Entrepreneurship
What is Entrepreneurship?
- Definition: The process of entrepreneurs starting a business and making it successful. Involves creating something new, regardless of scale.
Features and Nature of Entrepreneurship:
- Innovation: Utilizing new techniques instead of traditional methods.
- Creativity: Transforming useless things into useful products.
- Leadership: Focus on leadership rather than just ownership.
- Risk-Bearing: Accepting inherent business risks.
- Opportunity Identification: Finding new opportunities based on principles, not intuition.
Importance of Entrepreneurship:
- Economic Development: Fostering national economic growth through new startups.
- Establishment of New Enterprises: Creating new businesses.
- Development of New Products: Introducing innovative goods and services.
- Human Potential Utilization: Maximizing human capabilities.
- Employment Opportunities: Generating jobs (both skilled and unskilled).
- Balanced Economic Development: Contributing to overall economic equilibrium.
- Social Change: Driving positive societal transformation.
Process of Entrepreneurship:
- Self-Discovery: Assessing personal strengths and weaknesses.
- Opportunity Identification: Identifying societal needs, wants, and problems.
- Idea Generation & Evaluation: Brainstorming and discussing ideas.
- Planning: Creating a research-based business plan.
- Capital Raising: Securing funding (angel investors, venture capital, banks).
- Establishment & Launch: Setting up and launching the enterprise.
- Growth: Expanding and developing the enterprise.
- Harvesting: Generating profit from the enterprise.
Startups:
- Definition: A venture based on a unique idea that solves real-life problems, potentially applicable to business.
- Indian Government Definition (Ministry of Commerce):
- Must be less than 5 years old.
- Annual turnover should not exceed ₹25 crore.
- Must be incorporated and registered in India.
- Must be working towards innovation, development, and commercialization.
Incubation:
- Definition: The process of supporting startups' growth through managerial, technical, and other assistance. Incubators provide resources like workspace, mentorship, and networking opportunities. Similar to an incubator for eggs.
- Role of Incubators:
- Nurturing startups.
- Providing mentorship and experience.
- Facilitating relationships with investors and partners.
Unicorns:
- Definition (coined by Aileen Lee in 2013): A startup with a net worth of $1 billion or more, considering future growth potential and market potential.
- Reasons for High Number of Unicorns in India: Growing economy, large market, talented workforce, government support, and global investor interest.
- Reasons for Unicorn Failures in India: Market saturation, lack of innovation, poor management, regulatory challenges, and financial constraints (approximately 70% failure rate).
Venture Capital:
- Definition: Capital invested by professional investors in rapidly growing companies with high growth potential.
- Characteristics: Long-term investment, provided by professional investors, invested in high-risk sectors for higher returns, includes managerial guidance, and constant monitoring of company progress.
Angel Investors:
- Definition: An affluent individual who provides financial backing to startups and small businesses, often in exchange for equity or convertible debt.
- Characteristics: Individual investor, provides mentorship and contacts, smaller investment compared to venture capital firms.
Venture Capital vs. Angel Investors:
| Feature | Venture Capital | Angel Investor |
|---|---|---|
| Investor Type | Firm or group of professional investors | Single affluent individual |
| Investment Size | High (hundreds of millions or billions) | Relatively low (tens of millions) |
| Investment Stage | Later-stage, established startups | Early-stage startups |
| Focus | Growth and scaling | Initial funding and mentorship |