EM Question Bank-

1. What is an Entrepreneurship?
Entrepreneurship is the act of being an entrepreneur, which can be defined as "one who
undertakes innovations, finance and business acumen in an effort to transform innovations
in to economic goods". This may result in new organizations or may be part of revitalizing
mature organizations in response to a perceived opportunity. The most obvious form of
entrepreneurship is that of starting new businesses; however, in recent years, the term has been
extended to include social and political forms of entrepreneurial activity. When entrepreneurship
is describing activities within a firm or large organization it is referred to as intra-preneurship
and may include corporate venturing, when large entities spin-off organizations. According to
Paul Reynolds, entrepreneurship scholar and creator of the Global Entrepreneurship Monitor, "by
the time they reach their retirement years, half of all working men in the United States probably
have a period of self-employment
Nature of Entrepreneurship

It is an Multi-dimensional concept. Entrepreneurship as an economic activity emerge and

functions in Socio-economic and cultured settings.

It has the power to change the destiny of a family, city, state or a country as a whole.

2. Why be an entrepreneur? Why not?

3. Who is an Entrepreneur and what are his/her Characteristics?
The term entrepreneur is a French word which basically means to undertake or go between
and was first used in the French economies by Richard Cantillon, an Irish man living in France in
the 17th and the 18th century.
A French economist by the name of Jean Baptiste Say is credited to be the person who first
defined this term. He defined an entrepreneur as the person who shifts economic resources out
of an area of lower into an area of higher productivity and greater yield i.e. entrepreneurs create
value.
An Entrepreneur is one who organizes and operates an enterprise for personal gain. He pays
current prices for the materials consumed in the business, for the use of the land, for the personal
services he employs and for the capital he requires. He contributes his own initiative, skill and
ingenuity in planning, organizing and administering the enterprise. He also assumes the chance
of loss and gain consequent to unforeseen and uncontrollable circumstances. The net residue of
the annual receipts of the enterprise after all costs have been paid, he retains for himself.

An entrepreneur is defined as person in effective control of commercial undertaking; one

who undertakes a business or an enterprise.
"The entrepreneur shifts economic resources out of lower and into higher productivity and
greater yield. French Economist J.B. Say (1800)
Entrepreneur as an individual, who undertakes the formation of an organization for
commercial purposes by recognizing the potential demand for goods and services, and
thereby acts as an economic agent transforms demand into supply. Adam Smith
It has assumed super importance for accelerating economic growth both in developed and
developing countries. It promotes capital formation and creates wealth in country. It is hope and
dreams of millions of individuals around the world. It reduces unemployment and poverty and its
a pathway to prosper. Entrepreneurship is the process of searching out opportunities in the
marketplace and arranging resources required to exploit these opportunities for long term gains.
It is the process of planning.
Characteristics of Entrepreneur
1. Hard Work
2. Desire For High Achievement
3. Highly Optimistic
4. Independence
5. Foresight
6. Good Organiser
7. Innovative
8. Perseverance
9. Team Spirit
4. Do you need special skills and characteristics to be an entrepreneur?
Entrepreneurial Skills

Communication Skills, Especially Persuasion

Creativity Skills

Critical Thinking And Assessment Skills

Leadership Skills

Negotiation Skills

Problem-solving Skills

Social Networking Skills

Time-management Skills

5. What measures to be taken to avoid the Pitfalls of Small Business Failure?

Drawbacks of Entrepreneurship

Uncertainty of income

Risk of losing your entire investment

Long hours and hard work

Lower quality of life until the business gets established

High levels of stress

Complete responsibility

Discouragement

Ten Deadly Mistakes of Entrepreneurship

1. Management mistakes
2. Lack of experience
3. Poor financial control
4. Weak marketing efforts
5. Failure to develop a strategic plan
6. Uncontrolled growth

7. Poor location
8. Improper inventory control
9. Incorrect pricing
10. Inability to make the entrepreneurial transition
Avoiding the Pitfalls of Small Business Failure

Know your business in depth

Develop a solid business plan

Manage financial resources

Understand financial statements

Learn to manage people effectively

Keep in tune with yourself

6. Discuss Personality Traits of Entrepreneurs.

Personality Traits of Entrepreneurs
David C. McCellands Needs-based Motivational Model

The Need For Achievement (n-ach)

High achievers
Spend time considering how to do a job better & important
They actively seek out opportunities to take responsibility
They welcome feedback on their actions

The Need For Authority And Power (n-pow)

They need to be influential, effective and to make an impact

There is a strong need to lead and for their ideas to prevail
There is motivation and need towards increasing personal status and prestige.

The Need For Affiliation (n-affil)

They need for friendly relationships and is motivated towards interaction

They need to be liked and held in popular regard
These people are team players

7. Discuss the Big Five based on Costa and McCraes (1992) model of personality structure.
The Big Five based on Costa and McCraes (1992) model of personality structure

8. What is Innovation? Discuss.

While invention depends upon creativity
Successful technological innovation requires integrating new knowledge with multiple business
functions.
The creation of new ideas/processes which will lead to change in an enterprises economic
or social potential.

Innovation

How to classify newness and degree of innovation and what to focus on:

New to the firm?

First in the market?
First in the world?
Incremental or radical innovation?
The Innovation Process

An innovation starts as an idea/concept that is refined and developed before application.

Innovations may be inspired by reality (known problem). The innovation (new product
development) process, which leads to useful technology, requires:
Research
Development (up-scaling, testing)
Production
Marketing
Use

Experience with a product results in feedback and leads to incrementally or radically

improved innovations.

To Provide:
Value to Customers
Rewards to Employee
Revenue to Investors
Satisfaction of Founders

9. What Investors Look for?

Novelty; world-class; evidence of commercial interest; clear path to market
Unencumbered, or encumbered by reasonable conditions (Equity, royalties)
Protection (Non-disclosure agreements, Patents, Designs, Brands, Copyright)
IP protected by one or more Patents is the IP required to implement the business plan
Freedom to Operate

10. Discuss Entrepreneurial Environment.

The Entrepreneurial Environment :
1. Policy Perspectives in India to promote Entrepreneurship
2. Analysis of Business Opportunities in different sectors of economy at National and Global
levels.

3. Quick - start Routes to establish an Enterprises (Franchising Ancilliarising &

Acquisitioning)
4. Support Organizations for an Entrepreneur and their Role
5. Legal framework for starting a Business / Industry in India.
Business Environment & Entrepreneurship Environment
(a) Political : System, Stability, Leadership
(b) Socio cultural : Culture, Community, Values, Ethics, Attitude
(c) Technological : Education, Absorption, Competition, Innovation
(d) Legal : Regulatory framework, Consumer Protection, Concern
Labour Laws
(e) Economic : GDP, GNP, Resources, Fiscal, Non fiscal Policies,
Subsidies
]

11. Which factors influencing Entrepreneurship Environment?

Factors Influencing Entrepreneurship Environment

for Environment,
Incentives and

12. Discuss Government Support (Policies and Incentives)in Entrepreneurship.

Government Support

An entrepreneur requires a continuous flow of funds not only for setting up of his/ her
business, but also for successful operation as well as regular up gradation/ modernization
of the industrial unit. To meet this requirement, the Government (both at the Central and
State level) has been undertaking several steps like setting up of banks and financial
institutions; formulating various policies and schemes, etc. All such measures are
specifically focused towards the promotion and development of small and medium
enterprises.

The government of India has been taking active steps to promote entrepreneurship in
various industry & service sectors. It has declared several policy measures and is
implementing schemes and programmes to enhance the global competitiveness of small
enterprises across the country.

Policies and Incentives

The Ministry of Micro, Small and Medium Enterprises is the nodal Ministry for
formulation of policies, programmes and schemes, their implementation and related
co- ordination, for the promotion and development of small scale industries in India.
The role of the Ministry is to assist the States in their efforts for the growth of the
small scale sector, by enhancing their competitiveness in an increasingly liberalized
economy. It is assisted by an attached office and two public sector enterprise,
namely:-

 Micro, Small and Medium Enterprises Development Organization (MSME-DO)

National Small Industries Corporation Ltd (NSIC)
Khadi and Village Industries Commission (KVIC)
Coir Board 3
Micro, Small and Medium Enterprises Development Organization (MSME-DO) :the Office of the Development Commissioner (Micro, Small and Medium Enterprises)
[earlier known as the O/o the DC (SSI)] is also known as Micro, Small and Medium
Enterprises- Development Organization (MSME-DO). It is the apex body for assisting
the Government in formulating, coordinating, implementing and monitoring policies and
programmes for micro, small and medium enterprises (MSMEs) in the country. MSMEDO provides a comprehensive range of common facilities, technology support services,
marketing assistance, entrepreneurial development support, etc.
Coir Board :- is a statutory body, established under the Coir Industry Act, 1953, for the
promotion and development of coir industry in India as well as for uplifting the living
conditions of the workers engaged in this industry.
National Small Industries Corporation Ltd (NSIC) :- was established by the
Government with a view to promoting, aiding and fostering the growth of micro, small
and medium enterprises in the country, with a focus on commercial aspect of their
operations. It implements several schemes to help the MSMEs in the areas of raw
material procurement, product marketing, credit rating, acquisition of technologies,
adoption of improved management practices, etc.
Khadi and Village Industries Commission (KVIC) :- established under the Khadi and
Village Industries Commission Act, 1956, as a statutory organisation engaged in
promotion and development of khadi and village industries for providing employment
opportunities in the rural areas.
The Other Important Policies

I.
II.
III.

The other important policies for the sector relate to:

Excise Duty
Foreign Direct Investment Approval
Labour Laws
Foreign Direct Investment Approval

An industrial undertaking, i.e., a company with interests in industry can invest up to 24%
equity in a SSI unit.

If the equity goes beyond 24%, the industrial unit loses its SSI status.

There is no restriction on the extent of equity that can be held by a Non-resident Indian
(NRI) as an individual/partner in a SSI unit.

Investors need to file an application with the Reserve Bank of India (RBI) in the
prescribed format and approval is ordinarily granted within 15 days.

For foreign investment outside the automatic route, clearance has to be obtained from
Foreign Investment Promotion Board (FIPB).

Applications for setting up a 100% Export Oriented Unit are also required to be filed with
the SIA.

For setting up a unit in an Export Processing Zone (EPZ), application has to be filed with
the Development Commissioner of the concerned EPZ.
Labour Laws

Employment Exchange (Compulsory Notification of Vacancies) Act, 1959

Equal Remuneration Act, 1976

The Factories Act, 1948

The Industrial Disputes Act

The Industrial Employment (Standing Orders) Act,1946

The Inter-state Migrant Workmen (Regulation of Employment and Conditions of Service)

Act, 1979

Labour Laws (Exemption from Furnishing Returns & Maintaining Registers by Certain
Establishments) Act, 1988

The Sales Promotion Employees (Conditions of Service) Act, 1976

The Shops and Establishments Act, 1953

The Trade Union Act, 1926

Workmens Compensation Act, 1923

Schemes and Programmes

Tax Holiday Scheme

Composite Loan Scheme

Industrial Estate Scheme

Scheme for International Cooperation

Scheme of Surveys, Studies and Policy Research

Scheme of Fund for Regeneration of Traditional Industries (SFURTI)

Scheme of Product Development, Design Intervention and Packaging (PRODIP)

Scheme of Khadi Karigar Janashree Bima Yojana for Khadi Artisans Scheme of Interest
Subsidy Eligibility Certification (ISEC)

13. Discuss Business Opportunities in India.

Business Opportunities in India
India-Strategic Overview :

Rich human and industrial resource.

Fourth largest economy in the world.

Second largest GDP among developing countries.

Large consumer market.

Growing middle class with substantial purchasing power

English is widely spoken in India.

Since English is widespread in business and commerce globally, very less communication
barriers in India.

Vast stretch of the land rich in natural resources.

One of the richest countries in the world in terms of human resource.

India is a great country for investment.

Top 20 Business Opportunities in India

1. Tourism
2. Automobile
3. Textile
4. Social Ventures
5. Software
6. Engineering Goods
7. Franchising
8. Education and Training
9. Food Processing
10. Corporate Demand
11. 11. Ayurveda and Traditional Medicine
12. 12. Organic Farming
13. 13. Media
14. 14. Packaging
15. 15. Floriculture
16. 16. Toys
17. 17. Healthcare Sector
18. 18. Biotechnology
19. 19. Energy Solutions

20. 20. Recycling Business

14. How To Start Business With Zero Investment?

For many peoples who start business having main problem is lack of money with them.
There will be difficult to find the investor or support your business, and would be build
enough capital for them.
Here are ideas to start business with zero investment:

Start service business that would be purchase much inventory to sell. You can buy things
for service as per-job basis and choose something unique talent that you loved to.

Start small business that will require less money with perfect model, once you have
product, it will take time to grow your business.

If you are having computer in your home start moving to some of the persons explain
your ideas open your website with your website building knowledge build business
online by blogging, SEO, link building, online freelancing , sell your own products
through online with desire competition.

Help others to get the job in a good company starts with a zero investment by offering
that by publishing in classifieds and in websites.

Start product distributor without any investment on contract bases and immediate service
were to give the service for new products or business resources. Here you will get a
commission when you exchange their product to someone else when the job done by you
in recurred time.

Helping students to get their school subjects by teaching maths, tutoring English or
multiple languages you can handle and such as simple and free to start. Go to neighbours
and in your surrounding area talk to them here is only one this is needed is space in your
home for teaching students.

Your often come up with the down-payment-enable business either offering product or
services, ask for down payment or full payment. By this way you have the capital to
product the orders for the particular services and no financial investment involved at your
side for your business.

15. Discuss Franchising.

1. Franchising :
A management whereby the manufacturer or sole distributor of trade marked product or services
gives the exclusive rights of local distribution to independent retailers for their payment and
conformance to standardised operating procedures.
Types of Franchising Product Franchising (e.g. Naturals Ice-Cream, McDonalds, Monginis, Barista, CCD)
Process Franchising (NIIT, Aptech, Eurokid)
Business Format Franchising (e.g. Mckinsey, Earnst & Young)

Probability of Success

Proven line of business

Pre-qualification of franchisee
Overall lower failure rates

Financial Assistance

Loans & loan guarantees

Training

Franchisor- provided

Operating Benefits

Location feasibility study

Marketing assistance
Quick start-up time
Advantages to the Franchisee

The entrepreneur does not have to incur all the risks that are often associated with starting
a business from a scratch.

Enters into a business that has an accepted name, product or service

Managerial assistance and upfront support is often provided by the Franchiser.

Knowledge and behavioural pattern of the market

Maintaining quality control of products and services

Market Reach

Focus on manufacturing, quality control, product and service innovations

Expansion programmes

Better financial management

Disadvantages of Franchising

Inability of franchiser to provide service, advertising and location, data and actionable
points from market research, meeting timelines.

Franchiser is bought out by another company.

Territorial protection.

Renewal of agreement/ advancement/ growth.

16. Discuss Ancilliarisation.

2. Ancillarisation :
Industrial undertaking having investment in fixed assets in plant & machinery not exceeding Rs.
2 crores and engaged in :
Manufacturing of parts, components, sub assemblies, tooling or intermediates and Rendering
services and supplying not less than 50% of its production to one or more other industrial
undertakings for production of other articles

Advantages of Ancillarisation

Minimizes set up cost

Low level of Inventory

Economical Sourcing

Better Quality Standards

Complementary Role

Development of Entrepreneurial Skills

Disadvantages of Ancillarisation

Dependence on parent company

Obsolescence

Multiplicity of suppliers by parent company

Securities like earnest money deposit

Delay in receiving payments

17. DiscussAcquisition.
Acquisition :
An acquisition is the purchase of a business or a part of it so that the acquired business is
completely absorbed and no longer exists as a business entity.
Whether the acquisition will become the core of the business or represents a needed capability,
such as a distribution outlet, sales force or production facility, the entrepreneur must ensure that
it fits well in the overall direction and structure of the strategic plan of the present venture.
Acquisition is a start up option as well as growth strategy.
Advantages Of An Acquisition

The previous owner brings valuable experience to the enterprise.

Fixed assets can be purchased for less in a buyout.

Existing business may have a developed market structure of suppliers, wholesalers,

retailers etc.

Employees of the existing business can be an important asset.

The entrepreneur can spent more time in assessing new opportunities to expand or
strengthen the business.

Disadvantages of Ancillarisation

The existing business may have marginal success record or even failure

The business if acquired at an inflated purchase price reflecting unwarranted goodwill or

a faulty business model

One may end up inheriting some one else problem.

The existing products are in the decline phase of the life cycle.

Employees may have difficult time to adjust with the new management

18. What one must evaluate in buying a business?

In Buying A Business You Must Evaluate

Management

Reasons for Selling

Customers and Prospects

Markets

Competition

Products or Services Offered

Channels of Distribution, the Sales Force, and Marketing

Operations, Human Resources and Information Technology

Profit & Loss Statements, Cash Flows, Balance Sheets and

Forecasts

Critical Risks and Contingencies

19. What is the Procedure for Setting up Business?

Before starting any business, certain Basic question will click your mind such as Where to set up?
What type of organization to be formed?
What is the procedure for setting up?
What are the post set up actions ?
What are continuous essentials for business?
What is the Procedure for Setting up Business?

Deciding to go into Business

Analyzing Strengths/Weaknesses

Training

Environmental Scanning

Production Selection

Market Survey

Form of Ownership

Location

Technology

Machinery & Equipment

Project Report

Finance

Provisional Registration

Technic Know How

Power Connection Installation of Machinery

Recruitment of Manpower

Raw Material

Production

Marketing

Quality Assurance

Permeant Registration

Market Research

Monitoring

20. Discuss key factors for Manufacturing Industry.

21. Discuss key factors for Service &Trading Industry.

22. What is the post businesses set up actions?

Forming an organization is just a beginning and only half job is done. In order to carry on
business , further actions needs to be taken.
I.
II.
III.

Setting up office & infrastructure

Opening of Bank Account
Obtain Tax Number

IV.

Business Specific Approval

In case of certain business, it is necessary to obtain the permission of prescribed regulatory

authority before undertaking the said business.
V. Hiring of Manpower
VI. Other Requirements
23. Discuss The Enterprise Launching.
C . The Enterprise Launching :
1. Product / Project Identification
2. Developing a Project Report / Business Plan
3. Business Financing Including Venture Capital Finance
4. Managing Early Growth of a Business, Incubation Program
5. New Venture Expansion Strategies And Issues
24. Discuss Essential Characteristics of Projects.
Introduction :

A project may be seen as an investment activity where financial resources are expended
to create capital assets that produce benefits over extended period of time.

Project identification is the initial phase of the project development cycle.

It begins with the conceiving of ideas or intentions to set up a project.
These ideas are then transformed into a project.

For projects to be properly conceived, the characteristics below must be clearly defined:

Objectives

Expected outputs

Intended beneficiaries

Planned lifespan

Extended outcome of the project

Principle stakeholders

Financial plan and source of financing

25. Discuss product/project identification.

Introduction :

A project may be seen as an investment activity where financial resources are expended
to create capital assets that produce benefits over extended period of time.

Project identification is the initial phase of the project development cycle.

It begins with the conceiving of ideas or intentions to set up a project.
These ideas are then transformed into a project.

Project Identification : Collection, compilation and analysis of data to locate potential

opportunities for starting business and development of such opportunities

Opportunity is a business concept, which if turned into a tangible product or service, by

the enterprise, will result into profit. It is all about creating values

The search of a good idea: Generate your own idea / Develop someone elses idea

Opportunities are identified through innovation/search of business ideas.

Types of innovation:

Additive Innovation Fully exploiting already existing resources, such as product

lines extensions

Complementary Innovation Offers something new and introduces few changes in the
structure of the business

Breakthrough Innovation (Radical Innovation) Changes the fundamentals of the

business, creating a new industry and new avenues for extensive wealth creation

Importance of Project Identification

It has long term consequences (make or break)

Involves commitment which can not be easily reversed

Ideas are put into action

Projects are catalytic agents for economic development

Involves creative use of resources- manpower, capital, raw materials etc.

Generates value addition and build-up national capital

Brings socio-cultural development

Leads to development of infra-structure and environment

Ideas need to be filtered through a multi-layer sieve.

Does the idea fire up your motivation?

Is it a viable business proposition in your area?

Does it match the needs of your clientele?

Check it out with basic market research

Test it out at market place

Consult with the experts

Look out for competition in the field

Is it a sunrise industry?

Your business opportunity

Project conceptualisation

26. Discuss Developing aBusiness Plan.

Business idea/opportunity must be carefully screened and evaluated for market potential,
financial viability and technical feasibility.
Entrepreneur should understand the cause of opportunity.

It may be technological change, market shift, government regulation or competition

A good business plan develops in order to catch the defined opportunity.
Developing framework of activities
Arranging finance and other inputs
Selecting appropriate production technology
Securing clearance from the government
Successfully managing the resulting venture.
Determine the Resources Required
Financial: this includes money, shares and other assets
Physical: refers to tangible property such as equipment and office space
Human resources: includes the knowledge, training, experience, as well as the time of
the business owner and employees
Technological: are embodied in a process, system or physical transformation, eg. unique
software products and tailored information system architecture
Reputation: encompasses the perceptions that people in the business' environment have
of the business
Organizational: include the business' structure, routines and systems
Description of the Business
Focus on the business concept and why such a business opportunity exists as well as the
products and services being offered, the pricing system to be used to meet costs and
profits, distinguishing your business products/services from others in the industry (lower
prices, faster delivery, longer warranties etc.) and identifying potential customers and
suppliers.
Selecting an Appropriate Business Location
Consideration of location choices on the basis of business customers, accessibility and
security and whether the location is conducive to the business specific industry needs.
Identifying the Competition

 Knowledge of who the competition is with reference to the length of time in business,
reputation, quality of products and services, customer service, number of employees,
image and strengths and weaknesses.
Detailing a Marketing Strategy
Development of marketing/research techniques to help promote your business market
using various advertising tools such as television, news, trade shows, telemarketing, sales
programs, internet, radio, magazines, direct mail, long-term sponsorships, public relations
(web presence, events, press releases), and other referral mechanisms (yellow pages).
Use of networking activities such as memberships or leadership positions and strategic
alliances to bolster your business market.
Laying out a Financial Plan
Assessment of the financial feasibility and profitability of a business (break-even
analysis), identification of funds needed and how the funds will be spent, the potential
sources for funding (personal resources, banks, venture capital, angel investors, public
agency loan programs), the business sense of a loan or investment and how it will be
repaid, capital equipment list, revenue/expense assumptions, three year profit and loss
statements (projections), three year cash flow summaries, balance sheets
(assets/liabilities/net worth), and providing for supporting documents relevant to the plan
(personal financial history, legal documents, leases, etc.)
Describing Personnel/Management Needs
Description of the human capital skills and experience needed for a particular business,
pay methods, fringe benefits, payroll taxes
and the use of independent contractors
versus employees.
Division of tasks/ reporting hierarchy / final decision makers.
Creation of an advisor group and Board of Directors.
Designing a Strategic Plan for the Present and Future
Establishment of business priorities and goals, including branding, benchmarking,
timetables for action, anticipated plans to retain and expand current markets and having
an exit strategy.
Major Components of a Project Report/Business Plan writing
I.

Executive Summary

II.

Business Profile

III.

Market Section

IV.

Financial Statements

27. Why Do Businesses Need Finance?

Why Do Businesses Need Finance?
Starting Up Buildings, machinery, raw materials and office equipment
Working Capital Short term finance required for the day-to-day running of a business
Unforeseen Events Sudden decline in sales, large customer fails to pay on time or pay
expenses quickly
Sources of Finance :
Internal Sources Of Finance Finance which is raised internally, it does not increase
the debts of the business. Examples: Retained profit Personal savings Sale of unwanted
assets Sale and leaseback
External Sources Of Finance Finance provided by people or institutions outside the
business, creates a debt that will require payment. Examples: Loans Overdraft Shares
Debentures
28. Define Venture Capital Finance
Meaning
Venture capital means funds made available for startup firms and small businesses with
exceptional growth potential.
Venture capital is the financial support to young, rapidly growing companies/ individuals
that have potential to develop into significant economic contributors by the Business
men/ Group to create a product or service which has a unique idea.
The Concept of Venture Capital :
Venture Economics Jane Koloski Morris, defines Venture Capital as 'providing seed, start-up and
first stage financing' and also 'funding the expansion of companies that have already
demonstrated their business potential but do not yet have access to the public securities market or
to credit oriented institutional funding sources. The European Venture Capital Association
describes it as risk finance for entrepreneurial growth oriented companies.
The Origin of Venture Capital :

The Origin of Venture Capital In the 1920's & 30's, the wealthy families of and individuals
investors provided the start up money for companies that would later become famous. Eastern
Airlines and Xerox are the more famous ventures they financed. In its early years VC may have
been associated with high technology, over the years the concept has undergone a change and as
it stands today it implies pooled investment in unlisted companies.
Venture Capital in India :
In India the Venture Capital plays a vital role in the development and growth of innovative
entrepreneurships. Venture Capital activity in the past was possibly done by the developmental
financial institutions like IDBI, ICICI and State Financial Corporations. In India, the need for
Venture Capital was recognized in the 7th five year plan and long term fiscal policy of GOI.
Features/Characteristics of Venture Capital
High risk
Participation in management
Provided at earlier Stage
Finance to Smaller and Less Mature companies
Finance new and rapidly growing companies
Lack of liquidity
Long time horizon
Need of Venture Capital
To bridge the gap b/w Capital and Knowledge
Maximum utilization of available resources
Advantages of Venture Capital
To Investors
To Venture Capital Undertakings
To Society/Economy
Stages in Venture Capital

1. Seed Money: Low level financing needed to prove a new idea.

2. Start-up: Early stage firms that need funding for expenses associated with marketing and
product development.
3. First-Round: Early sales and manufacturing funds.
4. Second-Round: Working capital for early stage companies that are selling product, but
not yet turning a profit.
5. Third-Round: Also called Mezzanine financing, this is expansion money for a newly
profitable company.
6. Fourth-Round: Also called bridge financing, it is intended to finance the "going public
process
Venture Capital Fund
A venture capital fund refers to a pooled investment vehicle that primarily invests the
financial capital of third-party investors in enterprises
As per SEBI (Venture Capital Funds) Regulations, 1996Venture capital fund means a
fund established in the form of a trust or a company including a body corporate and
registered Under these regulations which
has a dedicated pool of capital
raised in a manner specified in the regulations, and
invests in venture capital undertaking in accordance with the regulations.
Conclusion :
Venture Capital Business has been drastically decreasing due to many reasons. Liberalize the
stringent policies and pave the way to the venture capital investors There are large sectors of the
economy that are ripe for VC investors, like,. I.T., Pharma, Manufacturing. Telecom, Retail
franchises, food processing and many more
Time Periods for Finance is generally considered to be either:
Short-term Finance : is needed for the day-to-day running of a business and is usually for a
period of up to 3 years. In order to understand short-term finance it is necessary to
understand the concept of Cash Flow.
Medium-term Finance : is normally thought of as being for between 3 10 years. It can
replace expensive equipment, to expand, convert persistent overdraft into formal mediumterm loan.

Long-term Finance : is usually thought of as being for periods in excess of 10 years. This
Finance is for securing the resources for long-term growth.
29. Discuss Managing Early Growth of a Business
The need for market focus
Financial foresight
Building a management team
Where can I contribute?
The need for outside advice
Phase 1: Creativity

Focus: Make & Sell

Structure: Informal

Style: Entrepreneurial

Control: Market Results

Rewards: Ownership

Crisis: Leadership

Phase 2: Direction

Focus: Operational Efficiency

Structure: Centralized

Style: Directive

Control: Standards, Cost

Rewards: Salary, Merit

Crisis: Autonomy

Phase 3: Delegation

Focus: Expansion of market

Structure: De-centralized

Style: Delegative

Control: Reports, Profit

Rewards: Individual Bonus

Crisis: Control

Phase 4: Coordination

Focus: Consolidation

Structure: Product Groups

Style: Watchdog

Control: Plans, Investment

Rewards: Profit Sharing

Crisis: Red-Tape

Phase 5: Collaboration

Focus: Innovation

Structure: Matrix of teams

Style: Participative

Control: Mutual goal setting

Rewards: Team Bonus

Crisis: ?

30. Define Business Incubation and discuss Incubation Program

Definition of Business Incubation
"Business incubation is a unique and highly flexible combination of business development
processes, infrastructure and people designed to nurture new and small businesses by helping
them to survive and grow through the difficult and vulnerable early stages of development."

Business incubation provide SMEs and start-ups with the nurturing environment needed
to develop and grow their businesses, offering everything from virtual support, rent-adesk through to state of the art laboratories and everything in between. They provide
direct access to hands on intensive business support, access to finance and experts and to
other entrepreneurs and suppliers to really make businesses and entrepreneurs to grow.

Business incubation provides a nurturing, instructive and supportive environment for

entrepreneurs during the critical stages of starting up a new business. The goal of
incubators is to increase the chance that a start-up will succeed, and shorten the time and
reduce the cost of establishing and growing its business. If successful, business
incubators can help to nurture the companies that will form the true creators of a regions
or nations future wealth and employment.

Incubators serve as a launching pad for young and small businesses. Start-ups, which are
innately dynamic entities, need access to support, and incubators are a means of
providing this.

Is a facility designed to assist businesses to become established and profitable during

the start up phase.

It Provides
Business Advice
Business Services
Networking
Mentoring
Full Time Manager
Business Incubator