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Entrepreneur 16/09/08

Entrepreneur 16/09/08

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This edition of the entrepreneur contains articles on financial bootstrapping, an interview with the students of IIT Kharagpur who have received funding for their project, carbon trading, articles about the latest happenings in E-Cell and an article from the series Vision India 2020 by renowned strategy consultant Sramana Mitra.
This edition of the entrepreneur contains articles on financial bootstrapping, an interview with the students of IIT Kharagpur who have received funding for their project, carbon trading, articles about the latest happenings in E-Cell and an article from the series Vision India 2020 by renowned strategy consultant Sramana Mitra.

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Published by: Editor on Sep 19, 2008
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Bootstrappers are entrepreneurs determined tomake a business pay for itself. The freedom fromrelying on capital invested by VCs is a great motiva-tor, if one knows how to acquire it from the rightsources. Their secret weapon, is being nimble andcutting through the bureaucracy to grow faster.Most are entrepreneurs, who have a drive to learnand better themselves in all fields related to theirstart-up. They use unconventional means to raisefunds for their business,without spreading outtheir arms. A small initialsize helps them to focus byrealizing that they havelittle to lose, and they arequick to catch on trendsand exploit them. But, how do they do all of thisand survive the bloody battles on the tilted corpo-rate battlefield? In this series of articles we delveinto some of the nuances of this seemingly esotericmethod of raising money.
Part 1: What you’ve got and they’ve lost
 It starts with identifying what a bootstraper does-n’t necessarily have as compared to his huge com-petition: Distribution, Access to Capital, Brand Eq-uity, Customer Relationships and Great Employees.Each of these facets, one might say, hinges on theamount of capital available to the company to en-able its sustenance and growth while maintaining itsfirm hold over the market. So, if you are a boot-strapper, can you go toe to toe with the big nameson their turf? No; the secret lies in waging the warin areas where you are more adept. For example,imagine yourself as a shoe manufacturer trying tosell your new line at retail outlets. You’d be clob-
 
 
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bered by the current brands and be out of businesswhile they won’t be losing a moment’s sleep. Success-ful bootstrappers know that just because they canmake a product doesn’tmean they should. Instead,they are well aware of thetraits they need to have andthe advantage they haveover the major market play-ers. Some of these advan-tages are : A mindset of ‘We’ve got nothing to lose’, being happy with thesmall fish, direct presidential input , Rapid R&D, beingthe underdogs, low overhead costs and controlling thetime of deliveries.We will elucidate on these points in the next issues,but let us close on an example much closer to home. Iam sure there are many who remember id software’s‘Castle Wolfenstein’. Following the huge success of their game, the 4 developers decided to take on themajor players with a unique strategy. They developedanother path breaking game called ‘Doom’ and gave itaway… for free! Millions of people downloaded thegame off their servers and id had captured a huge poolof trusting customers. They launched a bigger versionof the game with more levels and gameplay and madeit available at a price. It was a huge success! Withouthaving to go through the game retailers, or spendmore than 50 cents on marketing they had used anunusual strategy which helped them cut out the mid-dlemen and avoided losing capital as ‘commission’ yetfirmly carve a niche in the gaming industry.
Next Issue:
Part 2: Why big ideas can kill you and what is the bootstrapper’s business model.
It's easy to make a buck. It's a lot tougher to make a difference- Tom Brokaw 
Financial Bootstrapping: Smartly funding your start-up
Vision India 2020
 This is the first article of the series Vision 2020 by 
Sramana Mitra
describing  which she says, “
This is a new series in which I invite readers to take a journey with me into the future through the minds of multiple entrepreneurs, who by addressing the opportunities I seetoday, will perhaps shape the future of India.But in this series, we will close our eyes, and exist in this future, and BE each entrepreneur”.Enjoy!
Sneak Peek
MIT India – Vision 2020 - Page 2
Carbon Trading - Page 3
Editorial - Page 5
12 years ago
, in 2008, it was clear that the labourarbitrage based IT services industry that had madeIndia a player in the global technology market, wasfacing a threat. The key issue was supply-demandequilibrium. India’s engineering education systemsimply could not keep up with the demand for talent.Engineering schools below the top tier (IIT, IISC and afew others) were struggling due to lack of faculty.Anyone who knew any engineering had multiple mul-tinational companies dangling job offers in front of their nose. Why would they go teach in a small engi-neering college in a small town?
Continued on page 2...
 
www.ecell.iitkgp.ernet.in 
 
Continued from page 1...
Against that backdrop, we started a for-profit, private com-pany to train engineers in India. At the time, Susan Hock-field was the President of Massachusetts Institute of Tech-nology (MIT). MIT had also taken a leadership role in theOpen Course Ware (OCW) movement, systematically put-ting every lecture by the institute’s faculty online, freelyaccessible from anywhere in the world. We convinced Dr.Hockfield to take equity in the company on behalf of MIT,and let us do the project under the MIT India brand, exten-sively leveraging OCW content. We could, however, onlygrant certificates, not MIT degrees.When we launched MIT India in 2010, we were handsomelyfinanced by contracts from Intel, Infosys, Cadence, Auto-desk, Tata Motors and IBM, and hardly raised any outsidefinancing until much later, when we were ready to scale. Inaddition, companies like Cadence and Autodesk donatedCAD tools which our engineering students could learn with.Our model was simple. We worked directly with majorcorporations interested in hiring trained engineers. Ourcustomers, thus, were the companies, not the students orparents.To the youth of India, however, we brought a differentvalue proposition. We carefully recruited a set of high po-tential students with High School Education only, but whowere not going onto great colleges or universities. Thesestudents, upon acceptance into the MIT India program,were already guaranteed a job at the sponsor company forwhich we were training them. They participated in a rigor-ous curriculum focused on the engineering discipline of thesponsor’s choice. For example, Tata Motors, had us trainMechanical Engineers, while Intel had us train chip design-ers.We had 6 centers in our first year of 500 students each,aligned with one of our sponsors. They were geographicallydispersed, and most certainly not in Bangalore, which wasalready bursting in its seams. IBM’s center was in Kolkata,Tata Motors’ was in Thane, Cadence and Autodesk were inKanpur, Infosys in Indore, and Intel in Kharagpur.We solved the faculty issue by recruiting a group of tal-ented engineers who were passionate about teaching,and offered them market salary that they would normallyget working for MNCs. And our faculty followed MIT sylla-bus, OCW content, problem sets, exams, etc. As batchesof students finished our 2-year intensive program, werenewed our contracts with the sponsors, recruited newsponsors, and opened up new centers all over India.These contracts were extremely lucrative for us, and al-lowed us to finance great infrastructure, afford and at-tract faculty, and address the engineering education crisisthat India would have otherwise faced, had we tried towork within the government-approved channels.We made a few key strategic choices that made it possiblefor us to build the $6 Billion a year company that we havetoday with 1200 MIT India centers, each teaching 2batches of 500 students. Each year, we train a total of 600,000 engineers.First, we framed the engineering education problem as aproblem of the Corporations who need to recruit talentand asked that they pay for a quality solution. They did.Second, we did not allow compensation to be a deterrentfor hiring talented faculty. We paid them handsomely,such that they did not feel they were making a careersacrifice by teaching. This enabled those with passion forteaching to choose an academic career.Third, we chose to do this under the MIT brand umbrella,gaining instant credibility among the sponsors, the facultyand the students.With that, we created one of the most powerful engineer-ing workforces in the world.
Vision India 2020: MIT India
 Thoughts lead on to purposes; purposes go forth in action; actions form habits; habits decide character; and characterfixes our destiny - Tyron Edwards 
THE ENTREPRENEURPage 2
The author is a well known Silicon Valley entrepreneurwho has founded 3 companies, is a strategy consultant forover 70 companies, including SAP and Cadence amongothers, and the content from her popular strategy blog atwww.sramanamitra.com is syndicated by Yahoo! Finance,Indian Daily, etc. She also writes a weekly column forForbes.
©Sramana Mitra
www.ecell.iitkgp.ernet.in
 
“Clean money for dirty air” - that’s the premise of anemerging trade in carbon credits. In simply words, it signi-fies the trade of polluting gases which is gaining increasingimpetus in India with heightened emphasis being put onreducing greenhouse gas emissions in the environment.So what exactly is carbon credit?The concept of carbon credit, is thatof incentivising the industrial unitswhich pollute less, and disincentivis-ing those that pollute more. A cen-tral authority, fixes a limit to theamount of a pollutant that can beemitted into the environment. Thispermit or credit or allowances, giveslicenses to emit a fixed amount of pollutant into the environment.Now, if a company say SRF, emitsonly eight units of greenhouse gasesout of the 10 units allotted toit, then SRF will have two units of emission as 'credit outstanding' in its 'pollution' account.On the other hand, if a company say MRF, emits 14 unitsinstead of the 12 units allotted to it, then MRF will havetwo units of 'debit balance' in its 'pollution' account. Insuch a case, SRF will be able to transfer its two 'credit bal-ance' to the two 'debit balance' account of MRF. So, boththe companies’ pollution account will be matched, and theenvironment too is able to digest a certain scientificallyfixed amount of pollutants. This transfer, from SRF to MRFwill be for some monetary consideration, and hence it isreferred to as carbon trading.The value of the carbon trading market was around $30billion in 2006 as per estimates of the International Emis-sions Trading Association. Almost all industrialized coun-tries, are huge buyers of carbon credit, and all develop-ing countries where industrialization has not reached itspeak, are supplier of carbon credit. Japan is the largestbuyer of carbon credit, while India and Brazil are amongstthe largest suppliers of carbon credit. .With Indian economic growth based mainly on energyfrom fossil fuels such as coal, there is considerable poten-tial for reducing greenhouse gases,and for CDM projects. Most of thebeneficiaries of the carbon trading,are those companies that are in-vesting in windmills, Biodiesel, andBiogas. Actually, by investing insuch an alternative, non-pollutingsource of energy, these companieswill earn carbon credit in the formof CER’s (Certified Emissions Re-ductions), equivalent to theamount of environmental pollutionthey have prevented. These CER’scould be sold by Indian companies,to companies, say in Japan, at mar-ket prevailing rate of CER’s, and thus make profit.The Institute for Global Environmental Strategies, esti-mates the potential for CDM projects in India to be about300 million tonnes of CO
2
equivalent, which includes 90million tonnes from renewable energy sources alone.Listed Indian companies are already reaping sizeable prof-its through CER deals.Carbon trading has brought a huge opportunity for In-dian companies. Companies can earn CER’s by adoptingenergy saving and environment protection methods, andin turn can earn huge incomes by selling them. Its howcleverly these companies make use of this opportunity,that could give them a boost in their businesses.
Carbon Trading : A bright future
 Time is like money, the less we have of it to spare the further we make it go - Josh Billings 
THE ENTREPRENEURPage 3
1) In 1997, ______________ was formed and foundedby a trio of entertainment players, director and pro-ducer Steven Spielberg, music executive David Geffen,and former Disney studio chairman Jeffrey Katzenberg.
Who’s the big fish???
You’ll find a series of biz-questions in the next few  pages. The answer of each of these questions connectsto a central theme, which is a personality. Guess thebig connection. Lets see how biz savvy you are! Answers can be found on the last page.

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