Entrepreneurship
Entrepreneurship is
defined as the process of making money, earning profits and increasing the
wealth while posing characteristics such as risk taking, management, leadership
and innovation. The term Entrepreneurship is a complicated term and gives various
meaning depending on the situation. Nevertheless there are certain
characteristics of Entrepreneurs differentiate them and
those characteristics are explained below.
§ Entrepreneurship vs leadership-
Entrepreneurs need
certain level of leadership skills to direct their employees to achieve goals
and objectives to make money. But not all leaders are considered as
Entrepreneurs. As an example. Mahathma Gandhi is a leader but not an
Entrepreneur. His leadership can be seen as benevolent leadership which aimed at
directing the society to make well-being of the society. On the other hand the
aim of leadership practiced by Entrepreneurs is to make wealth for themselves.
§ Entrepreneurship vs management-
Entrepreneurs need
managerial skills to run their business and make sure they create incremental
wealth for themselves. On the other hand not all managers are Entrepreneurs.
There are managers who manage businesses of others as employees of
Entrepreneurs.
§ Entrepreneurs vs innovators-
Entrepreneurs need to
have innovating skills to identify market opportunities and find out a way to
make money out of them. They need to be innovative to come up with solutions
for problems in the market to make profits. This is
called Entrepreneurial innovation. On the other hand, not all innovators
can be called Entrepreneurs. As an example Thomas Alva Edison is the greatest
innovator of the 20th century who invented the electric bulb and his
innovations were purely based on scientific motives. He did not have the motive
of profit/making money and therefore he cannot be called as an Entrepreneur.
§ Entrepreneurship vs Risk Taking-
Entrepreneurs need to
accept risk to exploit market opportunities to make money. They need to try
different tactics which carries a risk component in it. But point to note is
that Entrepreneurs always accept calculated risk which is directly linked/pegged
to the return they receive. Entrepreneurs are based on fundamental of
“Higher the risk higher the return” and vice versa. On the other hand
not all risk taker are Entrepreneurs. As an example, the biggest risk takers
are gamblers but the risk they accept is not calculable and not directly
pegged to the return they earn. In other words gambles do not make conscious
decision about risk and accept large risks. The risk accepted by Entrepreneurs
can be mitigated and absorbed by the Entrepreneur. (As opposed to
gamblers, Entrepreneurs make conscious decision on risk where they know
the limit of risk that they can absorb)
Venture
Capital
What is venture capital?
Venture capital provides long-term, committed share capital, to
help unquoted companies grow and succeed. If an entrepreneur is looking to
start-up, expand, buy-into a business, buy-out a business in which he works,
turnaround or revitalise a company, venture capital could help do this.
Obtaining venture capital is substantially different from raising debt or a
loan from a lender. Lenders have a legal right to interest on a loan and
repayment of the capital, irrespective of the success or failure of a business
. Venture capital is invested in exchange for an equity stake in the business.
As a shareholder, the venture capitalist's return is dependent on the growth
and profitability of the business. This return is generally earned when the
venture capitalist "exits" by selling its shareholding when the
business is sold to another owner.
What kind of businesses
are attractive to venture capitalists?
Venture capitalist
prefer to invest in "entrepreneurial businesses". This does not
necessarily mean small or new businesses. Rather, it is more about the
investment's aspirations and potential for growth, rather than by current size.
Such businesses are aiming to grow rapidly to a significant size. As a rule of
thumb, unless a business can offer the prospect of significant turnover growth
within five years, it is unlikely to be of interest to a venture capital firm.
Venture capital investors are only interested in companies with high growth
prospects, which are managed by experienced and ambitious teams who are capable
of turning their business plan into reality.
For how long do venture
capitalists invest in a business?
Venture capital firms
usually look to retain their investment for between three and seven years or
more. The term of the investment is often linked to the growth profile of the
business. Investments in more mature businesses, where the business performance
can be improved quicker and easier, are often sold sooner than
investments in
early-stage or technology companies where it takes time to develop the business
model.
Where do venture capital
firms obtain their money?
Just as management teams
compete for finance, so do venture capital firms. They raise their funds from
several sources. To obtain their funds, venture capital firms have to
demonstrate a good track record and the prospect of producing returns greater
than can be achieved through fixed interest or quoted equity investments. Most
venture capital firms raise their funds for investment from external sources,
mainly institutional investors, such as pension funds and insurance companies.
Venture capital firms'
investment preferences may be affected by the source of their funds. Many funds
raised from external sources are structured as Limited Partnerships and usually
have a fixed life of 10 years. Within this period the funds invest the money
committed to them and by the end of the 10 years they will have had to return
the investors' original money, plus any additional returns made. This generally
requires the investments to be sold, or to be in the form of quoted shares,
before the end of the fund.
Venture Capital Trusts
(VCT's) are quoted vehicles that aim to encourage investment in smaller
unlisted (unquoted and AIM quoted companies) companies by offering private
investors tax incentives in return for a five-year investment commitment.
What is involved in the
investment process?
The investment process,
from reviewing the business plan to actually investing in a proposition, can
take a venture capitalist anything from one month to one year but typically it
takes between 3 and 6 months. There are always exceptions to the rule and deals
can be done in extremely short time frames. Much depends on the quality of
information provided and made available.
The key stage of the
investment process is the initial evaluation of a business plan. Most
approaches to venture capitalists are rejected at this stage. In considering
the business plan, the venture capitalist will consider several principal
aspects:
- Is the product or service commercially viable?
- Does the company have potential for sustained
growth?
- Does management have the ability to exploit this
potential and control the company through the growth phases?
- Does the possible reward justify the risk?
- Does the potential financial return on the investment
meet their investment criteria?
Najam Kidwai, is a young and vibrant personality and also a very successful businessman and entrepreneur. He is currently raising an early stage technology venture capital fund in Pakistan, called CleverThinking Ventures, which will be a $20M fund focused on making early stage investments in the enterprise software, medical devices, networking and wireless technologies.
Previously he has held a variety of roles such as CEO, VP, Director & General Manager with a sales focus and has built and launched a number of UK & US based technology companies in Europe and South East Asia. Najam has extensive experience in emerging technologies, specifically, wireless, CRM, Outsourcing iTV, enterprise software and natural-language.
Najam has raised over $55M in VC funds to date and has built and sold two technology/consulting companies for millions of dollars.
Najam was also heavily involved in the development of the first online funds supermarket of -www.egg.com (most successful online bank in the world)
Previously (1999 – 2002), a co-founder of AtomicTangerine (a Venture Consultancy and SRI International spin-off), Najam Kidwai led AtomicTangerine’s Commercialization practice and was responsible for taking the intellectual property from partner labs (SRI, Sarnoff, KRDL and alliances) and promising new business opportunities resulting in licensing the technology or creating new ventures to capitalize on the IP created.
Najam Kidwai has been involved with many award-winning online businesses such as ESI (E*Trade UK) and Egg. In 2000/1, Najam Kidwai was instrumental in founding and building AtomicTangerine’s European operations, revenue ($10,000,000+ in UK).
As of December 2001, AtomicTangerine was acquired by RedSiren Technologies (www.redsiren.com). In June 2001, Najam Kidwai was responsible for facilitating and structuring the acquisition by BSG PLC of AtomicTangerine’s Experience Design Business, which he co-founded
Najam Kidwai has a BSc(Hons) in Technology Management, an MSc in Business Innovation and is 34 years old. Najam Kidwai is a frequent speaker on technology issues and has presented at many global technology and venture capital conferences.
Najam Kidwai currently sits on the boards, as an advisor to www.primetext.co.uk, www.rockingfrog.com,www.ambientdevices.com,www.chicago.com and Epigraph Inc. Najam Kidwai is a member of the Institute of Directors, the British Computer Society and the Electronic Commerce Association.
