Entrepreneurship is the process of designing, launching and running a new business, which is

often initially a small business. The people who create these businesses are
called entrepreneurs.

Concept of Entrepreneurship:
The word “entrepreneur” is derived from the French verb enterprendre, which means ‘to
undertake’. This refers to those who “undertake” the risk of new enterprises. An enterprise is
created by an entrepreneur. The process of creation is called “entrepreneurship”.

Characteristics of Entrepreneurship:
Entrepreneurship is characterized by the following features:
1. Economic and dynamic activity:
Entrepreneurship is an economic activity because it involves the creation and operation of an
enterprise with a view to creating value or wealth by ensuring optimum utilisation of scarce
resources. Since this value creation activity is performed continuously in the midst of uncertain
business environment, therefore, entrepreneurship is regarded as a dynamic force.

2. Related to innovation:
Entrepreneurship involves a continuous search for new ideas. Entrepreneurship compels an
individual to continuously evaluate the existing modes of business operations so that more
efficient and effective systems can be evolved and adopted. In other words, entrepreneurship is a
continuous effort for synergy (optimization of performance) in organizations.

3. Profit potential:
“Profit potential is the likely level of return or compensation to the entrepreneur for taking on the
risk of developing an idea into an actual business venture.” Without profit potential, the efforts
of entrepreneurs would remain only an abstract and a theoretical leisure activity.

4. Risk bearing:
The essence of entrepreneurship is the ‘willingness to assume risk’ arising out of the creation and
implementation of new ideas. New ideas are always tentative and their results may not be
instantaneous and positive.

An entrepreneur has to have patience to see his efforts bear fruit. In the intervening period (time
gap between the conception and implementation of an idea and its results), an entrepreneur has to
assume risk. If an entrepreneur does not have the willingness to assume risk, entrepreneurship
would never succeed.

Importance of Entrepreneurship:
Entrepreneurship offers the following benefits:
Benefits of Entrepreneurship to an Organisation:
1. Development of managerial capabilities:
The biggest significance of entrepreneurship lies in the fact that it helps in identifying and
developing managerial capabilities of entrepreneurs. An entrepreneur studies a problem,
identifies its alternatives, compares the alternatives in terms of cost and benefits implications,
and finally chooses the best alternative.

This exercise helps in sharpening the decision making skills of an entrepreneur. Besides, these
managerial capabilities are used by entrepreneurs in creating new technologies and products in
place of older technologies and products resulting in higher performance.

2. Creation of organisations:
Entrepreneurship results into creation of organisations when entrepreneurs assemble and
coordinate physical, human and financial resources and direct them towards achievement of
objectives through managerial skills.

3. Improving standards of living:

By creating productive organisations, entrepreneurship helps in making a wide variety of goods
and services available to the society which results into higher standards of living for the people.

Possession of luxury cars, computers, mobile phones, rapid growth of shopping malls, etc. are
pointers to the rising living standards of people, and all this is due to the efforts of entrepreneurs.

4. Means of economic development:

Entrepreneurship involves creation and use of innovative ideas, maximisation of output from
given resources, development of managerial skills, etc., and all these factors are so essential for
the economic development of a country.

Factors affecting Entrepreneurship:

Entrepreneurship is a complex phenomenon influenced by the interplay of a wide variety of
factors.

Factors affecting Entrepreneurship:

Entrepreneurship is a complex phenomenon influenced by the interplay of a wide variety of
factors.

Some of the important factors are listed below:

1. Personality Factors:
Personal factors, becoming core competencies of entrepreneurs, include:

(a) Initiative (does things before being asked for)

(b) Proactive (identification and utilisation of opportunities)

(c) Perseverance (working against all odds to overcome obstacles and never complacent with
success)

(d) Problem-solver (conceives new ideas and achieves innovative solutions)

(e) Persuasion (to customers and financiers for patronisation of his business and develops &
maintains relationships)

(f) Self-confidence (takes and sticks to his decisions)

(g) Self-critical (learning from his mistakes and experiences of others)

(h) A Planner (collects information, prepares a plan, and monitors performance)

(i) Risk-taker (the basic quality).

2. Environmental factors:
These factors relate to the conditions in which an entrepreneur has to work. Environmental
factors such as political climate, legal system, economic and social conditions, market situations,
etc. contribute significantly towards the growth of entrepreneurship. For example, political
stability in a country is absolutely essential for smooth economic activity.

Frequent political protests, bandhs, strikes, etc. hinder economic activity and entrepreneurship.
Unfair trade practices, irrational monetary and fiscal policies, etc. are a roadblock to the growth
of entrepreneurship. Higher income levels of people, desire for new products and sophisticated
technology, need for faster means of transport and communication, etc. are the factors that
stimulate entrepreneurship.

Thus, it is a combination of both personal and environmental factors that influence

entrepreneurship and brings in desired results for the individual, the organisation and the society.
Difference between entrepreneurs and entrepreneurship

Top challenges faced by startup in India

Team
An important element of any startup is a team of dedicated people who aim to excel at their
work and are sincere enough to follow up without any reminders. Scouting for a good team is the
first major challenge of any startup especially at the nascent stage, wherein a team can make or
break the enterprise. According to a survey, team failure was attributed to the shutdown of 23
percent of failed startups. A top reason for a failed startups is the absence of co-founders. A team
of dedicated individual with complementary skill sets are required. A team with a perfect balance
of skills but different ways of communicating can also cause problems early on.

Funding
Nearly 242 million dollars of venture capital funding has gone into a total of 64 startups in India
according to research firm Venture Intelligence. However, industry experts claim that this
number is negligible and there is a strong cause to increase it substantially more to sustain early-
stage risk capital. Due to the processes involved and the high interest rates, debt as a source of
funding is also not a viable option. Personal funding becomes an issue as financial stability calls
for immediate sources of revenue which may not be possible in the initial stages of starting a
company.

Market Need
The next most important challenge for a startup is the location from which it is being launched
and gauging the market need for the product. Innovation is the key here, in the sense that the
startup would need to tweak products existing in the market to suit the demands of the clientele.

Revenue and Capital Burn

As there is immense competition, startups need to scale up fast and this is where external funding
comes in. Investments and startups go hand in hand. When fundraising comes to a halt, trouble
brews. Several startups are forced to focus more on raising investment rather than generating
revenue. Right management of burn rate is a big concern. Often, as soon as a startup gets funded,
it loses track of the burn rate and its own depleting revenue thus eventually going bankrupt.
Hence, a conscious approach to revenue generation is required.

Decelerators
One of the major challenges is the influence of external organisations which try to control,
manage, take advantage of their events, numbers or brands in the name of mentoring. Most
innovative, fast growing companies which started making profits early on have been self
dependent and have never been incubated or mentored. The initial growth might have been
slower, however it offers more in terms of stability and profits in the longer term. Influence of
external organisations/ entities need to be curtailed in order for the startup to accelerate.
Culture - Entrepreneurship and startups are only a recent phenomenon in the country. It is only
in the last decade and half that people in the country have moved from being job seekers to job
creators. Doing a startup is tough and every country sees more failures than success. More often
than not an entrepreneur needs to be prepared to face failures and unprecedented hardship.
However, culturally we are not groomed to fail and failure is frowned upon. Entrepreneurship
thrives on ..

Policies – Government is the single largest enabler for the entrepreneurial ecosystem.
Government's role in ease of doing business and helping companies start is vital to ensuring
success. The latest World Bank Ease of Doing Business (out of 189 economies) ranks India at an
abysmal 142 where starting a business rank for the country is even lower at 158.
it is uncannily difficult to start a business in India and myriad laws and regulations means it takes
about 30 days to comply compared to just 9 days in OECD countries. The government’s role has
so far been limited to giving out grants and loans, but without an effective, enabling
environment, implementation is far off the target. In this regard it will be interesting to see the
contours of the recently announced Startup Fund in this year’s budget. For startups to thrive and
succeed, the governmen ..

five factors are critical:

critical factors for new venture development

five factors are critical:
(1) the relative uniqueness of the venture,
(2) the relative investment size at start-up,
(3) the expected growth of sales and/or profits as the venture moves through its start-up phase,
(4) the availability of products during the prestart-up and start-up phases, and
(5) the avail- ability of customers during the prestart-up and start-up phases.

Uniqueness Venture uniqueness is further characterized by the length of time a nonroutine

venture will remain nonroutine.

Investment Another finance-related critical issue is the extent and timing of funds needed to
move through the venture process.

Will industry growth be sufficient to maintain break¬ even sales to cover a high fixed-cost
structure during the start-up period? Do the principal entrepreneurs have access to substantial
financial reserves to protect a large initial invest¬ ment? Do the entrepreneurs have the
appropriate contacts to take advantage of various environmental opportunities?
Growth of Sales
What is the growth pattern anticipated for new-venture sales and profits?

What is the expected growth pattern for sales?

o What type of venture is this?
Lifestyle venture: small business, autonomy, comfortable living
Small profitable venture: autonomy, grow, make profits, control
High-growth venture: significant sales growth, attract big
investments or an IPO on the stock market

Product Availability the availability of a salable good or service at the time the venture opens
its doors.

Lack of product availability in finished form can affect the company's image and its bottom line.

customer availability
A critical consideration is how long it will take to determine who the customers are, as well as
their buying habits.

Why New Ventures Fail

 Product/Market Problems
o Poor timing: Is the market ready - 1st mover vs. 2nd mover?
o Product design problems: Does product function as intended?
o Inappropriate distribution: Can you deliver?
o Unclear business definition: Value proposition?
o Overreliance on one customer: What if you lose your one account?
2. Financial Difficulties
o Initial undercapitalization: Not enough cash?
o Assuming debt too early: How do we pay back our debt?
o Investor relationship problems: Differing goals, vision, motivations?
3. Managerial Problems
o Team issues: How are decisions made and who controls what?
o Human resource problems: Are we hiring the right people?

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