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Efd7f Sme(New)(2)


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Efd7f Sme(New)(2)

  1. 1. 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
  2. 2. <ul><li>Characteristics </li></ul><ul><li>1.Uniquely positioned as pioneers, strong entry barrier </li></ul><ul><li>2.Require substantial capital exceeding the internally generated cash flows. </li></ul><ul><li>3.Have long gestation period </li></ul><ul><li>4.Growth requires customer adoption, scalability through systems and process standardization. </li></ul><ul><li>5.Growth potential linked to value/ difficult to apprise viz. scientific knowledge and intellectual property. </li></ul><ul><li>6.Requirement of highly skilled, professional manpower </li></ul>
  3. 3. <ul><li>Risk Types in Tech based SMEs </li></ul><ul><ul><li>Asset Risk </li></ul></ul><ul><ul><li>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. </li></ul></ul><ul><ul><li>Technology Risk </li></ul></ul><ul><ul><li>Focus as certain set of technologies and processes that are interested in market. </li></ul></ul><ul><ul><li>Market/Concentration Risk </li></ul></ul><ul><ul><li>Acceptance/Development of customer market ,focus on small/niche market segment raises vulnerability concerns. </li></ul></ul>
  4. 4. <ul><ul><li>Duration Risk </li></ul></ul><ul><ul><li>Long gestation period raises period for which funding is needed. </li></ul></ul><ul><ul><li>Operation Risk </li></ul></ul><ul><ul><li>Operations subject to stringent process controls. </li></ul></ul><ul><ul><li>FINANCIAL TECH-BASED SMEs </li></ul></ul><ul><ul><li>Specific financing needs and risks in different phases of SME life cycle. </li></ul></ul><ul><ul><li>SEED STAGE </li></ul></ul><ul><ul><li>1.Modest financial requirements (assessing feasibility,etc) </li></ul></ul><ul><ul><li>2.High degree of risk </li></ul></ul><ul><ul><li>STARTUP STAGE </li></ul></ul><ul><ul><li>1.Substantial financial requirements for prototypes </li></ul></ul><ul><ul><li>2.Marketing and promotion costs </li></ul></ul><ul><ul><li>3.High degree of risk </li></ul></ul>
  5. 5. <ul><li>EMERGING GROWTH </li></ul><ul><li>1.Sizeable financial requirements </li></ul><ul><li>2.Less risk </li></ul><ul><li>EXPANSION </li></ul><ul><li>1.Low financial requirements </li></ul><ul><li>2.Less risk </li></ul><ul><li>Role of Business in Supporting Tech based SME needs </li></ul><ul><li>Priority sector lending </li></ul><ul><li>Loan schemes for innovations, follow up finance for VC backed SMEs </li></ul><ul><li>Provide expertise in evaluating economic benefits of new technology </li></ul><ul><li>Valuation of intangible assets (R&D expenses , patents , marketing , brand building expenses) </li></ul><ul><li>Enable formation of supply side linkages (dealers/agents of vendors), long term service contracts. </li></ul><ul><li>Marketing and promotion for creating a critical user mass for self sustenance. </li></ul><ul><li>Standards for price transparency & information disclosure to the customer. </li></ul>