Entrepreneurship

Course Code: HS 492

Class PPT 2
 Entrepreneurship
• Entrepreneurship is the process of developing, organizing,
and running a new business to generate profit while taking
on financial risk.
OR

• Entrepreneurship is the ability and readiness to develop,

organize and run a business enterprise, along with any of its
uncertainties in order to make a profit.
 Types of Entrepreneurship
• Small Business Entrepreneurship
• Scalable Startup Entrepreneurship
• Large Company Entrepreneurship
• Social Entrepreneurship

Other Entrepreneurship Types

• Intrapreneurship
• Imitative Entrepreneurship
• Buyer Entrepreneurship
 Small Business Entrepreneurship
• Businesses include grocery store, travel agent, consultant,
carpenter, plumber, electrician etc.
• For them, profit would be able to feed their family and not to
make million or taking over an industry.
• They fund their business by taking small business loans or
loans from friends and family.
 Scalable Startup Entrepreneurship
• This startup entrepreneur starts a business knowing that
their vision can change the world
• They attract investor who think and encourage people
who think out of the box
• Their research focuses on a scalable business and
experimental models, so, that hire the best and the
brightest employees
• They require more venture capital to fuel and back their
project or business
 Large Company Entrepreneurship
• These huge companies have defined life cycle
• Most of these companies grow and sustain by offering new
and innovative products that revolve around their main
products
• The change in technology, customer preference, new
competition etc., build pressure for large companies to create
an innovative product and sell it to the new set of customers
in the new market
 Social Entrepreneurship
• This type of entrepreneurship focuses on producing product
and services that resolve social need and problems
• Their only motto and goal is to work for society and not
make any profits
 Intrapreneurship
• Unlike an entrepreneur, who is also the founder, designer and
manager of a business, an intrapreneur is a self-motivated
and action oriented employee who thinks out of the box and
works as an entrepreneur within a company.
• Intrapreneurship is a way that companies can support and
encourage employees that have entrepreneurial spirit.
 Imitation Entrepreneurship
• They copy what successful innovative entrepreneurs have
previously done, with some modification.
 Buyer Entrepreneurship
• A buyer entrepreneur purchases either a developing or well
established company and helps them thrive
• Unlike investors, a buyer entrepreneur is involved both
financially and personally in business
 Start-up Process
1. Ideation
2. Cofounder
3. Prototype
4. MVP, Beta and Early Adopters
5. Business Model and Revenue Model
6. Business Plan
7. Branding and Register the Company
8. Funding
 1. Ideation Stage

• You need to ask yourself & your prospective customer varied

questions in order to select and validate your idea.

Start-up idea should:

• Solve an actual problem that exists in the market
• Offer a solution that is really required by at least some people
• Have the potential for growth
1. Ideation Stage (cont…
POC (Proof of Concept)
• An idea is just a mental construct of a business opportunity that you
come up with
• A concept, on the other hand, is an idea that has gone through the
process of fine-tuning and has been tested for its credibility
• POC is an exercise done to determine the feasibility of the idea and to
verify whether it has a practical potential in the market or not
1. Ideation Stage (cont…
Target market
• It refers to a specific and well defined consumer segment within the
business’s serviceable market which the business wants to sell its
products or services and direct its marketing efforts to
• Market segmentation is the right way to identify the target market
2. Cofounder
• Two or more cofounders are more likely to succeed
• The founding team of a startup must have expertise in all the areas of
a business and that is only possible with a team
• A founder is usually the person who has a defined idea of a business.
He/ she may not have adequate finance or man-power or technical
skill.
3. Prototype
• It convert an idea into a concept that has a physical structure
• This concept can be presented to stakeholders to test its viability and
validate assumption
• Prototype is not just designing the product but testing it in the market
Prototype is useful for:
• Validate the design of the product
• Present to investor or licensees
• Protection the intellectual property
• Test and refine the final product
4. MVP, Beta and Early Adopters
• MVP (Minimum Viable Product) is the first saleable version of your
product designed with minimum yet sufficient features to satisfy early
adopter
• Beta version is an early release of the offering that’s almost ready but
might have bugs that can be found when a wide user base tries it out
5. Business Model and Revenue Model
Business Model
• It is a conceptual structure that supports the viability of the business
and explains who the business serves to, what it offers, how it offers
and how it will achieves its goals.
• All the business processes and policies that a company adopts and
follows are parts of business model
5. Business Model and Revenue Model (cont..
Revenue Model
• It is a conceptual structure that states & explains the revenue earning
strategy of the business
• It includes the details about value offering, the revenue generation
techniques, the revenue sources and the target consumer of the
product offered
6. Business Plan
• It is a written document that outlines the goal of the business and roadmap
of how to achieve them
• It is the written description of your business’s future
• It includes- sales forecasts, marketing strategies, competitive strategies,
milestones, expense budget, partners & employees and the short-term &
long-term goals.
Important of Business Plan
• For direction & Future vision
• For funding
• For management
• For partnership & alliances
6. Business Plan
Components of Business Plan
• Executive summary: A brief overview of the entire business plan. It
includes a brief overview of the business ideal, offering, business
goals, target market, competition, USP (Unique Selling Proposition),
the team and financial outlook for the business
• Company description & synopsis: This section explains the company’s
mission, philosophy, goals, industry, legal structure and USP
• Market overview: This section explains the current market scenario of
the industry- size of the market, market trends, success stories etc.
This section gives the readers a reason to believe why company chose
the market stated.
6. Business Plan (cont…
Components of Business Plan (cont…
• Customer Analysis
• Product/service overview
• Business model
• Revenue model
• Marketing plan
• Management team
• Funding & financing
7. Branding & Register the Company
• A brand is the combination of properties within and outside a product
that gives an identity to the generic product
• Consider a brand as a person
• It is what the customer recognise and use to differentiate when they
are offered several products that perform a similar function
7. Branding & Register the Company (cont…
Register the Company
• For registering a company in India, an application for registration
should be submitted to the Registrar of Companies (ROC) with the
following Documents:
• Memorandum of Association (MoA)----[What is to be done?]
• Articles of Association (AoA)----[How is to be done?]
• A declaration signed by a person named in the articles of the
proposed company as a director, manager, etc.
7. Branding & Register the Company (cont…
Types of company
• Sole proprietorship
• Partnership
• Limited liability partnership
• Private limited companies
• Public limited companies
• One-person companies
 8. Funding
• Every startup, irrespective of the nature & size of operations, requires
funds to convert its innovative ideas into reality.
• Most of the businesses generally fail because of their inability to raise
sufficient funds
• After all, you need some money or capital to keep your business going at
every stage
FUND TYPE
• Equity
• Debt
• Convertible Debt
 8. Funding (cont…

Pre-seed Venture
funding Product capital Initial Public
Personal Angel Finish
from crowd Series Offer or
Funding investment
family or funding Funding Acquisition
friends (A, B, C..
8. Funding (Cont…
• Self-funding or Bootstrapping
- start-up requires a little investment (self, friends and family– cheaper
rate)
• Seed-capital
- Investment made at the preliminary stage of the startup
- Usually, the funds are procured from relatives, friends, family and
other contacts
- The investor actually plays a gamble by investing at your business &
hence ask for a lot of shares
8. Funding (Cont…
• Angel investor is a high net worth individual who invests in the
business in return of convertible debt or ownership equity. This is the
beginning of the capital raise
• Venture Capitalist:
- When the company’s final products or services reach the market,
venture capital funding comes into the picture.
- A venture capital firm is an organization composed of many angel
investors and other corporates who pool in their money to invest in
businesses with huge growth potentials.
- A, B, C….Funding each round of funding will dilute your ownership
8. Funding (Cont…
• Exit
-Once the company is all set & has started earning profit, it’s time to
sell your investment, reduce your stake in the business and earn
substantial profits.
-Two options when it comes to plan an exit strategy- IPO or Sell
Important Terms
• Incubators focus on early-phase startups that are in the product-
development phase and do not have a developed business model.
• Accelerators focus on speeding up the growth of existing companies
that already have a MVP in the hands of early adopters with an
established product-market fit.
 Types of Startups
• Lifestyle startups: Self-employed people, working for no one, but themselves.
E.g. professional such as freelance coders or web designers, they love their job
because of passion
• Small business startups: Small business that run their own business to feed the
family. E.g. grocery stores, carpenters
• Scalable startups: Always search for a repeatable & scalable business model.
E.g. facebook, uber
• Buyable startups: Their goal is to be sold to a larger company for cash.
e.g. Startups that offer web and mobile app solutions, are sold to larger company
• Large company startups: Innovation or die- forced to create new innovative
products. E.g. Automobile companies (EV & Self driven cars)
• Social startups: They are passionate and driven to make an impact
Their mission is to make the world a better place, not for wealth’s sake
 Start-up Ecosystem
• Ecosystem: It is a geographic area where plants, animals and other
organisms, as well as weather and landscape, work together to form a
bubble of life. It contain biotic as well as abiotic factors

What is Start-up Ecosystem?

• Start-up cannot exit in a vacuum.
• Entrepreneurs are supported by a community of people,
organisations and other startups that surround them.
Start-up Ecosystem (cont…
Start-up

Government
Agencies Educational
Institutions

Start-up
Eco
System

Support & Service

Investors
Providers
Start-up Ecosystem (cont…
Start-up
• Startups themselves are an indispensable part of any startup
ecosystem. They are the nuclei of innovation, disruption and
progress. They determine the face of the local ecosystem & play an
important role in economic growth.
• Startup create more jobs than large corporations, boosting local
economic development
Start-up Ecosystem (cont…
Educational Institutions
• Colleges, universities and other education institutions- plays a fundamental
role in nurturing talent and setting the next generation of entrepreneurs
and startup employees on their paths
Investors- Funding Organizations
• If talent is the most important resource for startups, money is a close
second. Few startups survive for long without an investor or a financial
institution to back them- which is why they are an essential pillar of every
startup ecosystem
• Angel investors, venture capital firms, loans and grants (private & Govt.)
and other funding provides all have their place within an ecosystem.
Start-up Ecosystem (cont…
Support & Service Providers
• Incubators & accelerators
-They provide mentorship, guidance, training, strategy, partnerships,
R&D and funding
-They often offer a physical space where startups can establish their
offices
• Service providers
- Research organisations
Start-up Ecosystem (cont…
Government Agencies
• In every country, government agencies regulate business
• Commerce, industry and trade department
• New business can take advantage of tax incentives, grants and awards
and seek the help of government organisations that support
entrepreneurs
• E.g. Startup India
 Role of Entrepreneurs in Economic Development
or
Need/Importance of Entrepreneurship
1. Capital Formation
2. Create Jobs
3. Balanced regional Development
4. GDP and Per Capita Income
5. Standard of living
6. Exports
7. Community Development
8. Backward and Forward linkages
9. Wealth creation and sharing
Meaning
• Entrepreneurship plays an influential role in the economic growth and
standard of living of the country. As a startup founder or small
business owner, you may think that you are simply working hard to
build your own business and provide for yourself and your family. But
you are actually doing a whole lot more for your community, state,
region and the country as a whole.
1. Capital Formation
• Entrepreneurs mobilize the ideal saving of the public through the
issues of industrial securities. Investment of public savings in industry
results in productive utilization of national resources.
• Rate of capital formation increases which is essential for rapid
economic growth. Thus, an entrepreneur is the creator of wealth
2.Create jobs
• Entrepreneurs by nature and definition job creators, as opposed to
job seekers. The simple translation is that when you become an
entrepreneur, there is one less job seeker in the economy, and that
you provide employment for multiple other job seekers. This kind of
job creation by new and existing business is again is one of the basic
goals of economic development.
3. Balanced Regional Development
• Entrepreneurs setting up new business and industrial units help with
regional development by locating in less developed and backward
areas. The growth of industries and business in these areas leads to
infrastructure improvements like better roads and rail links, airport,
stable electricity & water supply, school, hospitals, shopping malls
and other public and private services that would not otherwise be
available
4. GDP and per Capita Income
• Indian MSME sectors, comprised of 36 million units that provide
employment for than 80 million people, account for 37% of the
country’s GDP
• Each new addition to these 36 million units makes use of even more
resources like land, labour and capital to develop products and
services that add to the national income, national product and per
capita income of the country.
• This growth in GDP and per capita income is again one of the
essential goals of economic development.
Note:
• Gross domestic product (GDP) is a monetary measure of the market
value or the market value of all the final goods and services produced
and sold in a specific time period by a country or countries, generally
"without double counting the intermediate goods and services used
up to produce them“. GDP is most often used by the government of a
single country to measure its economic health
• Per Capita Income is a metric used to determine the amount of
money earned per individual in a nation or geographical area.
5. Standard of Living
• Entrepreneurs not only just create jobs, but also develop and adopt
innovations that lead to improvement in the quality of life of their
employees, customers and other stakeholders in the community.
• E.g. Automation that reduces production costs and enables faster
production will make a business unit more productive, while also
providing its customers with the same goods at lower prices.
6. Exports
• Any growing business will eventually want to get started with export
to expand their business to foreign markets. This is an important
ingredient of economic development since it provides access to
bigger markets, and lead to currency inflow and access to the latest
cutting-edge technologies and processes being used in more
developed foreign market.
• Another key benefit is that this expansion that leads to more stable
business revenue during economic downturns in the local enonomy
7. Community Development
• Economic Development doesn’t always translate into community
development. Community development requires infrastructure for
education & training, healthcare, and other public services. E.g. you
need highly educated & skilled workers in a community to attract new
businesses. If there are educational institutions, technical training
schools & internship opportunities, that will help build the pool of
educated & skilled workers.
• A good example of how this kind of community development can be
promoted is Azim Hashim Premji, chairman of Wipro Ltd. Who
donated Rs 27,514 crores for promoting education through the Azim
Premji foundation. This foundation works with more than 350,000
schools in eight states across India
8. Backward and Forward linkages
• An entrepreneur initiates change which has a chain reaction. Setting
up of an enterprise has several backward & forward linkages.
• E.g. the establishment of a steel plant generates several ancillary units
and expands the demand for iron ore, coal etc. (backward linkages).
forward linkages include distributor, wholesaler, utensil
manufacturing, machine building etc.
9. Wealth creation and sharing
• By establishing the business entity, entrepreneurs invest their own
resources & attract capital (debt & equity) from investors, lenders and
the public. This mobilizes pubic wealth & allows people to benefit
from the success of entrepreneurs and growing businesses. This kind
of pooled capital that results in wealth creation & distribution is one
of the basic imperatives and goals of economic development.
 Theories of Entrepreneurship
Different thinkers have propounded different theories of
entrepreneurship development at different time.
• Economic theory of Entrepreneurship
• Psychological theory of Entrepreneurship
• Sociological theory of Entrepreneurship
• Cultural theory of Entrepreneurship
 Economic Theory
• Economists are of the opinion that entrepreneurship & economic
development require certain favourable economic conditions.
• The main advocates of this theory are G.F. Papanek (1962) and J.R.
Harris (1970)
• They were of the opinion that economic incentives are the main
drive for entrepreneurial activities as the inner drives of
entrepreneurs have always been associated with economic gains
• Entrepreneurship lags behind due to insufficient economic policies
and imperfect market planning
Economic theory (cont…
• This theory suggests that favourable economic conditions develop
good entrepreneurship to establish new ventures and bring together
the resources & plan required to move in a positive direction
 Psychological Theory

• This theory is based on the belief that the driving force for generating
and growing any enterprise is :
 5% technology
 95% psychology
• A society having sufficient number of individuals possessing particular
psychological characteristics is more likely to engage in
entrepreneurship
Psychological theory (cont…
• The entrepreneurs are primarily motivated by an atavistic will to
power, will to find a private kingdom or will to conquer.. [Joseph
Schumpeter (1934)]
• The definition of an atavism is a genetic trait that reoccurs after
skipping several generations
According to this theory, the characteristics of entrepreneurs are:
• Vision to see things in a way that proves to be correct in the future
• Energy of will and mind to overcome fixed habit or thoughts
• Capacity to withstand social opposition
Psychological theory (cont…
• E.E Hagen (1964) considers withdrawal of status respect as the trigger
mechanism for the change in personality formation
• Thus, psychologist tend to view entrepreneurs in behavioural terms as
achievement oriented individuals driven to seek challenges and new
accomplishments.
 Sociological Theory

• Sociologists argue that entrepreneurship is most likely to emerge

under a specific social culture
• According to this theory social sanctions, cultural values and role
expectations are responsible for the emergence of entrepreneurship
An entrepreneur’s performance depends upon:
• His own attitude towards his occupation
• The role expectation of the sanctioning groups
• The occupational requirements of the job
Sociological theory (cont…
• Culturally marginal groups promote entrepreneurship and economic
development [Bert. F. Hoselitz (1964)]
• Everett Hagen (1968) conducted a study of the origin and background
of entrepreneurs is several countries
• Hagen concluded that entrepreneurs have emerged from certain
specified castes and communities due to certain social changes
 Cultural Theory
• Cultural & sociological theories of entrepreneurship go hand-in-hand
• The key element in this theory are culture values, role expectations
and social sanctions
• In the process of economic development, the entrepreneurs are not
seen as super normal individual but rather as representing society’s
model personality possessing social, cultural values and norms as a
part of his/ her own thoughts & deeds
 Conclusion
• Entrepreneurship is the outcome of a complex and varying
combination of social-economic, psychological and other cultural
factors.
 Name of the supporters of each theory
• Economic Theory • Sociological Theory
- G. F. Papanek - Maciver & Page
- J.R. Harris - Weber
- M. Kirzner - Everett Hagen
• Psychological Theory • Cultural Theory
- Joseph Schumpeter - Thomas Cochran
- David C. Mc. Clelland
- E.E. Hagen
- J. H. Kunkel