ED UNIT-1

What is an 'Entrepreneur'
An individual who, rather than working as an employee, runs a small business and assumes all
the risk and reward of a given business venture, idea, or good or service offered for sale. The
entrepreneur is commonly seen as a business leader and innovator of new ideas and business
processes.
BREAKING DOWN 'Entrepreneur'
Entrepreneurs play a key role in any economy. These are the people who have the skills and
initiative necessary to take good new ideas to market and make the right decisions to make the
idea profitable. The reward for the risks taken is the potential economic profits the entrepreneur
could earn.
INTERNAL and EXTERNAL factor of entrepreneurship:

If there is anything that is steadfast and unchanging, it is change itself. Change is

inevitable, and those organizations who do not keep up with change will become
unstable, with long-term survivability in question.
There are things, events, or situations that occur that affect the way a business operates,
either in a positive or negative way. These things, situations, or events that occur that
affect a business in either a positive or negative way are called "driving forces or
environmental factors or forces."
There are two kinds of driving forces; Internal driving forces, and external driving
forces. Internal driving forces are those kinds of things, situations, or events that occur
inside the business, and are generally under the control of the company. Examples might
be as follows.

organization of machinery and equipment,

technological capacity,
organizational culture,
management systems,
financial management
employee morale.
External driving forces are those kinds of things, situation, or events that occur outside of
the company and are by and large beyond the control of the company. Examples of
external driving forces might be, the industry itself, the economy, demographics,

competition, political interference, etc.

Whether they are internal or external driving forces, one thing is certain for both. Change
will occur! A company must be cognizant of these changes, flexible, and willing to
respond to them in an appropriate way.
External driving forces can bury a business if not appropriately dealt with. The question
is, how does a business know what changes are occurring so that they can deal with them
in a positive way. OK, that's the next issue.
In order for a business to succeed and gain the competitive edge, the business must know
what changes are indeed occurring, and what changes might be coming up in the future. I
guess you might call this forecasting. Thus, critical to the business is what we
call "informational resources." It is the collection and analyzation of data. Some
examples of critical information might include the following:

Competition (what are they doing?)

Customer behavior (needs, wants, and desires)

Industry outlook (local, national, global)

Demographics (the change populations, there density, etc.)

Economy (are we peaking, or moving negatively)

Political movements and/or interference

Social environment

Technological changes

General environmental changes

Government interference (laws, regulations, policies, etc.)

The above are just some issues organizations must be on top of. Well it's never easy, but
organizations that are successful include all of the above (and more), to develop the appropriate
tactics, strategies, and best practices, to ensure successful out comes.

4 FUNCTIONS OF AN ENTERPRENEUR:
1. Entrepreneurial functions 2. Managerial functions 3. Promotional functions
4. Commercial functions (explanation in note book).

BARRIERS TO ENTREPRENEURSHIP:
1. Corrupt and unsupportive business environment: Lack of supportive and marketaugmenting governmental regulations serve as a barrier to entrepreneurship. Russia leads
all other large nations in having an unsupportive business environment because they lack
rule of law, have poorly defined contract and property laws, enforce regulations
inconsistently, allow rampant corruption and bribing, allow regulatory authorities and
inspectors to act in a predatory nature which therefore requires friendly ties with
government officials and bureaucrats to smooth the way for businesses to operate.
2. Employee related difficulties: Building an employee asset base for the enterprise is one
of the more daunting and sometimes overlooked tasks. Entrepreneurs must find and select
the best-qualified employees who are motivated and willing to grow with the venture.
Then they must ensure the employees do not leave. The professors say this task becomes
a barrier when employees expectations increases, governmental regulations related to
labor employment is hardened, and employee costs grow. Employee cost is more than
pay. It includes healthcare, workers compensation, social security tax, and health and
safety regulations.
3. Severe market entry regulations: Governmental rules, taxation, environmental
regulations, lending requirements and licensing are all barriers to entrepreneurship. Most
countries, the United States included, proscribe or license market entry and the creation
of new firms to protect incumbents in certain industries and professions. Entry
procedures, or red tape, vary such that entrepreneurs need one day to register an
enterprise in one country and up to 20 weeks in another. Other barriers to
entrepreneurship are predatory tax behavior of authorities, lack of property rights and tax
disadvantages.
4. Shortage of funds and resources: Finding the money to start up an enterprise is a
leading barrier to entrepreneurship. Without funds, any person cannot begin to organize,
train, develop and sell product.
5. Lack of Entrepreneurship Opportunities: Venture creation requires existing
marketplace opportunities with possibilities known to the entrepreneur and favorable
odds for success for entrepreneurial spirit to succeed.
6. Lack of Adequate Entrepreneurship Training: Training and education can be a robust
incubator for new ventures. This includes training in technical skills, managerial skills,
entrepreneurial skills and entrepreneurship.

7. Lack of Appropriate Technical and Practical Skills: People tend to use the skills they
have acquired to pursue entrepreneurial initiative. Lacking the appropriate skills and
knowledge inhibits economic development.
8. Lack of Market Experience: The essence of leadership is first learning and doing before
leading. Therefore, the capability to start a business is propelled by previous education
and work experience. Rushing into a new market because it looks attractive and
rewarding without having some experience and background in it can be fatal. Experience
in a related business before start-up is positively correlated to the probability of success.
9. Aversion to Risk: A psychological barrier closely related to the fear of failure is aversion
to risk. Entrepreneurs must take initiative, create structure with a social-economic
mechanism and accept risk of failure. Entrepreneurs have to be risk takers while those
who are risk averse will seek the security if an existing establishment.
Entrepreneurial Motivation
Motivation is regarded "as the inner state that energizes activities and directs or channels
behavior towards the goal". It can also be seen as a process that arouses action, sustains the
activity in progress and that regulates the pattern of activity.
The motives can be categorizing as social and psychological motives.
Few of the social motives are
1.
2.
3.
4.
5.

Self esteem
Social acceptability
Competence building
Wealth generation
Self-actualization

Motives are not necessarily the gifts of heredity but are the outcome of the individuals
interactions with others or the society.
CLASSIFICATION OF ED:
Based on the Type of Business:
1. Trading Entrepreneur:
As the name itself suggests, the trading entrepreneur undertake the trading activities. They
procure the finished products from the manufacturers and sell these to the customers directly or
through a retailer. These serve as the middlemen as wholesalers, dealers, and retailers between
the manufacturers and customers.
2. Manufacturing Entrepreneur:

The manufacturing entrepreneurs manufacture products. They identify the needs of the
customers and, then, explore the resources and technology to be used to manufacture the
products to satisfy the customers needs. In other words, the manufacturing entrepreneurs
convert raw materials into finished products.
3. Agricultural Entrepreneur:
The entrepreneurs who undertake agricultural pursuits are called agricultural entrepreneurs. They
cover a wide spectrum of agricultural activities like cultivation, marketing of agricultural
produce, irrigation, mechanization, and technology.
Based on the Use of Technology:
1. Technical Entrepreneur:
The entrepreneurs who establish and run science and technology-based industries are called
technical entrepreneurs. Speaking alternatively, these are the entrepreneurs who make use of
science and technology in their enterprises. Expectedly, they use new and innovative methods of
production in their enterprises.
2. Non-Technical Entrepreneur:
Based on the use of technology, the entrepreneurs who are not technical entrepreneurs are nontechnical entrepreneurs. The forte of their enterprises is not science and technology. They are
concerned with the use of alternative and imitative methods of marketing and distribution
strategies to make their business survive and thrive in the competitive market.
Based on Ownership:
1. Private Entrepreneur:
A private entrepreneur is one who as an individual sets up a business enterprise. He / she its the
sole owner of the enterprise and bears the entire risk involved in it.
2. State Entrepreneur:
When the trading or industrial venture is undertaken by the State or the Government, it is called
state entrepreneur.
3. Joint Entrepreneurs:
When a private entrepreneur and the Government jointly run a business enterprise, it is called
joint entrepreneurs.
Based on Gender:

1. Men Entrepreneurs:
When business enterprises are owned, managed, and controlled by men, these are called men
entrepreneurs.
2. Women Entrepreneurs:
Women entrepreneurs are defined as the enterprises owned and controlled by a woman or
women having a minimum financial interest of 51 per cent of the capital and giving at least 51
per cent of employment generated in the enterprises to women.
Based on the Size of Enterprise:
1. Small-Scale Entrepreneur:
An entrepreneur who has made investment in plant and machinery up to Rs 1.00 crore is called
small-scale entrepreneur.
2. Medium-Scale Entrepreneur:
The entrepreneur who has made investment in plant and machinery above Rs 1.00 crore but
below Rs 5.00 crore is called medium-scale entrepreneur.
3. Large-Scale entrepreneur:
The entrepreneur who has made investment in plant and machinery more than Rs 5.00 crore is
called large-scale entrepreneur.
Based on Clarence Danhof Classification:
Clarence Danhof (1949), on the basis of his study of the American Agriculture, classified
entrepreneurs in the manner that at the initial stage of economic development, entrepreneurs have
less initiative and drive and as economic development proceeds, they become more innovating
and enthusiastic.
Based on this, he classified entrepreneurs into four types:
These are discussed in seriatim:
1. Innovating Entrepreneurs:
Innovating entrepreneurs are one who introduce new goods, inaugurate new method of
production, discover new market and reorganize the enterprise. It is important to note that such
entrepreneurs can work only when a certain level of development is already achieved, and people
look forward to change and improvement.
2. Imitative Entrepreneurs:

These are characterized by readiness to adopt successful innovations inaugurated by innovating

entrepreneurs. Imitative entrepreneurs do not innovate the changes themselves, they only imitate
techniques and technology innovated by others. Such types of entrepreneurs are particularly
suitable for the underdeveloped regions for bringing a mushroom drive of imitation of new
combinations of factors of production already available in developed regions.
3. Fabian Entrepreneurs:
Fabian entrepreneurs are characterized by very great caution and skepticism in experimenting
any change in their enterprises. They imitate only when it becomes perfectly clear that failure to
do so would result in a loss of the relative position in the enterprise.
4. Drone Entrepreneurs:
These are characterized by a refusal to adopt opportunities to make changes in production
formulae even at the cost of severely reduced returns relative to other like producers. Such
entrepreneurs may even suffer from losses but they are not ready to make changes in their
existing production methods.

THEORY OF ENTREPRENEURSHIP:
Economic Theories
Economic entrepreneurship theories date back to the first half of the 1700s with the work of
Richard Cantillon, who introduced the idea of entrepreneurs as risk takers. The classic,
neoclassical and Austrian Market process schools of thought all pose explanations for
entrepreneurship that focus, for the most part, on economic conditions and the
opportunities they create. Economic theories of entrepreneurship tend to receive significant
criticism for failing to recognize the dynamic, open nature of market systems, ignoring the
unique nature of entrepreneurial activity and downplaying the diverse contexts in which
entrepreneurship occurs.
Resource-Based Theories
Resource-based theories focus on the way individuals leverage different types of resources to get
entrepreneurial efforts off the ground. Access to capital improves the chances of getting a new
venture off the ground, but entrepreneurs often start ventures with little ready capital.
Other types of resources entrepreneurs might leverage include social networks and the
information they provide, as well as human resources, such as education. In some cases, the
intangible elements of leadership the entrepreneur adds to the mix operate as resource that
a business cannot replace.
Psychological Theories

Psychological theories of entrepreneurship focus on the individual and the mental or

emotional elements that drive entrepreneurial individuals. A theory put forward by
psychologist David McCLelland, a Harvard emeritus professor, offers that entrepreneurs possess
a need for achievement that drives their activity. Julian Rotter, professor emeritus at the
University of Connecticut, put forward a locus of control theory. Rotters theory holds that
people with a strong internal locus of control believe their actions can influence the
external world and research suggests most entrepreneurs possess trait. A final approach,
though unsupported by research, suggests personality traits ranging from creativity and resilience
to optimism drive entrepreneurial behavior.
Sociological/Anthropological Theories
The sociological theory centers its explanation for entrepreneurship on the various social
contexts that enable the opportunities entrepreneurs leverage. Paul D. Reynolds, a George
Washington University research professor, singles out four such contexts: social networks, a
desire for a meaningful life, ethnic identification and social-political environment factors.
The anthropological model approaches the question of entrepreneurship by placing it within the
context of culture and examining how cultural forces, such as social attitudes, shape both the
perception of entrepreneurship and the behaviors of entrepreneurs.
Opportunity-Based Theory
Prolific business management author, professor and corporate consultant, Peter Drucker put
forward an opportunity-based theory. Drucker contends that entrepreneurs excel at seeing and
taking advantage of possibilities created by social, technological and cultural changes. For
example, where a business that caters to senior citizens might view a sudden influx of younger
residents to a neighborhood as a potential death stroke, an entrepreneur might see it as a chance
to open a new club.

THE CONCEPT OF ENTREPRENEURSHIP

Entrepreneur

person

entrepreneurship

Process of action

enterprise

object

Concept of Entrepreneur
Basically an entrepreneur is a person responsible for setting up a business or an enterprise.
He has the initiative, skill for innovation and who looks for high achievements.
He is catalytic agent of change and works for the good of people. He puts up new green field
projects that create wealth, open up many employment opportunities and leads to growth of other
sectors.
ENTREPRENEUR
The word "entrepreneur" is derived from a French root entreprendre, meaning, "to undertake".
The term "entrepreneur" seems to have been introduced into economic theory by Cantillon
(1755) but Say (1803) first accorded the entrepreneur prominence.
It was Schumpeter however, who really launched the field of entrepreneurship by associating it
clearly with innovation. Druckers definition of entrepreneurship, namely a systematic,
professional discipline, brought a new level of understanding to the domain (Maurer,Shulman,
Ruwe & Becherer 1995:526). Sharma and Chrisman (1999:12) identified two clusters of thought
on the meaning of entrepreneurship. One group focused on the characteristics of
entrepreneurship (e.g. innovation, growth, uniqueness) while a second group focused on the
outcomes of entrepreneurship (e.g. the creation of value).
He is a person who develops and owns his own enterprise
He is a moderate risk taker and works under uncertainty for achieving the goal.
He is innovative
He peruses the deviant pursuits
Reflects strong urge to be independent.
Persistently tries to do something better.
Dissatisfied with routine activities.
Prepared to withstand the hard life.
Determined but patient
Exhibits sense of leadership

Also exhibits sense of competitiveness

Takes personals responsibility
Oriented towards the future.
Tends to persist in the face to adversity
Convert a situation into opportunity.
An entrepreneur is a person who starts an enterprise. He searches for change and responds to it.
A number of definitions have been given of an entrepreneur-The economists view him as a
fourth factor of production along with land, labor and capital. The sociologists feel that certain
communities and cultures promote entrepreneurship like for example in India we say that
Gujaratis and Sindhis are very enterprising. Still others feel that entrepreneurs are innovators
who come up with new ideas for products, markets or techniques. To put it very simply an
entrepreneur is someone who perceives opportunity, organizes resources needed for exploiting
that opportunity and exploits it. Computers, mobile phones, washing machines, ATMs, Credit
Cards, Courier Service, and Ready to eat Foods are all examples of entrepreneurial ideas that got
converted into products or services. Some definitions of an entrepreneur are listed below:
Stems:
from the French word entrependre meaning one who undertakes or one who is ago-between
Richard Cantillon: An entrepreneur is a person who pays a certain price for a product to resell it
at an uncertain price, thereby making decisions about obtaining and using the resources while
consequently admitting the risk of enterprise.
J.B. Say
: An entrepreneur is an economic agent who unites all means of production- land of one, the
labour of another and the capital of yet another and thus produces a product. By selling the
product in the market he pays rent of land, wages to labour, interest on capital and what remains
is his profit. He shifts economic resources out of an area of lower and into an area of higher
productivity and greater yield.
Schumpeter:
According to him entrepreneurs are innovators who use a process of shattering the status quo of
the existing products and services, to set up new products, new services.
David McClleland: An entrepreneur is a person with a high need for
achievement [N-Ach]. He is energetic and a moderate risk taker.

Peter Drucker
: An entrepreneur searches for change, responds to it and exploits opportunities. Innovation is a
specific tool of an entrepreneur hence an effective entrepreneur converts a source into a resource.
Kilby:
Emphasizes the role of an imitator entrepreneur who does not innovate but imitates technologies
innovated by others. Are very important in developing economies.
Albert Shapero
: Entrepreneurs take initiative, accept risk of failure and have an internal locus of control.
G. Pinchot: Intrapreneur is an entrepreneur within an already established organization. Definition
of Entrepreneurs Today

Entrepreneurship is the process of creating something new and assuming the risks and
rewards.
Four aspects of being an entrepreneur today:
Involves creation process.
Requires devotion of time and effort.
Involves rewards of being an entrepreneur.
Requires assumption of necessary risks

UNIT-2
CONTENT OF A BUSINESS PLAN:
1 : Basic Information Name of the business or organization;
What stage are you up to? What is the business selling or producing? What money or other
resources do you need to start the business? What do you hope to achieve?
2 : People Involved
Names, abilities, qualifications, experience of people involved How will your business be
managed? Describe the jobs involved running your business and the skills required Will people
need training? What training do you need?
3 : The Product Or Service
Describe in detail what you plan to make/sell What research have you done? Do you plan to
develop your product/service? How well does your planned product/service fit the market?

4 : Marketing Customers :
location, age, spending habits and buying power What are the trends in the market? What share
of the market will you need? Who are your target customers (those buying often)? Who are your
main competitors? Does the way you plan to price your product fit the market? How will you
prevent or deal with complaints?
5 : Production/Delivering
Your Service Premises needed, their layout and their suitability for producing/delivering the
service Machinery, equipment, fixtures and tools required Suppliers, their terms and the
availability of alternatives Sub-contracting (if any) Stock and quality control
6 : Legal Issues
Legal status of the business or organisation Licences, permits, agreements needed, leases on
premises Ownership of assets, patents, commercial information
7 : Financial Issues
Prices and basic costs Budgets or projections of your costs: labour, materials, overheads Cashflow forecasts; When will you break -even? When will you start to be profitable? How profitable
is the business? How large will your mark-up be? How much money will you need - grant, loan
or overdraft?
8 : Other Information
Research findings, other information, CVs of key personnel Publicity materials or photographs
Premises plans/layout
CREATIVE PROBLEM SOLVING
PROJECT APPRAISAL
Project appraisal is a generic term that refers to the process of assessing, in a structured way,
the case for proceeding with a project or proposal. In short, project appraisal is the effort of
calculating a project's viability. It often involves comparing various options, using economic
appraisal or some other decision analysis technique.
PROCESS:

Initial Assessment

Define problem and long-list

Consult and short-list

Evaluate alternatives

Compare and select Project appraisal

VALUE ANALYSIS:
Value analysis is an organized approach to identify unnecessary costs associated with any product,
material, part, component, system or service by analysis of function and efficiently eliminating them
without impairing the quality functional reliability or its capacity to give service.
According to Society of American Value Engineers (SAVE) Value analysis is the systematic
application of recognized techniques which identify the function of a product or services establish a
monetary value for the function and provide the necessary function reliability at that lowest overall
cost.
It is a rational and structured process consisting of:
(a) Functional analysis to define the reason for the existence of a product or its components,
(b) Creatively analysis for generating new and better alternatives and
(c) Measurement for evaluating the value of present and future conce pts.
The phrase value analysis can be defined as a technique which examines the facts of a function and
cost of a product in order to determine whether the cost can be reduced or altogether
eliminated, while retaining all the features of performance and qu ality of a product or both.
Therefore, logically, VA is an organized approach of exposing and eliminating unnecessary costs.
The method has logical foundation in its fundamental approach to cost reduction and profit
improvement and in this objective approach, the VA techniques has to analyze the functional
cost of an item and recommend a change.
Put alternatively, VA is a team approach to think functionally about a component as to what it does
rather than what it is. This approach is the real test of understanding problems under study.

UNIT-3
Corporate entrepreneurship
The concept of corporate entrepreneurship is generally believed to refer to the development of
new ideas and opportunities within large or established businesses, directly leading to the

improvement of organizational profitability and an enhancement of competitive position or the

strategic renewal of an existing business.

UNIIT-4
Concept of Women Entrepreneurs
Women Entrepreneurs may be defined as the women or a group of women who initiate, organize
and operate a business enterprise. The Government of India has defined women entrepreneurs as
an enterprise owned and controlled by women having a minimum financial interest of 51 per
cent of the capital and giving at least 51 per cent of the employment generated in the enterprise
to women. Women entrepreneurs engaged in business due to push and pull factors which
encourage women to have an independent occupation and stands on their on legs. A sense
towards independent decision-making on their life and career is the motivational factor behind
this urge.
ROLE:
1. Imaginative: It refers to the imaginative approach or original ideas with competitive
market. Well-planned approach is needed to examine the existing situation and to identify
the entrepreneurial opportunities. It further implies that women entrepreneurs have
association with knowledgeable people and contracting the right organization offering
support and services
2.

Attribute to work hard: Enterprising women have further ability to work hard. The
imaginative ideas have to come to a fair play. Hard work is needed to build up an
enterprise.

3. Persistence: Women entrepreneurs must have an intention to fulfill their dreams. They
have to make a dream transferred into an idea enterprise; Studies show that successful
women work hard.
4. Ability and desire to take risk: The desire refers to the willingness to take risk and ability
to the proficiency in planning making forecast estimates and calculations.

5. Profit earning capacity: She should have a capacity to get maximum return out of
invested capital.

The motivational factors to be an entrepreneur

To improve the quality of life of their children
To share the family economic burden
To adjust and manage household and business life successfully on their own terms
Due to the death or sickness of their husband
CHALLENGES FOR OMEN ENTREPRENEUR:

1. Utilizing connections:

"One of the biggest challenges for a female

entrepreneur is not understanding how important it is to have networks and

trusted advisors. In almost any type of entrepreneurial endeavor, a key
contributor to success is obtaining introductions and connections to people who
can help you to get through the door. If you get through the door of a decision
maker as the result of a friend's recommendation, you will inevitably walk away
having learned valuable information from the meeting.

2. Being decisive : "A prerequisite to being an entrepreneur

is to finely tune your

decision-making abilities. In my time as CEO, I have learned to be comfortable

making decisions with less than perfect information, while being mindful of the
various viewpoints. Avoiding 'paralysis by analysis' is a major obstacle, but it is
also not an excuse to overlook contrasting viewpoints."

3. Access to funding :

"Women face greater obstacles than men when starting

and growing businesses, especially when it comes to receiving angel

and

venture capital. Though

it might be unintentional, men fund people who

look and sound just like them, and the consequences are just as harmful as if
there was malicious aforethought. Don't do it alone! [Seek] advice from a variety
of sources, including co-founders, professional advisers such as accountants and
lawyers, peer advisory groups, CEO mastermind groups, boards of advisers, and
family members."

4. Lack of role models:

"There are successful female entrepreneurs throughout

the world, but male entrepreneurs get better media coverage and visibility.
What's easier to name, three successful female entrepreneurs or three
successful male entrepreneurs? Women tend to start businesses in the sectors
where they have work experience, skills and networks. The low percentages of

female startups in the

tech sector reflect the

low numbers of women working in

this sector in general. Increasing the number of women employed in technical

positions, as well as in other male-dominated sectors such as construction,
transportation [and] mining, will increase the number of female startups in these
industries."

5. The expectation to succeed at everything: "Working women face the

expectation to do well in all areas of their multi-faceted lives. In general, men are
judged by how well they do in their careers, while women are judged by how well
they excel with family, friends, 'looking their best' and, if they work, their career.
It's a struggle to find enough time in the day to focus on them all, understand
what is important to you, set goals and put a plan in place to reach them. At the
same time, keep in mind that during any part of your life, you can't do it all.

6. Time management:

"It can be overwhelming to manage your time,

communicate effectively and stay organized while developing your business

skills. No one hands you a resource book you have to be self-disciplined. As
an entrepreneur, you love what you do, so taking a break is challenging. But you
need to work

7.

on your

business, not

in it.

Fear of success: figured out how to recognize them, manage them and grow
from those experiences. Treat yourself as a business owner so others treat you
the same way. Stop waiting for permission or recognition from others in order to
feel entitled to your success. Only you can award yourself the right to earn
success for your career or business."
UNIT-5
NEED OF FINANCE:
Entrepreneurial finance is the study of value and resource allocation, applied to
new ventures. It addresses key questions which challenge all entrepreneurs: how
much money can and should be raised; when should it be raised and from whom;
what is a reasonable valuation of the startup; and how should funding contracts
and exit decisions be structured.

SOURCES OF FINANCE:
1. Financial Bootstrapping: Financial Bootstrapping is a term used to cover
different methods for avoiding using the financial resources of external investors.
It involves risks for the founders but allows for more freedom to develop the
venture.
2. External Financing: Businesses often need more capital than owners are able
to provide. Hence, they source financing from external investors: angel
investment, venture capital, as well as with less prevalence crowd funding, hedge
funds and alternative asset management. While owning equity in a private
company may be generally grouped under the term private equity, this term is
often used to describe growth, buyout or turnaround investments in traditional
sectors and industries.
(i)Business Angels: A business angel is a private investor that invests part of his or her
own wealth and time in early stage innovative companies. Apart from getting a good
return, business angels expect to have fun. It is estimated that angel investment
amounts to three times venture capital.
(ii) Venture Capital: Venture capital is a way of corporate financing by which a financial
investor takes participation in the capital of a new or young private company in
exchange for cash and strategic advice. Venture capital investors look for fast-growing
companies with low leverage capacity and high-performing management teams. Their
main objective is to make a profit by selling the stake in the company in the medium
term. They expect profitability higher than the market to compensate for the increased
risk of investing in young ventures.

Key differences between business angels and venture capital:

Own money (BA) vs. other peoples money (VC)

Fun + profit vs. profit

Lower vs. higher expected IRR

Very early stage vs. start-up or growth stage

Longer investment period vs. shorter investment horizon

VENTURE CAPITAL PROCESS:

There are five common stages of venture capital financing
1. The Seed stage
2. The Start-up stage

3. The Second stage

4. The Third stage
5. The Bridge/Pre-public stage

The Seed Stage

This is where the seed funding takes place. It is considered as the setup stage
where a person or a venture approaches an angel investor or an investor in
a VC firm for funding for their idea/product.

During this stage, the person or venture has to convince the investor why
the idea/product is worthwhile.

The investor will investigate into the technical and the economic feasibility
(Feasibility Study) of the idea. In some cases, there is some sort of prototype of
the idea/product that is not fully developed or tested.

If the idea is not feasible at this stage, and the investor does not see any
potential in the idea/product, the investor will not consider financing the idea.
However, if the idea/product is not directly feasible, but part of the idea is worthy
of further investigation, the investor may invest some time and money in it for
further investigation.

The Start-up Stage

If the idea/product/process is qualified for further investigation and/or investment,

the process will go to the second stage; this is also called the start-up stage.
A business plan is presented by the attendant of the venture to the VC firm.

A management team is being formed to run the venture. If the company has
a board of directors, a person from the VC firms will take seats at the board of
directors. While the organization is being set up, the idea/product gets its form.

The prototype is being developed and fully tested. In some cases, clients
are being attracted for initial sales. The management-team establishes a
feasible production line to produce the product.

The VC firm monitors the feasibility of the product and the capability of the
management-team from the board of directors.

To prove that the assumptions of the investors are correct about the
investment, the VC firm wants to see result of market research to see whether
the market size is big enough, if there are enough consumers to buy their

product. They also want to create a realistic forecast of the investment needed to
push the venture into the next stage.

If at this stage, the VC firm is not satisfied about the progress or result from
market research, the VC firm may stop their funding and the venture will have to
search for another investor(s). When the cause relies on handling of the
management in charge, they will recommend replacing (parts of) the
management team.

The Second Stage

At this stage, we presume that the idea has been transformed into a product
and is being produced and sold.

This is the first encounter with the rest of the market, the competitors. The
venture is trying to squeeze between the rest and it tries to get some market
share from the competitors. This is one of the main goals at this stage.

Another important point is the cost. The venture is trying to minimize their
losses in order to reach the break-even.

The management team has to handle very decisively. The VC firm monitors the
management capability of the team. This consists of how the management team
manages the development process of the product and how they react to
competition. If at this stage the management team is proven their capability
of standing hold against the competition, the VC firm will probably give a
go for the next stage.

However, if the management team lacks in managing the company or does

not succeed in competing with the competitors, the VC firm may suggest
for restructuring of the management team and extend the stage by redoing
the stage again. In case the venture is doing tremendously bad whether it is
caused by the management team or from competition, the investor will cut the
funding.

The Third Stage

This stage is seen as the expansion/maturity phase of the previous stage. The
venture tries to expand the market share they gained in the previous stage. This
can be done by selling more amount of the product and having a good marketing
campaign. Also, the venture will have to see whether it is possible to cut down their
production cost or restructure the internal process. This can become more visible by
doing a SWOT analysis. It is used to figure out the strength, weakness, opportunity and
the threat the venture is facing and how to deal with it.

Apart from expanding, the venture also starts to investigate follow-up products and
services. In some cases, the venture also investigates how to expand the life-cycle of
the existing product/service.
At this stage the VC firm monitors the objectives already mentioned in the second stage
and also the new objective mentioned at this stage. The VC firm will evaluate if the
management team has made the expected cost reduction. They also want to know how
the venture competes against the competitors. The new developed follow-up product
will be evaluated to see if there is any potential.
The Bridge/Pre-public Stage
In general, this is the last stage of the venture capital financing process. The main goal
of this stage is for the venture to go public so that investors can exit the venture
with a profit commensurate with the risk they have taken.
At this stage, the venture achieves a certain amount of market share. This gives the
venture some opportunities, for example:

Merger with other companies

Keeping new competitors away from the market

Eliminate competitors

Internally, the venture has to examine where the product's market position and, if
possible, reposition it to attract new Market segmentation. This is also the phase to
introduce the follow-up product/services to attract new clients and markets.
Ventures have occasionally made a very successful initial market impact and been able
to move from the third stage directly to the exit stage. In these cases, however, it is
unlikely that they will achieve the benchmarks set by the VC firm.

UNIT-6:
STAGES OF ECONOMIC DEVELOPMENT:
The Rostow's Stages of Economic Growth model is one of the major historical models
of economic growth. It was published by American economist Walt Whitman Rostow in
1960. The model postulates that economic growth occurs in five basic stages, of varying
length:

Traditional society
Preconditions for take-off

Take-off
Drive to maturity
Age of High mass consumption

Below is a detailed outline of Rostow's five stages:

Traditional society

characterized by subsistence agriculture or hunting and gathering; almost

wholly a "primary" sector economy

limited technology

A static or 'rigid' society: lack of class or individual economic mobility, with

stability prioritized and change seen negatively
Pre-conditions to "take-off"

external demand for raw materials initiates economic change;

development of more productive, commercial agriculture and cash crops not
consumed by producers and/or largely exported
widespread and enhanced investment in changes to the physical
environment to expand production (i.e. irrigation, canals, ports)

increasing spread of technology and advances in existing technologies

changing social structure, with previous social equilibrium now in flux

individual social mobility begins

development of national identity and shared economic interests

Take off

Urbanization increases, Industrialization proceeds, Technological

breakthrough occurs

the "secondary" (goods-producing) sector expands and ratio of secondary vs.

primary sectors in the economy shifts quickly towards secondary
textiles and apparel are usually the first "take-off" industry, as happened in

Great Britain's classic "Industrial Revolution"

Drive to maturity
diversification of the industrial base; multiple industries expand and new ones
take root quickly
manufacturing shifts from investment-driven (capital goods) towards
consumer durables and domestic consumption

rapid development of transportation infrastructure

large-scale investment in social infrastructure (schools, universities, hospitals,

etc.)

Age of mass consumption

the industrial base dominates the economy; the primary sector is of greatly
diminished weight in economy and society
widespread and normative consumption of high-value consumer goods (e.g.
automobiles)
consumers typically (if not universally), have disposable income, beyond
all basic needs, for additional goods.

Difference between manager and entrepreneur:

Bases of difference
between

Entrepreneur

Manager

Motive

The main motive of an

entrepreneur is to start a
venture by setting up an
enterprise. He
understands the venture
for his personal

But, the main motive of a

manager is to render his
services in an enterprise
already set up by
someone else i.e.,
entrepreneur.

Status

An entrepreneur is the
owner of the enterprise.

A manager is the servant

in the enterprise owned
by the entrepreneur.

Risk bearing

An entrepreneur being
the owner of the
enterprise assumes all
risks and uncertainty
involved in running the
enterprise.

A manager as a servant
does not bear any risk
involved in the enterprise.

Rewards

The reward an
entrepreneur gets for
bearing risks involved in
the enterprise is profit
which is highly uncertain.

A manager gets salary as

reward for the services
rendered by him in the
enterprise. Salary of a
manager is certain and
fixed.

Innovation

Entrepreneur himself
thinks over what and how
to produce goods to meet
the changing demands of

But, what a manager does

is simply to execute the
plans prepared by the
entrepreneur. Thus, a

Qualification

the customers. Hence, he

acts as an innovator also
called a change agent

manager simply
translates the
entrepreneurs ideas into
practice.

An entrepreneur needs to
possess qualities and
qualifications like high
achievement motive,
originality in thinking,
foresight, risk -bearing
ability and so on.

On the contrary, a
manager needs to
possess distinct
qualifications in terms of
sound knowledge in
management theory and
practice.