Unit 4

Availability of Financial
Sources and Assistance:
Types of Finance, Sources of
Finance, Venture Capital,
Start-up and Make-
in-India program, MUDRA
The availability of financial sources and assistance
for entrepreneurship development is crucial for
fostering innovation and economic growth.
Various government schemes, financial
institutions, and support programs provide
entrepreneurs with the necessary resources to
start and grow their businesses.
 Types of Finance
1. Equity Financing
2. Debt Financing
3. Grants and Subsidies
4. Self-Financing
5. Government Programs and Assistance
 Equity financing involves
raising capital by selling
shares of ownership in the
business.
This type of financing
does not require
repayment like loans do,
but it does dilute
ownership among
investors.
 1. Equity Financing
•Venture Capital
•Angel Investment
•Crowdfunding
•Initial Public Offering (IPO)
Venture Capital:Venture
Capital is a form of private
equity financing that provides
funds to startup, early-stage,
and emerging companies
deemed to have high growth
potential.
In exchange for their
investment, venture capitalists
receive equity or ownership
stakes in the companies. This
type of financing is crucial for
startups that may not have
access to traditional funding
sources like bank loans due to
high risks and uncertainties.
Example of Venture Capital- Uber.
Background: Founded in 2009, Uber started as a ride-
hailing service that connected drivers with
passengers through a mobile app.
Venture Capital Funding: Uber raised significant
amounts of venture capital in its early stages from
various investors, including notable venture capital
firms such as Benchmark Capital, Menlo Ventures,
and Google Ventures.
Impact of Funding: The capital raised allowed Uber to
expand rapidly into new markets, enhance its
technology, and develop its brand. By the time of its
IPO in 2019, Uber had become a global leader in the
ride-sharing industry, demonstrating the
effectiveness of venture capital in scaling a startup.
2. Angel Investment: Angel
Investment refers to the
process where affluent
individuals, known as angel
investors, provide financial
support to early-stage
startups or small
businesses in exchange for
equity ownership or
convertible debt.
 Example of Angel Investment- Google.
•Background: In the late 1990s, Larry Page and Sergey Brin,
the co-founders of Google, were graduate students at
Stanford University working on a search engine project.
•Angel Investment: In 1998, they received an initial
investment of $100,000 from Andy Bechtolsheim, co-founder
of Sun Microsystems. This investment was crucial in helping
them establish Google as a company and develop their
search engine technology.
•Impact of Investment: The funding allowed Page and Brin to
hire their first employees and begin scaling their operations.
This early angel investment was instrumental in Google's
rapid growth, leading to its eventual IPO and establishment
as one of the most valuable companies in the world.
 Crowdfunding – Example-Robin Hood NYC Crowdfunding Campaign
• Background: Robin Hood is a nonprofit organization
dedicated to fighting poverty in New York City. They invest
in various nonprofits that address critical issues such as
education, job security, and basic survival needs for low-
income families.
• Campaign Details: To support their NYC Marathon runner
team, Robin Hood launched a crowdfunding campaign
using the Fundly platform. The campaign featured a
comprehensive backstory about the organization,
accompanied by inspirational photos that highlighted
their mission and impact.
• Outcome: The campaign exceeded its fundraising goal,
demonstrating the effectiveness of well-crafted
storytelling and community engagement. By providing
specific suggested donation amounts and explaining the
impact of each contribution, Robin Hood successfully
connected with donors and illustrated how their support
would make a difference.
 An example of an Initial Public Offering (IPO) is
the Facebook IPO, which took place on May 18,
2012.Details of the Facebook IPO:
• Shares Offered: Facebook offered 421,233,615 shares at an initial price of $38
per share.
• Capital Raised: The IPO raised approximately $16 billion, making it one of the
largest IPOs in technology history at that time.
• Market Capitalization: At the time of the IPO, Facebook achieved a peak
market capitalization of over $104 billion.
• Background: Prior to going public, Facebook had experienced rapid growth,
boasting 845 million monthly active users and generating a net income of $1
billion in 2011, which was a 65% increase from the previous year.
• Underwriters: The IPO was underwritten by major investment banks,
including Morgan Stanley, which played a significant role in managing the
offering and pricing the shares.
 2. Debt Financing
Debt financing is a method of
raising capital by borrowing
money from lenders and agreeing
to repay the loan with interest. It
involves selling debt instruments
like bonds, notes, or bank loans to
individuals or institutions.
 Example – Debt Financing
• For example, a manufacturing company named Bright Corporation wants
to expand its production capacity to meet growing demand. To fund this
expansion, Bright Corporation takes out a loan from a bank with the
following terms:
• Loan Amount: ₹5,00,000
• Interest Rate: 6% per annum
• Loan Term: 5 years
• Repayment: Monthly payments with interest portion gradually decreasing
as principal is repaid over the 5 year term
• So in this case, Bright Corporation is using debt financing in the form of a
bank loan to raise capital for its business expansion project.
3. Grants and Subsidies
Various government and non-profit organizations offer grants and subsidies to support
entrepreneurs, especially in specific sectors or demographics (e.g., women, minorities).
Grants do not need to be repaid, making them a valuable funding source.
 The Indian government has introduced several grants and subsidies to
support startups and promote entrepreneurship. Here are some key
schemes:
1. Atal Innovation Mission (AIM)
2. Startup India Seed Fund Scheme (SISFS)
3. Multiplier Grant Scheme (MGS)
4. Dairy Entrepreneurship Development Scheme (DEDS)
5. Startup India Initiative
6. Biotechnology Ignition Grant Scheme (BIG)
7. Aspire Scheme
8. COVID-19 Startup Assistance Scheme (CSAS)
4. Self-Financing Also known as bootstrapping, this involves using
personal savings or reinvesting profits back into the
business. This approach allows entrepreneurs to
maintain full control over their business but can be
risky if personal finances are heavily invested.

Examples
Some examples of companies that have successfully self-financed their growth include:
•Apple, which has used its large cash reserves to fund operations and acquisitions
•IKEA, which reinvests its profits back into the company as it is owned by a foundation
•Patagonia, a private company that self-finances its sustainable business practices and
environmental initiatives
5. Government Programs and Assistance
MCQs:
What is the primary purpose of venture capital?
A) To provide loans to established businesses
B) To invest in startups and small businesses with high growth
potential
C) To fund government projects
D) To support non-profit organizations
Which financing method involves raising funds
through the sale of shares?
A) Debt Financing
B) Equity Financing
C) Crowdfunding
D) Bank Loans
Which type of finance involves raising money from a
large number of people, typically via the internet?

A) Private Equity
B) Venture Capital
C) Crowdfunding
D) Angel Investment
• Answers
1. Equity Financing - C. Funds raised through the sale of shares
2. Debt Financing - D. Long-term loans from banks or financial institutions
3. Venture Capital - B. Investment in startups by venture capitalists
4. Crowdfunding - E. Raising small amounts of money from a large number
of people
5. Trade Credit - A. Short-term borrowing for operational needs
6. Lease Financing - F. Renting equipment or property for a specified period
7. Angel Investment - G. Personal funds invested in early-stage companies
 Key Objectives
•Promote Innovation:
The Startup India Scheme is •Create Jobs:
a flagship initiative launched by •Simplify Regulations:
the Government of India
on January 16, 2016, aimed at
fostering entrepreneurship and
promoting innovation across the
country. The scheme seeks to create
a conducive environment
for startups, facilitating their
growth and development through
various support mechanisms.
With the objective to build a strong eco-system for nurturing innovation and Startups in the country the
Government launched a Startup India Action Plan that offers the following support to recognized supports
through:
• Government Initiatives (startupindia.gov.in)
▪ Make in India is a national
initiative launched by
Prime Minister Narendra Modi on
September 25, 2014, aimed at
transforming India into a global
manufacturing and investment hub.
▪ The program seeks to enhance the
country’s
manufacturing capabilities, attract
foreign investment, and foster
innovation across various sectors.
 The primary objectives of the Make in India program include:
• Attracting Foreign Investment: The initiative aims to create a
conducive environment for foreign direct investment (FDI) by
simplifying regulations and improving the ease of doing business.
• Boosting Manufacturing Growth: The program targets an annual
growth rate of 12-14% in the manufacturing sector and aims to
increase its contribution to the GDP from 16% to 25% by 2022.
• Job Creation: Make in India aims to generate 100 million additional
jobs by 2022, thereby addressing unemployment and
underemployment.
• Promoting Export-led Growth: The initiative encourages industries to
focus on export-oriented production, enhancing India's presence in
global markets.
 Key Components
The Make in India initiative is built on four main pillars:
• New Processes: Recognizing the importance of ease of doing business,
the program aims to de-license and deregulate industries to encourage
entrepreneurship.
• New Infrastructure: The government plans to develop industrial corridors
and improve existing infrastructure to support manufacturing growth.
• New Sectors: The initiative identifies 27 key sectors for development,
including automotive, aerospace, pharmaceuticals, textiles, and
renewable energy.
• New Mindset: The government seeks to shift its role from a regulator to a
facilitator, partnering with industries for economic development.
 Here are some key statistics related to the
Make in India program as of 2024:
Foreign Direct Investment (FDI) Job Creation
•FDI inflows reached a record high of $100 •Over 50 million additional jobs were created in the
billion in 2023-24, demonstrating growing manufacturing sector since the launch of Make in
investor confidence in India's manufacturing India in 2014.
potential. •The program has been instrumental in generating
•The cumulative FDI inflows from 2014-15 to employment opportunities for India's young
2023-24 amounted to over $500 billion, a workforce and reducing the unemployment rate
significant increase compared to the previous
decade

Ease of Doing Business

Manufacturing Sector Growth
•India's rank in the World Bank's Ease of Doing
•The manufacturing sector's growth rate
Business index improved from 130th in 2016 to
averaged 12-14% per annum between 2014-
48th in 2023.
2024, meeting the initial target set by the
•The government's efforts to simplify
Make in India program.
regulations, digitize processes, and improve
•The manufacturing sector's contribution to
infrastructure have significantly enhanced the
GDP increased from 16% in 2014 to 22% in
business environment
2024
 Sectoral Achievements
• The electronics manufacturing sector
witnessed a significant boost, with 95% of
smartphones sold in India being made
domestically by 2019.
• The automotive and auto components sector
attracted major investments, making India a
global hub for manufacturing and exports.
• The pharmaceutical and medical devices
sectors have become more self-reliant,
reducing import dependence and increasing
exports
Micro Units Development & Refinance Agency
 Pradhan Mantri Mudra Yojana
(PMMY) is a flagship scheme
launched by the Government of
Key Features India on April 8, 2015, aimed at
1.Loan Amounts: PMMY offers loans up to ₹10 lakh providing financial support to
(approximately $13,000) to micro and small micro and small enterprises.
enterprises.
2.The loans are categorized into three segments: The initiative focuses on
Shishu: Loans up to ₹50,000.
promoting entrepreneurship and
enhancing the availability of credit
Kishore: Loans ranging from ₹50,001 to ₹5 lakh.
for income-generating activities in
Tarun: Loans ranging from ₹5,00,001 to ₹10 lakh.
the non-farm sector.
• Eligibility: The scheme is open to various entities including individuals, proprietary concerns,
partnership firms, private limited companies, public companies, and other legal forms.
Borrowers must not be defaulters with any bank or financial institution and should have a
satisfactory credit history.
• Collateral-Free Loans: Mudra loans are provided without the need for collateral security,
making it easier for small entrepreneurs to access funds.
• Interest Rates: Interest rates are determined by the lending institutions based on their
policies and the Reserve Bank of India's guidelines. The loans are covered under the Credit
Guarantee Fund for Micro Units (CGFMU), which enhances credit access for micro and small
enterprises.
• Application Process: Applicants can apply for Mudra loans online through the UdyamMitra
portal or directly at designated banks and financial institutions. Required documents include
ID proof, address proof, business registration details, and other relevant information.
• Support Services: The scheme also provides access to various support services including
project proposal preparation assistance through hand-holding agencies.
https://www.mudra.org.in/mudra-kahaniyaan-v2/index.html
 MCQS:
In which year was the Start-Up India initiative officially
launched?
• A) 2014
• B) 2016
• C) 2018
• D) 2020
What is the primary objective of the Start-Up India
initiative?
A) To promote traditional industries
B) To boost the startup ecosystem and encourage
innovation
C) To increase foreign direct investment in agriculture
D) To enhance government control over businesses
Which of the following is NOT a benefit provided under
the Start-Up India initiative?
A) Tax exemptions for startups
B) Financial assistance for proof of concept and
prototype development
C) Mandatory government employment for all startups
D) Easier access to patent registration
What is the primary objective of the Make in India
initiative?
A) To boost the services sector in India
B) To strengthen India's manufacturing sector
C) To increase agricultural production
D) To promote tourism
Which of the following is NOT a focus area of the
Make in India initiative?
A) Automobiles
B) Biotechnology
C) Education
D) Defense manufacturing
What slogan is associated with the Make in India
initiative?
A) Digital India
B) Zero Defect, Zero Effect
C) Skill India
D) Clean India
Which of the following statements about Make in
India is correct?
A) It aims to reduce foreign investment.
B) It focuses solely on traditional industries.
C) It promotes innovation and skill development.
D) It targets only large corporations.
Which of the following categories is NOT part of the
Mudra loan scheme?
A) Shishu
B) Kishore
C) Tarun
D) Udyog
Which of the following is a requirement for
borrowers applying for a Mudra loan?
• A) Must have a minimum educational qualification
• B) Should not be a defaulter in any bank or financial
institution
• C) Must have collateral to secure the loan
• D) Should be an established business for at least five years