RISK TAKER
 INNOVATIVE
 CHANGE ORIENTED
 PERSISTENT
 VSIONARY LEADER
 ABILITY TO MANAGE CHANGE
 ETHICAL AND SOCIALLY RESPONSIBLE

Entrepreneurial process

 Identification and evaluation of the
opportunity
 Development of the business plan
 Determination of the required resources –
needed, existing, gaps, access
 Management of the resulting enterprise –
style, key variables for success, potential
problems, controls, growth strategy

Concept of Entrepreneurship
Development

 “The combination of entrepreneurship
education in schools and colleges, the
hassle free growth of venture capital
and evolution of good market will give
momemtum for the National growth”
- Dr APJ Abdul Kalam

Entrepreneurship

 Job seeking ------> Job giving

India-Entrepreneurial Activity

 Software
 Automobile

 IT Enabled services

Importance of
Entrepreneurship
 Job creation and economic
development.
 Strategic adjustment and
realignments.
 De regulation and privatisation of
public utilities and state owned
enterprises.

Results

 High growth start ups
 Bread and butter earners

Concepts

 Who is an entrepreneur
 Nature and development of
entrepreneurship

Who is an Entrepreneur

 ?

Can You Recall ?

 Dhirubhai Ambani
 Narayayan Murthy

 Yash Raj Chopra

Profiles
 Oprah Winfrey- Nature of Entrepreneurship
 Ewing Marion Kauffman – Intrapreneurship (Pharma)
 Robert Mondavi – Wine making in California
 Malachi Mixon III – Intl Opportunities
 Frederick W Smith – FEDEX Creativity & Biz Idea
 Daniel Schriber -Legal issues
 Belinda Guadarrama –GC Micro Corp,
Biz woman
 Michael S Dell -Marketing Plan

Evolution of the concept of
Entrepreneur
 Individual who takes risk and starts
something new – french for between taker
and go between
 Early Period -Marco Polo- go between or
trader – trade to Far East -borrowed money
@22.5% from money lender (modern
venture capitalist-passive risk bearer) and
merchant adventurer took active role
bearing all physical and emotional risks.
Profits divided 75% to money lender and
25% to adventurer trader

Concept – Three Definitions

 Business
 Managerial

 Personal

Middle Ages

 Middle Ages- person actor and
manager for production- projects
mostly buildings using resources
provided by govt. .Usually cleric
incharge of great architectural works
public buildings such as castles and
fortifications, cathedrals.

17th Century

 Re emergence of connection of risk with
entrepreneurship
 Contractual agreement with govt. To
perform a service or to supply stipulated
products- fixed price contracts with resulting
profit or loss (risk)
 John Law , A frenchman allowed to set up a
bank and then a trading co. This led to
Law’s down fall when he attempted to push
the company’s stock price higher than the
value of assets

Asymmetry in Price –Basis of
Risk
 Richard Cantillon – in 17 th century
understood Law’s mistake and is the
author of the term entrepreneur.
 Viewed entrepreneur as risk taker
observing that merchants craftsmen
and sole proprietors buy at a certain
price and sell at an uncertain price
thereby operating at a risk.

18th Century

 18 th century person with capital (
present venture capitalist) was
differentiated from the one who
needed capital (entrepreneur).
 Reason was industrialisation and
inventions running during this time
were reactions to the changing world
as was the case with Thomas Edison.
Inventors with new technologies
unable to finance their inventions
themselves.

19th and 20th Century
 Innovation and newness now integral
 Entrepreneurs not frequently distinguished from
managers – economic perspective
 Entrepreneur organises and operates an enterprise
for personal gain contributing initiative , own skill
and ingenuity assumes the chance of loss and gain
consequent to unforeseen and uncontrollable
circumstances
 Carnegie – not invent but adapted new technology-
made the American steel industry

Contribution to Concept
 Adam Smith – Capitalist and manager et
foresight to recognise potential demand and
transform into supply
 Carl Menger – economic changes come
from individual’s awareness of changes in
circumstances and he creates the
transformation of resources into goods and
services that fulfill human needs
 Joseph Schumpeter- reform or revolutionise
the pattern of production, exploit innovation
or untried technology .

Peter Drucker
 Getting and using resources
 Allocating to progressive opportunities instead of
allocation to solve problems or administrative
efficiency in management
 Entrepreneur always searching for cange ,responds
and exploits the opportunity
 Innovation instrument of entrepreneurship and he finds
resources whose usefulness not thought of before and
creates value form it
 Manager can also be entrepreneur if he acts as in
above

Other Views on
Entrepreneurship
 Frank Knight- profit is reward and the cost of
uncertainty.
 Kirzner- Alertness for new possible goals with new
possible resources. Action should be active, creative
and human rather than passive, automatic and
mechanical.
 Mark Casson – specialist on decision making on
coordination of scarce resources.
 Stevenson and Sahlman- relentless pursuit of
opportunity from identification to harvestinng fruits of
labour without regard to resources currently controlled

Views on Entrepreneurship
 Gartner – Eight themes- entrepreneur, Innovation,
organisation creation, creating value, profit/non profit,
growth, uniqueness, owner –manager and expectation of
return. Essence of entrepreurship in relentless pursuit of
discontinous opportunity involving creation of an
organisation with the expectation of value creation to
participants
 Byrave and Hofer – focus of field of entrepreneurship
changes from the characteristics of the entrepreneur to
the characteristics of the enterpreneurial process. “ All
functions, activities and actions associated with the
perceiving of the opportunities and the creation of
organisations to pursue them.

Entrepreneurship in India
 Rig veda- metal handicrafts entrepreneurship
as old as civilisation
 Trading –Gupta and Chola dynasties
 Craftsmen –performed duty towards society.
 Economic and social system –stratification
based on economic activity and profession-
villages and towns had different exclusive
structures.
 Most enterprises of craftsmen around river
banks in Karkhanas for transport and town
cluster- Banaras(silk, metal wares), Kashmir
(shawls)Allahabad,Gaya ,Puri etc for Royal
patronage

Entrepreneurship Development
In India
 East India Company and fall of handicraft s
 Swadeshi Movement –ship building,gun and
textiles , steel. 43 % of textiles mills set up by
Parsis
 Increase in trade
 Managing agency system
 Partition – demography(82% popualtion vs 77%
area,90% industry with 93% workers), minerals
-97% of value ,manpower and managerail skills
– great loss, transport 83% of routes, major
ports lost.
 Iindustrial Policy resolution of 1948

“If you want to blossom
like a rose in the
garden,you have to
learn the art of
adjusting with the
thorns”

ENTREPRENEURIAL PROCESS

Opportunity
Identification Business Resources Management
Evaluation Plan Requirement Of
Enterprise

TIMMONS MODEL OF ENTREPRENEURIAL PROCESS

Communication
Opportunity Resources
Business Plan
Unlimited NIL
To Ltd Growth To Unlimted
Potential access to
Competitors capital Markets
Biz plans And resources
Fits and Gaps
Exogenous Forces
Ambiguity

Leadership
Creativity Team
Zero to
One of the
best Capital Market context
Uncertainty

Founder

Entrepreneur
 Need for Achievement-Strong desire to win
 Perseverance-An approach to never say die
 Moderate Risk takers-Entrepreneurs prefers
a middle of the road strategy on tricky
issues
 Ability to find and explore opportunity.
 Analytical Ability- dispassionate approach to
problems
 Using feedback- how faring on goals
 Facing uncertainty- Not deterred by
unfamiliar situations.

Entrepreneur

 Independence-Dislike working for others
 Flexibility
 Planner – think ahead and plan for future
 Interpersonal skills
 Motivator – influence others
 Stress Taker - work long hours and multi
task
 Positive self concept
 Orientation for Future- think ahead

Behavioural Aspects

 Initiative taking
 Organising of social and economic
mechanisms to turn resources plus
situations into results
 Acceptance of risk of failure

Role Demands and
Requirements
 Accomodation to the Venture
 Total Immersion and Commitment

 Creativity and Innovation

 Knowledge of the Business

 People and Team building

 Economic Values

 Integrity and reliability

Functions of Entrepreneur
 Idea generation
 Determination of
 Risk bearing
business objectives
 Organisation
Product analysis and
 Innovation market research
Form of ownership
Promotion formalities
Fund raising
Procurement of
machinary
Recruitment
Business operations

Entrepreneurship

 Opportunity sensing
 Idea generation

 Innovation

 Add initial capital – angel and venture
capital funding.

Need of Society

Entrepreneurial
Activity

Capability of Entrepreneurs Resources available in
The Environment

Dynamics of Project identification

Bridging the science
Marketplace gap
 Government as Innovator
 Intraprenuership

 Entrepreneurship

Government as Innovator

 Government active as in
commercialising technology through
technology transfer
 Inventions require modification to be
useful.
 Govt. lacks business skills especially
marketing and distribution
 Bureaucracy and red tape inhibit
timely business formation

Opportunity Identification
and assessment
 Opportunity assessment
 Creation and length of opportunity
 Real and perceived value of
opportunity
 Risk and return of opportunity
 Opportunity vs personal skills and
goals
 Competitive environment

Opportunity Assessment

 What market need does it fulfill
 What personal observations have you
experienced or recorded for market
need
 What social conditions underlie this
market need
 What market research data can be
mustered to describe the market need

Opportunity Assessment

 What patents might be available to
fulfill market need
 What competition exists in the market
and its behaviour
 What does the international market and
competition look like
 Where is the money to be made in this
activity

Entrepreneurial decision
making
 Strategic orientation
 Commitment to opportunity

 Commitment to resources

 Control of resources

 Management structure

XEROX

 Creative employees should Stay or
Leave the organisation?

Intrapreneurship

 Intrapreneurship is
entrepreneurship within the existing
business structure
 Existing business have financial
resources business skills frequently
the marketing and distribution
system

Intrapreneurship(2)

 Creativity inhibited by bureaucratic
structure, short term profit
vision, organisation hierarchy prevents
development of new products and
services.
 Corporations realising these inhibiting
factors and need for creativity attempt to
establish the intrapreneurial spirit in their
organisations.

OCTAPAC Culture

 Openess
 Confrontation

 Trust

 Autonomy

 Proactiveness

 Authenticity

 Collaboration

Building Culture and Climate
Top mgt. Support
Developing OCTAPAC culture
Flat Orgn. Structure
Flexible Job description
Development of Active Creative cell
Development of Venture Capital Fund

Building Competence Building And Nurturing
Basic Biz Mgt Training Intrapreneurs
Development of Leadership
Networking
Building Self directed ,
self sustaining work teams

Relationship management
Reward Management
Building and Nurturing
Grievance Management
Intrapreneurs

Creative Enterprises

 Open channels of communication
 Problem solving teams

 Decentralised structure – promote risk
taking
 Culture and freedom to discuss ideas
and long term plans of the enterprise
 Allocating resources for creative
pusuits and rewarding such efforts

Entreprenuer vs
Intrapreneur
 Entrepreneur – Individividuals who
establish a new organisation without
the benefit of corporate sponsorship
 Intrapreneurs – new venture creators
working inside big
companies(corporate entrepreneurs)

Entrepreneur

 Creating something of value- to
entrepreneur, and for the audience
addressed
 Devotion of necessary time and effort
 Assumption of the necesssary risk –
financial psychological and social
 Rewards- independence, satisfaction
 High failure due to poor sales, intense
competition, lack of capital, lack of
managerial ability

Entrepreneur vs
Intraprenuer
 Independent in his  Dependent on the
operations entrepreneur
 Raises funds /management
himself for the  Funds are provided
enterprise but not raised by
 Bears the risk him
involved in the  Does not fully bear
business the risk involved
 Operates within the  Operates within the
overall industry and organisation that
environment he belongs to.

Entrepreneurship -
Difficulties
 Difficult to create new ventures by individuals
 Lack of managerial skills, marketing capability or
financial resources.
 Inventions are unrealistic, requiring modifications to be
marketable
 Difficulty in interfacing with necessary entities such as
banks, suppliers, customers, venture capitalists
distributors and advertising agencies.
 Still best bet and effective in bringing new products to
the market place.
 However entrepreneurship effects economy of the
area and build jobs but has to follow tough labour laws

Types of Entrepreneurs
 Innovating – new goods, methods, new market, re
organises enterprise – requires certain level of
development
 Imitative – readiness to adopt successful innovations by
using techniques and technology innovated by others.
Suitable in underdeveloped regions.
 Fabian – greatly cautious and skeptic in experimenting
change in organisation and will imitate only if failure to
do so would result in a loss of the relative position in the
enterprise.
 Drone – refuse to adopt opportunities to make changes
in production formulae even at cost of severely reduced
returns

High
Inventor Entrepreneur

Creativity
and
Innovator
Promoter Manager
Administrator

Low

General management skills, business know how and networks
High
Low

High Innovation High Innovation
Innovation High Risk High Risk
(Creating
A Unique
&
Differentiated
Product/Service Low Innovation Low Innovation
Low Risk High Risk

Low Risk High

Probability of Major Loss
Entrepreneurial Strategy

 Motive –Start an enterprise  Renders services in
 Status – owner enterprise set up by others
 Risk bearing – assumes all  Manager is an employee
risks  Does not bear any risk
 Rewards- all the profit but except his own
uncertain performance
 Innovation – decides what  Gets salary which is certain
and how to produce by  Executes plan given by
innovation owner
 Qualifications-achiever,  Possess distinct
originality, risk bearing qualification of
ability management theory and
practice

Entrepreneur vs Manager

Idea

 Just whatever comes to mind when
one thinks
 Representation of an image
 Innate ideas – those that are general
and abstract and already exist
 Adventitious ideas – images or
concepts that are accompanied by
judgement that are caused by some
object outside the mind

Innovation

 Is a change in the thought process for
doing something or the useful
applications of new inventions.
 Can be incremental, emergent or
revolutionary
 Can be in thinking, products,
processes or organisations

Creativity

 Ability to generate innovative ideas
and manifest them from thought to
reality

Invention

 Is a new composition, device or
process
 May be derived from existing model or
idea or be independently conceived.
 Invention is a creative process

Entrepreneurship -Facets

 Innovation (act of introducing
something new)
 Newness
 Ability to create
 Conceptualise
 Ability to understand all the forces at
work in the environment
 Product distribution system, financing
method, reorganising

Entrepreneur

 Economist – combines 4MsI to
increase value and introduces change
,innovation/new order
 Psychologist – sees person driven by
forces – need to attain or achieve,
experiment, accomplish or to escape
authority of others, act alone,
inventors,
 Business man –may see him as
challengers,competitor or ally,
supplier ,customer, wealth creator

Innovation

 New Quality of product
 New product

 New source of material

 New market

 New organisation structure

 Combination of means of production

Business Idea
 Opportunity in the market
 Needs or wants for product or service
 Utilise existing skills
 Use locally available raw materials
 Make products that have demand but not
freely available
 Enable use of any technical know how or
specific tools or machines entrepreneur
is aware of
 Solve a current problem existing in the
market.

Creative
Process

Intrinsic Skills
Creative Diverse Critical
Motivation Task
Thinking Alternatives Evaluation
Domain

Components of Creative
process
 Intrinsic motivation – processing diverse
information, seeing non obvious sides of an
issue and exploring alternate solution paths.
 Skills in task domain – knowledge of he
problem and technical skills or area expertise.
 Skills in creative thinking – random association
between ideas, see divergent views of a single
idea, access one’s subconscious, visualise
potential solutions.
 Generate a number of diverse alternatives
 Hold back critical evaluation till full range of
possibilities.

Core Elements of Innovation

 Creativity and innovation

 Ability to apply that creativity

 Belief in the ability to change the
status quo
 Focus on creating value

 Risk taking

Creativity

 Ability to bring something new into
existence
 Useful to society

 Ability not activity

Innovation

 Process of doing new things
 Different from creativity as that is the
ability to conceive and innovation is
the ability to do things to
convert/transform the ideas into useful
products or services

CREATIVITY PROCESS STAGES

Task Idea
Presentation Preparation Incubation Generation Idea Outcome
Validation Assessment

Creative Process

 Task presentation – specific problem or area of study
 Preparation – search for solutions
 Incubation – subconscious assimilation of information
or mulling over a problem
 Idea generation – multiple ideas and solutions giving
different approaches to the problem using experience,
insight and fears
 Idea validation – ideas generated verified for being
translatable into realistic and useful applications
 Outcome assessment – achievement of goal or
solution to problem

Creativity Stages

 Task presentation
 Preparation Stage

 Incubation stage

 Idea generation stage

 Idea validation stage

 Outcome assessment

 Process complete or go back to task
presentation

Sources of Innovative and Creative
Ideas

 Present and potential customers
 Existing companies

 Raw material providers

 Distributors and retailers

 Research and development

 Existing employees

Sources of Business Ideas

 Discussion
 Observation

 Literature

 Visiting Exhibitions, Fairs, Trade
shows
 Research Institutes

 Brainstorming

Opportunity

 Technological discoveries
 Demographic changes

 Lifestyle and taste changes

 Economic dislocations

 Calamities

 Govt. initiatives and rule changes

 Franchises

New Ideas- Sources and
Methods
 Brainstorming
 Group discussion
 Consumers
/Customers  Data collection
 Existing Companies  Invitation for ideas form
advertisements ,mails,
 Research and
Internet
development
 Value addition to current
 Employees
products/services
 Dealers/Retailers
 Market research
 Contests
 Commercialising
inventions

Entrepreneurship

 Creation Of value by people working
together to implement an idea through
the application of drive and A
WILLINGNESS TO TAKE RISK
 An INDIVIDUAL WHO BEARS THE
RISK OF OPERATING A BUSINESS
IN THE FACE OF UNCERTAINTY
ABOUT FUTURE CONDITIONS (
Encl Britannica)

Creating Entrepreneurial
Venture
 Business Planning Process
 Environmental Analysis –Search and
Scanning
 Identifying Problems and
Opportunities
 Defining Business Ideas

 Basic Government Procedures to be
complied with

Franchising

 An entrepreneurial alliance between
an franchisor (an innovator who has
created at least one successful store
and wants to grow) and a franchisee
(a partner who manages a new store
of the same type in a new location).
 Food retailing, service business,
sports and recreation.

Entrepreneurship Process

 Identify and Opportunity – right time ,
first mover, sense opportunity
 Establish Vision – dream for the future
 Persuade others –form the foundation
team, business plan
 Gather Resources – Financial,
operating, Human, Information and
intangibles (image procedures, transport,
management).
 Create new venture product or market
 Change adapt with time

Feasibility Study

 Is the evaluation of the proposal
designed to determine the difficulty in
carrying out a designated task.
 Is the evaluation or analysis of the
potential impact of a proposed project.
 Will the idea work and should you
proceed with it ?

Feasibility Study

 Before writing business plan need to
 identify how ,where and to whom you
intend to sell a service or product
 assess competition
 figure out how much money is needed to
start a business and keep it running until
established
 Determine if and how it can succeed and
serves to develop a business plan

Feasibility Study
 Is conducted during the deliberation phase of the
project development cycle prior to obtaining project
financing business process
 It is an analytical tool that includes several scenarios
for the decision maker of the group to utilise in
determining if they should continue the project
 If the would be entrepreneur decides to proceed
further then he /she makes a business plan
 Normally done independently by people outside the
project group
 Feasibility study is only at the developmental stage of
the project

Feasibility Study –Why
Important
 Lists requirement of essentials to do
to make business work
 Identify logistical and other business
related problems and solutions
 Develop marketing strategies to
convince bankers and investors to
ensure their consideration
 Serves a foundation for business plan

Feasibility Analysis
 Done to check the feasibility of the project
itself in the particular environment on great
detail. More descriptive than environmental
appraisal.
 Market Analysis –estimate demand of
proposed product/service and target market
share.
 Technical/Operational Analysis – operational
ability of the project and cost and availability
of the technology-material and plant
parameters.

Feasibility Study

 Contains comprehensive ,detailed
information about your business structure,
 your products and services,
 the market,
 logistics of how you would deliver a product
or service,
 resources needed to make the business run
efficiently as well as
 other information about the business

Business plan

 Sets out objectives, estimates and financial
forecasts
 Helps establish where you are, where you
are going and how you intend to get there.
 Demonstrates determination to start a
successful business
 Only half the new businesses survive more
than five years – the better the planning is,
the more likely you are to succeed.
 Should be updated on an annual basis at
least- ongoing process – monitor and
update.

Business plan
 Basic structure should follow a format to
facilitate an efficient way of meeting
evidence requirements like National
Vocational Qualification (NVQ) Level 3
Business Planning Qualification.

Summary of units and Elements of
Owner Manager NVQ Standards
 Assess the potential of the proposed business –
Describe, review market,evaluate
 Assess your own skills and capabilities for running the
business- identify
 Investigate requirements of any legislation to be complied
with
 Assess finance requirements
 Develop marketing and sales strategy
 Quality standards
 Customer service policy
 Dedicated premises
 Physical resources
 Additional personnel in first year
 Comprehensive business plan
 Leading the team of individuals
 Manage information for action

Business Plan
 Is a roadmap for starting and running a
business.
 Is a blue print of the step by step
procedure to be followed to convert a
business idea into a successful business
venture.
 Identifies an innovative idea, researches
the external environment for SWOT,
assess the feasibility of the idea and then
allocates resources in the best possible
manner to make the plan successful.

Business Plan

 Efficient method of focusing ideas in
terms of defining objectives and
assessing abilities to organise and run
the business.
 Establishes parameters and specific
targets which provide a yardstick to
measure progress and profitability
 Prerequisite to both planning and
starting as well as running a business
 Good business plan necessary for
raising finance.

Preliminary Investigation

 Review available business plans
 Draw key business assumptions (e.g
inflation exchange rates, market
growth, competition, taxes)
 Scan external and internal
environment
 Seek professional advice from some
one already in business

Objectives of Business Plan
 Direction to vision of entrepreneur
 Objectively evaluate prospects of business.
 Monitor progress of implementation.
 Persuade others to join business
 Seek loans form fin. institutions.
 Visualise the concept in terms of market availability, organisational and
financial feasibility
 Guide in actual implementation
 Identify strengths and weaknesses in the plan
 Check on management information about competitors and the market
 Identify resources required to implement the plan
 Document ownership arrangement ,future prospects and projected
growth of the venture

Business Planning Process

 Preliminary Investigation
 Idea generation

 Product Development and selection

 Environmental Scanning

 Feasibility Analysis

 Project report preparation

 Evaluation, Control and Review

Business Idea

 Nature and purpose of business, new
business or purchase of existing, franchise.
 Legal format –Sole
trader/proprieter, partnership, private
co, public co, cooperative
 Way it will operate i.e trading status
 Legislation that will effect the business.
 Intended market and range of products or
services, customer needs
 External influences- PESTLE analysis
(political, economic, social, technological, le
gislative, environmental

Environmental Scanning

 Socio –cultural  Raw material
 Technological  Production/
 Economic Operations
 Demographic  Finance
 Governmental  Market
 Human resources

Feasibility Analysis (2)

 Financial feasibility -assess the
financial issues of the venture e.g cost
estimates of land , plant and
machinery, market survey , cost of
capital, registering, contingencies,
profitability, break even point,
projections of cash flows, balance
sheet multi year projections

Functional Plan
 Gives the outline plan for all the functional areas
 Marketing plan-marketing mix,demand, cusomer profile,
market segmentation, target market and strategies
 Production /Operational plan –locatio, layout,cost
availability of equipment, machinery, raw materials, list
of suppliers, manufacturing/running cost, quality
management, production scheduling,capacity and
inventory management
 Organisational Plan- ownership,structure, HRM practices
 Financial Plan – cost incurred in smooth running of other
plans (above),projected cash flows, income statement,
break even point,balance sheet, ratios(projected

Project Report Executive summary,
Cover, Table of Contents,
 The Business- Objectives, brief history, form of ownership, name
and qualification of owners, proposed headquarters and capital
structure.
 Funding Requirement- Debt and equity
 Product /Service- description, comparative analysis, patents,
trademarks, copyrights, licenses
 Plan- Marketing (Demography, Competitors SW, Market SWOT,
marketing Mix), Operational Plan, Organisational plan, Financial
plan (2 -5 years)
 Critical Risks
 Exit Strategy
 Appendix – CV of Owners, Ownership Agreement, Certificate for
Pollution Control Board, MOU, Articles of Association, Other
documents for feasibilty of project and its viability

Identifying Relevant
Legislation
 Health and Safety related legislation
 Environmental and trading legislation’

 Employment law

 Financial and company law

 Anti discrimination Law

Personal Skill and Abilities
Business Needs to make it
Successful
 Analyse and identify current and
foreseeable skills- Technical, marketing,
sales, organisational ,decision making,
financial, customer service, staff
management, information management and
computer skills.
Identify own goals and objectives
Producing a realistic personal development
plan
Monitoring ongoing performance as owner
manager

Intellectual Property Rights
-IPR
 Refers to a number of distinct types of
creations of the mind for which property
rights are recognised.
 Under Intellectual property law, owners are
granted certain exclusive rights to a variety
of intangible assets, such as musical literary
and artistic works, discoveries and
inventions, and words phrases symbols and
designs

Financial Controls

 Basic Accounts and Double entry
book keeping
 Monitoring budgets and cash flow

 Profit margins and mark up

 Stock control

 Aged debtor accounts

 Credit control procedures

 Accounting ratio

Common types of IPR

 Patents
 Trademarks

 Copyrights

 Industrial design

 Trade secrets

 Geographical Indication

Legal issues for the
Entrepreneur
 Distinguish Intellectual property (any patents, trademarks
copyrights and trade secrets held by entrepreneur) assets of new
venture including software and websites
 Nature of patents (contract between government and inventor
giving exclusivity of invention for a period of time- after that public
domain) Purpose and procedure of trademarks
 Purpose of copyright
 Identify procedures that can protect trade secrets
 Value of licenses in starting or expanding business
 Implications of new legislation that affects Board of Directors and
internal audit processes
 Issues related to contracts insurance product safety and liability
 WTO Agreement on Trade Related Aspects of Intellectuual
Property Rights (TRIPS) the duration of patents should be twenty
years

Patent
 Is a set of exclusive rights granted by a state to an
inventor or assignee for a limited period of time in
exchange for a public disclosure of an invention
 Application to be made for a claim defining the
invention as new or useful process, machine,or
composition of matter and any improvement thereof ,
non obvious and useful or industrially applicable,
 Certain subjects like business methods and mental
acts are excluded generally
 Exclusive right is the right to prevent others from
making, using, selling or distributing the patented
invention normally for a period of twenty years.
 May be given to individual or corporate identity

Trademark
 A word, identity, symbol, design or
some combination of such and even
could be a slogan or a particular
sound that identifies the source or
sponsorship of certain goods and
services
 Can last indefinitely as long as the
mark continues to perform its
indicated function –initially given for
20 years with 20 years renewable
terms.

Copyright

 Protects original works of authorship –
does not protect the idea itself but its
usage
 Music, literary work, pictures
videos, software

Trade Secret

 Maintaining an idea or process as
confidential and to sell or license it as
a trade secret.
 Life as long as the idea or process
remains a secret.
 Confidential information agreement

Geographical Indication
 Is a name or sign used on certain products which
corresponds to a specific geographical location or
origin.
 The use of GI acts as a certification that the product
possesses certain qualities or enjoys a certain
reputation , or other characteristic attributable due to
its geographical origin
 To use GI, a product or its constituents materials
emanate from a particular area or meet certain
standards
 Protected Designation of Origin (PDO), Protected
Geographical Indication(PGI) and Traditional
Speciaility Guaranteed ((TSG) . Wines of France,
Banarasi Silk, Hyderabad Benami.

Industrial Design
 Is an intellectual property right that protects the visual
design of objects that are not purely utilitarian.
 An industrial design consists of the creation of a shape
, configuration or composition of pattern or colour or
combination in three dimensional form containing
aesthetic value.
 An industrial design can be a two or three dimensional
pattern used to produce a product, industrial,
commodity or handicraft.
 Indian Design Act 2000 enacted to consolidate and
amend protects of design under Art 25 and 26 of
TRIPS agreement.

Protecting Trade Secrets
 Employee training refer sensitive questions to one
person
 Provide escorts to office visitors
 Avoid discussing business in public places
 Keep travel plans secret
 Control information presented at conferences
 Physical protection of documents
 Non disclosure agreements by employees and
consultants
 Debrief departing employees on confidential
information
 Marking document confidential.
 Keep track of outgoing and incoming electronic traffic

Others

 Product Safety and Liability –
consumer protection
 Insurance –property ,casualty, life,
worker’s compensation, bonding
(employee theft of funds,
subcontractor failure to complete work
on time)

Licensing

 Arrangement between two parties
where one party has proprietary right
over some information, process or
technology protected by patent
, trademark or copyright for use of
which the licensee pays a royalty or
some specified sum in return for
permission to copy the
patent, trademark or copyright.
 Licensing a trademark requires a
franchising agreement.

Enterprises Classification
(MSMED Act 2006)
 Manufacturing or Service
 Investment based classification
Manufacturing/Service
 Micro – investment upto Rs 25
Lakhs/10 lakhs
 Small – From Rs 25 lakhs to Rs 5 crs/
Rs 10 lakhs to Rs 2 crs
 Medium – from Rs 5crs to Rs10 crs/
Rs 2 to 5crs
 Take advantage of Credit Linked
Capital Subsidy Scheme

Schemes in MSME Sector
 National Manufacturing Competitiveness
Programme 2005
 Micro and Small Enterprises Cluster
Development Programme – holistic
development of selected MSE clusters
through value chain and SCM management
on cooperative basis
 Scheme for Capacity Building –
strengthening of database and advocacy by
industry/enterprse associations, as
envisaged by promotional package for
MSEs

Schemes in MSME Sector

 Credit Linked Capital Subsidy Scheme for
Technology Upgradation Max loan –Rs 100
lakhs
 Credit Guarantee Scheme – Collateral free
loans upto Rs 50 laks
 ISO 900/ISO 14001 certification
Reimbursement Scheme
 MSME MDA- for participation in trade fairs
abroad and producing publicity materials

Schemes for MSME

 Financial Assistance for using Global
Standards in barcoding
 Purchase and Price Preference Policy-
Under single point registeration Scheme
,358 items are reserved for exclusive
purchase from MSME by Central Govt. No
tender fee, no Ernest money or security
deposit and 15% price preference for
purchases from individual MSMEs

Schemes for MSMEs

 Mini Tool Rooms – Assistance upto
Rs 9 crs or 90% for setting up
 National Awards –for
exports,innovation,quality ,product
development, import substitution in
MSMEs

Basic Govt. Procedures

 Industrial Licensing -Industrial
(Development and Regulation) 1951 Act.
– Applicable to where 50 or more workers
are employed with power in preceding 12
months and 100 or more workers without
power(no part with power).

Industries (Devp and Reg)
Act
1. Registration of Industries
2. Licensing of Expansion
3. Production of new articles
4. License is a written permission
issued by the central govt. to an
industrial undertaking stating details
as location, articles of manufacture,
capacity etc.

Legislation -Factories Act
1948
 Factories Act (10 or more persons in
manufacture with motive power or 20
without motive power, competent person -
18 years qualified and recognised
 Hours of work – adult male and female(48
per week and 8 per day) and wages double
for overtime.
 Health – clean, floor clean once a week,
whitewashing once in 14 months
 Ventilation and temperature ,water facilities,
toilets and spitoon

Factories Act

 Safety provisions – safety guards
where moving machinery, fencing
 Welfare – washing facility, place for
storing dry clothes (changing rooms),
first aid boxes for every 150 workers
 Safety condition of building and
machinery
 Penalty for breach – imprisonment
upto 3 months

Legislation
 Shop AND Establishment Act 1948
 Payment of Wages Act 1936
 EPF Act
 Workmen Compensation Act
 Employment of Women Legal Provisions
 Employment of Children Protective Legal Provisions
 Payment of Gratuity Act
 Employees State Insurance Act
 Payment of Bonus Act 1985
 Trade Union Act 1926
 Water (prevention of Pollution ) Act 1974
 Environment Protection Act 1986
 Industrial Disputes Act 1947
 Delayed Payments Act 1993

Shop and Establishment Act

 Regulates conditions of work and
employment in shops, commercial
establishments, residential hotels,
restaurants, eating houses, theatres, other
places of public entertainment and other
establishments.
 Provisions include regulation of
establishments, employment of children,
young persons and women, leave and
payment of wages, health and safety.

Shop and Establishment Act

 Register for lime washing
 Opening and closing hours

 Employment Register

 Leave register

 Visit Book

Legislation (2)
 Sale of Goods Act and Consumer
Protection Act
 Advertising Standards
 Information Technology Act
 Employment and Labour Regulations
 Employment Protection Act
 Working Hour Directives
 Contracts of Employment Act
 Employer Compulsory Insurance Regulation
 PF Act
 Minimum Wage regulations

Legislation (3)

 Finance Act
 Customs Excise and VAT regulation
 Law of Taxation
 Companies Act
 Partnership Act
 Business Names act
 Copyright Design and Patents Act
 Consumer Credit Act

Legislation (4)

 Insolvency Act
 Contract Law (Debt Recovery)

 Property law

 Disabled Person Employment Act

 Disability Discrimination Act

 Trade Union Act

Sources of Finance- Factors
influencing suitable sourcing of
finance-

 purpose,
 size of borrowing required,

 anticipated repayment period,

 affordability of payment,

 availability of security.

Funding Options

 equity or debt
 unsecured loans,
 Overdrafts
 loan guarantee schemes,
 short/ medium/long term bank loan,
 share capital from private investors or
ordinary/preference shares,
 debentures, mortgage debentures,
 grants,
 commercial mortgages

FINANCIAL LIFECYCLES

Sales High Potential Firm

20
mn

Foundation Firm

Equity Risk Capital

Life style firm

Personal Savings 10
R&D START Up RAPID 5
GROWTH EXIT (LBO,MBO)
EARLY GROWTH

shareholders

customers CENTRAL
Value ISSUES IN
creation
ENTREPRENEURIAL
employees
FINANCE
suppliers

Slicing Risk and
Value Pie return

Cash –risk -time

Covering Debt :take control
Risk

Equity staged
commitments

Physical Resources
 Identify need
 Transport
 Plant and machinery
 Furniture and office equipment
 Fixtures and fittings
 Resale stock
 Raw materials
 Componens ,materials and consumables
 Public utilities
 Vetting list and costing
 Cash flow and payment schedule
 Supplier relationsips

Customer Service

 What do customers expect- from the
business, from staff, from the product,
goods or services
 Customer service essential for retention,
improve confidence of existing customers,
enhance reputation of business and quality
standards,increase job satisfaction of staff
 Sell solutions not systems
 Customer care policy- response, standards,
achievement

Premises Requirements
 What type are needed – nature of business
planned, customer access, appearance, easy
access, regulatory approval , need for
customer facilities like parking, security,
affordability, space requirements, convenience,
access for staff
 Size
 Options for acquiring premises- free hold or
leasehold,rental agreements,insurance cover –
product,public, employers professional
indemnity,motor vehicel health, disability,key
person

Sales and Marketing

 Market research –size, growth,
projected/targeted market share,
barriers, resources and time,
problems anticipated, effort vs
rewards assessment, competitors,
other comparable products, key
features looked for by customers,
prevailing pricing
 Market segmentation

 Marketing Plan

Recruiting and Employing
Staff
 Need for full time or casual or temporary
and affordability to pay as well as
productiveness of additional workers.
 Pay as you earn (PAYE) system for
insurance and income tax liabilities.
 Define the requirements, attract candidates
and carry out selection process
 Job description, personnel specification,
terms and conditions of employment,
advertising the position
 Discipline and grievance procedures
 Staff Appraisal

Taxation

 Allotment of PAN,TAN( Tax Deduction
Account Number)
 Opening of Bank Account
 Registration with Sales tax, VAT, Trade
Tax, Excise, Service Tax, Customs
 No Objection from Pollution Control Dept.
 Linking with Tax information Network (TIN)
 Import Export Code (IEC) from RBI
 Regd. with concerned Chamber of
Commerce and Industry

Other Govt. Dept.

 Clearance from Police,
 Fire

 Labour

 Health

Utility Arrangements

 Electricity
 Water

 Sewage

 Any other registration/ legality
required due to specific nature of the
venture

 NEED- Network of Entrepreneurship and
Economic Development (brings together
underpriveleged communities with teams of
social entrepreneurs in oreder to maximise
HR potential and create positive change in
their socio economic and political
environment .Located in Lucknow
 National Small Industries Corporation
(NSIC) facilitates growth of small
entreprises

 District Industries Centers (DICs) – to
promote Cottage and Smal Scale Industries
in the District . Fin,Assistance Scheme
(PMRY, Nomal bank Finance, BSAI (Bengal
State Aid to Ind. Act), Regd, Project
Scheme vetting, Marketing
Assisstance,Special Assisstance, Bio Gas
development,Pllution Control,Training
Programme,Rural Employment Generation
programme,
 Industrial Estates
 SEZs

Plant and Machinery
 Domestic or import
 Imports regulated by Foreign Trade (Devp. And
Regulation ) Act 1992 –DGFT
 Process provides specifications of machinery required
 Techno –economic survey
 Trade fairs
 Consult experts/dealers
 Second hand machinery
 NSIC provides machinery and equipment to SI offering
them long term repayment period with moderate rate
of interest.Also gives it on hire purchase and lease
basis

HR

 Availability at different skill levels
 productivity and cost of labour
 Flexibility of labour
 Attitude and behaviour of labour
 Nature of trade unionism
 Right no of emplyees for the right job
 Manpower planning,
recruitment,selection, placement

 Small Industries Development Organisation (SIDO) –
Nodal development agencies for SSIs (Laghu Udyog)
 Small Scale Industries Board (SSIB)- apex body the of
Govt to render advise on all issues pertaining to the
small scale sector
 Small Scale Industries Development Corporations
(SSIDC)
 MSME Development Institute -Formerly Small
Industries Service Institutes(SISI). There are 30 such
Institutes provide assistance for the promotion of
MSMS in respective states.

Govt. Support

 Office of Development Commisioner(
Micro, Small and Medium Enterprises)
MSME takes care of entrepreneur
ship and small industries as generally
enterprises start small.
 Small Industries Development
Organisation SIDO – nodal
development agency for small
enterprises estd. 1954

Financial Needs –Start Up
Expenses
 Land and building
 Machinery ,equipment and tools
 Furniture and office equipment
 Raw material and inventory
 Power connection and back up
 Advertising and promotion
 Requirements like legal certificates
 Partnership agreements

Considerations for Sources
of Financing
 Length of time – short or long term
 Cost – Fixed rate, floating rate,% of
profits
 Control- Equity, covenants
(agreement or contract), voting rights

Sources of Finance

 Internal –Personal Savings, retained
earnings, Working Capital, Sale of Assets
 External- Ownership capital –ordinary
/preference shares
 External –non ownership capital
(Debentures,other loans, Overdraft, Hire
purchase,Lines of credit from
creditors,grants, venture capital
 Factoring and Invoice Discounting
 Leasing

Line of credit
 Is a credit source extended to a govt., business
or individual by a bank or other fin. institution.
 Can take several forms- overdraft protection,
demand loan, export packing credit, term loan,
discounting, purchase of commercial bills
 It is effectively a bank account that can be
readily tapped at the borrower’s discretion.
 Interest is only paid on money actually
withdrawn
 Can be secured by collateral or be unsecured
 A maximum loan balance a bank will permit the
borrower to maintain

Factoring and Invoice
Discounting
 Factoring is the sale of account receivables
by a business to a third party called a factor
on a continual basis. (Receivable is a fin.
Asset associated with a debtor’s liability to
pay money owed to seller)
 Forfaiting – is a one time transaction of sale
of recievables
 Invoie Discounting – is borrowing where
recievables are used as collateral

Facilities
 Small Industry Cluster Development
Programme
 Credit Linked capital Subsidy Scheme
for Technology Upgradation -15 %
cost capital subsidy
 Credit Guarantee Scheme- Collateral
free loans upto Rs 50 lakhs for
individual SSI’s.
 ISO 9000 Certification
Reimbursement Scheme- lower of
75% or Rs 75000

Environmental Barriers

 Raw Material
 Labour

 Machinery

 Land and Building

 Other infrastructure Requirements

 Financial barriers

Project
 A scheme, design, a proposal of something
intended or devised to achieve a specified
objective within a specified time
 Unique, non routine and non repetitive
,one off undertaking/activity which
systematically coordinates inputs in
direction of intended outputs with discrete
time, financial and technical performance
goals.
 Well planned activity that includes a
correct consideration of alternatives,
identification of key issues, broad
participation, compactness and
enforceability.

Project Formulation

 Is the systematic development of a
project idea for the eventual purpose
of arriving at an investment decision.

Project Report

 A written document pertaining to an
investment proposal containing data
on the basis of which data has been
appraised and found relevant to the
entrepreneur.

Environmental Factor’s Support

Entrepreneur
Support
Systems

Supportive
Systems
Basic
Attributes

Non Entrepreneurial
Characteristics &
Environments

Venture Capital
 Money provided by professionals who
invest alongside the management in young
,rapidly growing companies that have the
potential to develop into significant
economic contributors.
 Professionally managed pool of equity
capital formed from the resources of
wealthy limited partners- pension funds,
endowment funds, institutions including
foreign investors
 Investment made in exchange for a
percentage of the gain realised on the
investment and a fee.

Angel Investors
 Fills the gap between friends and family
financing who provide seed funding and
venture capital.
 Most investment of the size of upto
$500,000 and in Healthcare
services, medical devices and
equipment, software, and biotechnology
 Bear very high risk and require very high
return on investment –potential to return at
least 10 or more times the capital invested
in five years through a defined exit strategy
such as an IPO or an acquisition
 In such cases cheaper source of financing
are not available

Attributes sought by VCs

 Business Plan – complete, fluid and market
drives
 Competition Analysis – Doing things
competitor is not doing, and understanding
that what you are doing is needed
 Industry Knowledge- to finding a gap in the
market, knowledge is required through
experience and extensive industry research.
 Team – Team assembled would be crucial
to its success.Team consist of industry
experts, technologists and domain specialist

Analysis of Venture
Investments
 VC/PE funds invested about $1.1 bn in 66
Indian cos and exited about 30 cos during
2004
 Investments in BPOs declined sharply
compared to 2003
 ICICI Ventures emerged as the most active
VC
 Cos based in South India cornered 50% of
the investments
 Six venture backed cos pulled off
successful IPOs during the year
 Contract electronics manufacturer emerged
aas a major investor in and acquirer of
Indian technology cos.

Comparison of Domestic and
Offshore Funds

 Base
 Guidelines –SEBI with registration

 Corpus Size- Small/large

 Invested Cos- SME/ Large

 Investment Size – Rs 0.5 to 2.5 crs/
Avg Rs 8 crs
 Structure- Regd. As trust inder India
Trust Act 1882.

Venture Funds in India

 Financial Institutions Led by ICICI
Ventures, ILFS
 Private venture funds like Indus
 Regional funds like Warburg Pincus,JF
Electra (operating out of Hong Kong)
 Regional Funds dedicated to India like
Draper,Walden etc
 Offshore Funds like Baring,HSBC
 Corporate ventures like Intel
 Sivan Securities

Entrepreneurship developmen 21_sep_2010

Entrepreneurship developmen 21_sep_2010

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