Entrepreneurship : an art explored

Shubhi Verma

Introduction

The word „entrepreneur‟ is derived from the French verb „enterprendre‟. It means

“to undertake”. Entrepreneur is the artist who innovates,

thinks and creates layman goods into commercial phenomenon.

The underlying spirit of entrepreneurship is innovation(Schumpeter,1950).

He is a artist who imagines and creates products for his ‘target audience’.

Objectives

Through this case study, an attempt has been made to focus on the

following :Evolution of Entrepreneurship in India.

Analysis of the challenges that Indian entrepreneurs face.

Throw light upon the potential of entrepreneurship in India.

Observing the role of the incubators and the government .

Research methodology

Information in the case study is based on primary and secondary resource drawn from

various :Books

Newspaper

Website

Interview

Reports

Story

of Entrepreneur

ship in

India

Socialistic India :Nehruvian era

Quota raj

Capitalistic India :LiberalizationPrivatizationGlobalization

faced

By India

Challenges

ChallengesFaced By an

Indian Entrepreneu

r

Cultural Reasons

Brain-Drain

Theory

Socialistic

Reasons

Historical

Reasons

Maslow’s theory of human motivation

Discovery Of potential In India

The 1.15 billion huge

population creates great

opportunities

400 million people

below the age of 35 by 2020

Unsaturated market

India- democrati

c and capitalistic

Government

schemes and

programes

Role Of Incubators

Financial Foothold

Sources of Finance

Debts Equity

Banks

OtherFinancialInstitutions

VentureCapitals

PrivateEquity Funds

Angel Investors

Other

Government’sIntervention

Self-finance

VENTURE CAPITAL

In a Venture Capital, the

investors give money to young

business and startup firms

that have long-term growth potential.

This source of funding is very

crucial for those young

entrepreneurs who do not have access to capital

markets.

There is high risk for the venture capitalists but they can earn above average returns and a substantial

amount of equity in the firm.

Majority of the venture

capitalists are investment

banks, wealthy individuals and other financial

institution.

IPO

Advantages and Disadvantages of VC

ADVANTAGES•Venture capital funding minimizes the amount of risk. When a loan is taken from the banks there is a need to pay it back with interest added.

•No need of collateral. When taking loan, possessions such as home etc. is listed as collateral, which is not required in Venture capital.

•Expertise accompanies the VC funding. Most of these VCs consist of experienced and talented businessmen, which often bring in their advice, and invest their knowledge in the startup. This leads to the birth of innovative new ideas that maximizes their chances of success.

•Other value added services such as:

•Mentoring •Alliances•Facilitate exit

DISADVANTAGES• Loss of autonomy. Start-ups

must give a substantial amount of share or equity to the VC, this means VCs acquire a say in the company’s decision making. This result in the loss of autonomy.

• There are certain restrictions on the part of the start up firm when a VC deal is signed. This includes employee salary and start up’s management team amongst others.

• This could be a lengthy and complex process. One needs to draw a complete business plan, and put forward company’s financial projection etc.

• Accounting fees and Legal expenses. At the deal negotiation stage one needs to handle these external costs, which would add on to the financial pressure.

Angel Investors

Also known as Business Angels or Investment angels

An investor who provides financial backing for small startups or entrepreneurs.

Angel investors are usually found among an entrepreneur's family and friends.

The capital they provide can be a one-time injection of seed money or ongoing support to carry the company through difficult times.

Angel investors give more favorable terms than other lenders, as they are usually investing in the person rather than the viability of the business.

Advantages and Disadvantages of IAs

IAs are free to make investment decisions

quickly

No need for collateral – i.e. personal assets

Access to your investor's sector knowledge and

contacts

Better discipline due to outside scrutiny

Access to BA mentoring or management skills

No repayments or interest

Not suitable for investments

below £10,000 or more than

£250,000

Takes longer to find a suitable IA

investor

Giving up a share of your

business

Less structural support

available from an IA than from

an investing company.

Others- Government Intervention

Government also plays an important role in an

entrepreneur’s life. There are various

schemes launched by the government to help young entrepreneurs to

stand on their feet. Various legislations

have been enacted to serve these

entrepreneur’s needs and help them to

construct their ideas. One such legislation is

the Micro Small and Medium Enterprise Act

(MSME) 2006.

Another brilliant examples is Mukhya

Mantri Yuva Swarozgar Yojna (MYSY Scheme) being implemented in the State of Madhya

Pradesh which aims at promoting

entrepreneurship in the state without the need for collateral security.

Micro Small and Medium Enterprises Development Act 2006

Section 10 of the MSME Act states that ‘the

policies and practices in respect of credit to the

micro, small and medium enterprises shall be

progressive’…and that the RBI would issue guidelines

from time to time, ‘ to ensure timely and

smooth flow of credit to such enterprise,

minimize the incidence of sickness and enhance the competitiveness of such

enterprises’.

Section 12 of the MSME Act also calls for the constitution of one or

more funds for the sector, to which the

government would provide grants.

Mukhya Mantri Yuva Swarozgar Yojna (MYSY)

Objective: For promoting entrepreneurship in the Madhya Pradesh without the need for collateral

security.

Nodal Office for implementation and monitoring of the scheme: Department of

Commerce, Industries and Employment•Implementing Agencies: Panchayat and Rural Development Department for Rural Areas and  Department of Commerce, Industries and Employment for Urban Areas.

•Project Cost: Ultra Small: Project Cost Up to Rs.50000 , Small : Project Cost from Rs.50000 to Rs.25 lac

•Classification of Advance: Micro and Small Enterprises

•Repayment:  Not exceeding 84 months excluding the moratorium period.

•Quantum of Finance: Rs. 25 lac•Margin: State Government will provide 20% of the project cost as Margin Money or  Maximum Rs.10000 one shot basis for project cost up to Rs.50000

•Rate of Interest: For Loan up to Rs.10 lac : BR+0.50%, For Loan above Rs.10 lac and up to Rs.25 lac: BR+1.00%

•Security: No collateral security if the account is covered under CGTMSE. In other case security of 100% of amount of loan sanctioned to be taken.

•Guarantee Fee:•Interest Subsidy by government: 5% for initial 5 years subject to certain limit. 

Question

Is education a necessity for one

to be an entrepreneur ?

Conclusion

Through this case study

we discovered ,t

hat it is entrepreneur

s that fuel our economic

growth.

They not only ensure the

reduction of poverty but

also the socio-

economic growth.

Entrepreneurship paves

the way for a layman to turn into a

phenomenon.

There is no age bar for

one to be an entrepreneur , you think today and

tomorrow will be your day.

Bibliography

Report:

Entrepreneurship Challenges and Opportunities in India : Dr.N. Santhi and S. Rajesh Kumar

UNDP report on Entrepreneurship 2010

National knowledge commission report 2009.