Institutional

Support to New
Venture
Unit-4

Institutional Support to New Venture

Introduction:
The entrepreneurship development movement is primarily
based on the belief that people can accept entrepreneurship
as a career . In order to accelerate the speed of selfemployment and entrepreneurship development , various
agencies were established by government . These agencies
cater to the business needs and requirements of the
entrepreneurs . It can be categories in the central level and
state level .
Basically , institutional support system is necessary at three
stages of enterprise development .

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These are:
i.

Inception or promotion of a business or industrial unit ,

ii. Day to day management or routine management and,

iii. Expansion and diversification.
. These institutions provide not only financial facilities but other types
of assistance also , such as, availability of raw material , marketing of
products , training of personnel , developing infrastructure ,
facilitating exports . The network of institutes , such as
DIC,NIESBUD,IDBI,SIDC,SISI, etc.. with main emphasis on long and
short term credit needs of entrepreneurial development , is also
available in the country.

Role of Institutions in Developing

Entrepreneurship

Role of Institutions in Developing Entrepreneurship

Financial Assistance
Promotional Activities

Technical Assistance
Marketing Assistance

District Industries Centres

(DIC)

District Industries Centres(DIC)

Introduction:
Governments both Central & State ,have in the past taken a number
of measures for the development of small and village industries
,multiplicity of instructions involved in small industries development
and complicated systems and procedures made the job of promoting
the industrial units an uphill task for small entrepreneurs . Hence , it
was felt necessary to establish a development agency , which could
provide all services and facilities to village and small industries under
one roof . Accordingly , the DICs were established in May 1978 in
order to cater to the needs of small units .
Each district has a DIC at its headquarters . The main responsibility of
DIC is to act as the chief coordinate or multifunctional agency in

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Government departments and other agencies . The prospective small
entrepreneur would get all assistance from DIC for setting up and
running an industry in rural areas .

Objectives of DIC
Accelerate the overall efforts for industrialization of the district .
Rural industrialization and development of rural industries and
handicrafts.
Attainment of economic equality in various regions of the district.
Providing the benefit of the government schemes to the new
entrepreneurs.
Centralization of procedures required to start a new industrial unit and
minimization of the efforts and time required to obtain various
permissions , licenses , registrations , subsidies, etc..

Roles of DIC
1) Identification of Entrepreneurs
2) Selection of Projects
3) Provisional Registration under SSI
4) Purchase of Fixed Assests
5) Clearances from Various Departments
6) Assistance to Raw Material Supplies

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7) Assistance to Village Artisans and Handicrafts
8) Interest-Free Sales Tax Loan
9) Subsidy Schemes
10) Training Programmes

Schemes of DIC
1. PMEGP
2. Seed Money Scheme(SMS)
3. District Industries Centre Loan Scheme
4. Industrial Promotion Subsidy Scheme
5. NABARD Margin Money Scheme
6. Zilla Udyog Mitra
7. District Awards to Small-Scale Entrepreneurs

Maharashtra Industrial
Development Corporation
(MIDC)

Maharashtra Industrial Development Corporation

(MIDC)
1. MIDC was established in 1962,under MID Act, 1961 as the Premier Industrial
Infrastructure Development Agency of Government of Maharashtra .
2. The MIDC was set-up to develop industrial areas by providing necessary
infrastructure and to make developed plots available to entrepreneurs for
establishing industrial units . By the end of 1975-76 , the MIDC has established
53 industrial areas , allotted 4,620 plots ,and 226 factories had gone into
production involving a total investment of rs.470 crore and providing
employment to 1,01,300 workers .
3. MIDC is a project of the Government of Maharashtra State in India and is the
leading corporation of Maharashtra . It provides businesses with infrastructure
such as land (open plot or built-up spaces) , roads , water supply , drainage
facilities , and street lights .

Objectives of MIDC
1. To achieve balanced industrial development of Maharashtra with an emphasis
on developing parts and under developed parts of the state .
2. To facilitate infra structural development of each and every district of
Maharashtra .
3. To facilitate entrepreneurs in setting-up industries at various locations .
4. To establish industrial areas and to provide necessary infrastructure in such
areas in the form of roads , street, lights , water supply , drainage , and
common facilities .
5. To facilitate dispersal of industries away from Mumbai and in the developing
parts of the state by providing necessary physical infrastructure.

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6. To provide developed plots with clear titles of entrepreneur for setting-up of
their industries in such plots and also to provide plots for industrial housing and
common facilities .
7. To make special efforts for encouraging technician/small-scale entrepreneurs
by providing readymade sheds/galas in various industrial areas and help them in
setting up their own industries .
8. To provide industrial housing by constructing residential by buildings .
9. To establish major water supply schemes for helping industrial and urban
growth.
10. To undertake on behalf of the government/agencies projects on deposit
contribution basis.

Role of MIDC
1. Acquisition and Disposal of Land
2. Provision of Infrastructure Facilities
3. Providing of Services
i.

Assured Water Supply

ii.

Drainage (effluent disposal) and CETP Schemes

iii. Other Services

Schemes of MIDC
1. Exemption from Electricity Duty
2. Waiver of Stamp Duty and Registration Fees
3. Octroi Refund
4. Incentives to SSI Units
i.

Special Capital Incentives for SSI Units

ii.

Interest Subsidy to New Textile , Hosiery , and Knitwear SSI Units

Small Industries Service

Institute
(SISI)

Small Industries Service Institute(SISI)

Introduction:

1. SISI is a national level organization established by the Central government .

The small industries service institutes (ISISs) are set-up one in each state to
provide consultancy and training to small and prospective entrepreneurs . The
activities of SISs are co-ordinate by the industrial management training
division of the DC , SSI office(New Delhi) .
2. ISIS have been generally organizing the following types of EDPs on specialized
courses for different target groups like energy conversation , pollution control ,
technology up gradation , quality improvement , material handling ,
management technique etc..
3. SISI arranges general EDP for educated unemployed youth , ex-service ,
personnel etc. for a duration of four weeks . In these programmes , classrooms
lectures and discussions are held on issues such as facilities and assistance
available from State and Central government agencies , banks , financial

Objectives of SISI
1) Assistance/Consultancy to prospective entrepreneurs ,
2) Assistance/Consultancy rendered to existing units ,
3) Preparation of state industrial profiles ,
4) Preparation/Updation of district industrial potential surveys ,
5) Project profiles
6) Entrepreneurship development programmes .
7) Motivational campaigns ,
8) Production index ,

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9) Management development programmes ,
10) Skill development .

Role of SISI
1) Technical Consultancy Services
2) Managerial Consultancy Services
3) Economic Investigation Services
4) Entrepreneurial Development Programme and Prime Ministers Rojgar Yojana
5) Ancillary Development Programmes
6) Marketing Assistance and Services
7) Export Promotion Services
8) Modernization /Technology Upgradation Services

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9) Library Facility
10) Assistance to State Government Agencies

Schemes of SISI
1) Technical Consultancy Services
I.

Technical guidance

II.

Identification and preparation of Project profiles / reports .

III. Selection of Equipment , Machinery & Raw Materials

IV. Technical Up-gradation / Quality Control
V.

Technical Seminar / Workshop / Clinic

VI. To prepare technical literature / papers etc.

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2) Managerial Consultancy Service
I.

Conduct various Industrial Management Courses e.g. Personnel , Finance ,

Marketing , Taxation , Export etc.

II.

Improvement of Quality , Productivity of Labor , etc.

III. Techno-Economical and Managerial , Appraisal reports to Banks/Financial

Institutions.
IV. Technical Training Courses on product development etc.
V.

Short-term / Tailor-made Technical courses.

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3) Economic Investigation Services
I.

Industrial Potential Surveys / Market Surveys

II.

Feasibility reports/State Industrial Profile

III.

Sample Survey/Collection of Statistics

IV.

SSI Census

V.

Review Report/Production Index

VI. Assistance and Rehabilitation of sick units

VII. Advise /Gudiance on Policy issues
VIII. Guidance on facilities available with Banks , Financial Institutions etc.

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4) Entrepreneurial Development Programme and Prime Ministers Rojgar Yojana
I.

General One Month EDP Courses

II.

Product and Process EDP Programmes

III.

One week EDP for Self Employed Youths

IV.

EDP for Women entrepreneurs

V.

Product/Process Demonstration

VI. To implement the Prime Ministers Rojgar Yojana in

VII. BMR and assistance to DIC in implementing PMRY for Educated unemployed youths
VIII. To assist various institutions and Agencies for EDP

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5) Ancillary Development Programmes
I.

Identification of Ancillary items for large/small scale industries

II.

Interactions with public /private sector undertakings

III.

Preparation of Ancillary report

IV.

Organizing State Level Ancillary Development Committee and participation in PLC

meeting

V.

Organizing Buyers Sellers Meet/Vendor Development Programme-cum-Exhibition

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6) Marketing Assistance and Services
I.

Provide Market Information

II.

Assist to prepare Market feasibility report

III.

Indirect marketing support through sub-Contract Exchnage

IV.

Marketing assistance for Govt./Semi-Govt. purchase

V.

Programme through Single Point NSIC registration

VI. Marketing Buyer-Sellers Meet-cum-Exhibition

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7) Export Promotion Services
I.

Export Market information

II.

Export to prepare Market feasibility report

III.

Export Management training

IV.

Export Packaging training

V.

Seminar/ Workshop on Export Related Procedures

VI. Arrange and forward exhibits to foreign trade fairs

VII. Preparation of Export directory and reports

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8) Modernization /Technology Up gradation Services
I.

Undertaking in-plant studies

II.

Conduct cluster studies

III.

Programmes on Technology up-gradation/quality up-gradation&ISO-9000/Energy

conservation

IV.

Conducting Awareness Programmes/Seminars/Workshop on Pollution Control & ODS

Phase out

V.

Undertaking industry status studies

VI. Co-ordination of modernization activities

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9) Common Facility Services
I.

Workshop facilities for undertaking jobs , jigs &

II.

Fixtures , process tools complicated jobs etc.

III. Product Development

IV. Industrial Design
V.

On the job 6 months training to industrial workers

VI. Short term training courses

MSME
MICRO,SMALL AND MEDIUM ENTERPRISES

MSME

Introduction:

1. MSMEs constitute an important segment of the Indian economy in terms of

their contribution to countrys industrial production , exports , employment ,
and creation of entrepreneurship base . The primary responsibility for
promotion and development of MSMEs lies with State Governments .
2. All activities related to small scale industry is directed by this Ministry of Micro,
Small and Medium Enterprises . In accordance with the provision of Micro
,Small , and Medium Enterprises Development(MSMED) Act , 2006 the Micro ,
Small ,and Medium Enterprises(MSME) are classified in two classes , which are
as follows:
a. Manufacturing Enterprises
b. Service Enterprises

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a. Manufacturing Enterprises:
i.

A micro enterprise is where the investment in plant and machinery is more

than 25 lakh.

ii.

A small enterprise is where the investment in plant and machinery is more

than 25 lakh but does not exceed 5 crore.

iii. A medium enterprise is where the investment in plant and machinery is more
than 5 crore but does not exceed 10 crore.

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b. Service Enterprises:
i.

A micro enterprise is where the investment in equipment does not exceed 10

lakh.

ii.

A small enterprise is , where the investment in more than 10 lakh but does
not exceed 2 crore.

iii. A medium enterprise is , where the investment in equipment is more than 2

crore but does not exceed 5 crore.

Characteristics of MSME

Characteristics of MSME
Born Out of Individual Initiatives
and Skills

Greater Operational
Flexibility

Low Cost of Production

High Propensity to Adopt

Technology

High Capacity to Innovate

Export

High Employment Orientation

Reduction of Regional
Imbalances

Objective of MSME
1. To create immediate employment opportunities with relatively low investment.
2. To make small industries export-oriented and help quality up gradation.
3. To remove regional disparities through a deliberate policy.
4. To encourage growth in villages and in small towns.
5. To reduce disparities in income , wealth , and consumption.
6. To mobilize resources of capital and skills and their optimum utilization.
7. To eliminate economic backwardness of rural and under-develop regions in the
country.
8. To provide steady source of income to the low-income groups living in rural and
urban areas of the country.

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9 . To provide substitutes for various industrial products now being imported into
the country.
10 . To effect an integration of the activities of small business with the rural
economy on the one hand and with the large-scale business on the other.
11 . To improve the quality of industrial products manufactured in the cottage
industry sector and to enhance both production and exports.
12 . To remove the problems created by urbanization and consequent growth of
big towns and cities and to attain self-reliance.

Scope of MSME
1)

Manufacturing Industries

I.

Village and Cottage Industries

II.

Handlooms and Handicrafts

III.

Modern Small Industries

a)

Small Enterprises

b)

Ancillary Industries

c)

Tiny Units

2) Trading Industries
3)Service Industries

Role of MSME
1) Employment Generation
2) Production
3) Export Contribution
4) Innovation and Development
5) Utilizing Resources Optimally
6) Developing Entrepreneurial Capacity
7) Increase GDP
8) Feeder to Large Industries

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9) Opportunity for Artisan
10)Increase Standard of Living
11) Less Pressure of Population on Agriculture
12)Equitable Distribution of Income
13) Social Advantage

MSME Policy in India

1) Reservation Policy

2) Purchase and Price Preference Policy

3) Licensing Policy
4) Trade Policy
5) Foreign Direct Investment Approval Policy
6) Labor Policies
7) Credit Policy
i.

Priority Sector Lending

ii.

Institutional Arrangement

Financial Assistance For Small

Enterprises

Financial Assistance For Small Enterprises

Introduction:

Financial sector plays an indispensable role in the overall development of a country . The
most important constitute of this sector is financial institutions , which act as a conduit for
the transfer of resources from net savers to net borrowers , that is , from those who spend
less than their earnings to those who spend more than their earnings .
In developing countries , Small and Medium-sized Enterprises(SME)particularly micro
and small enterprises have great difficulty in obtaining the necessary financial resources
to effectively scale-up and grow their businesses . Access to traditional growth capital ,
including debt and equity , is often prohibitively costly , due to such factors as insufficient
legal and regulatory policies , and inadequate financial markets .
The development community has tried to address this challenge by creating microfinance
lending instruments and private sector investment intermediary institutions , including
those supported by the International Finance .

Financial Assistance For Small Enterprises

Introduction:

Financial sector plays an indispensable role in the overall development of a country . The
most important constitute of this sector is financial institutions , which act as a conduit for
the transfer of resources from net savers to net borrowers , that is , from those who spend
less than their earnings to those who spend more than their earnings .
In developing countries , Small and Medium-sized Enterprises(SME)particularly micro
and small enterprises have great difficulty in obtaining the necessary financial resources
to effectively scale-up and grow their businesses . Access to traditional growth capital ,
including debt and equity , is often prohibitively costly , due to such factors as insufficient
legal and regulatory policies , and inadequate financial markets .
The development community has tried to address this challenge by creating microfinance
lending instruments and private sector investment intermediary institutions , including
those supported by the International Finance Corporation (IFC).

Need of Financing for Small Enterprises

1. Cash Flow Challenges.
2. Capital Investments.
3. Lengthy Product Development Cycles.

Types of Finance
1. The financial needs of a business are of a peculiar nature . The type and
amount of funds required usually differs from one business to another . For
instance , if the size of business is large , the amount of funds required will also
be large . The financial requirements are more in manufacturing are more in
manufacturing business as compared to trading business . The business need
funds for longer period to be invested in fixed assets like land and building ,
machinery etc..
2. The business also needs fund to be invested in shorter period . An
entrepreneur requires adequate amount of capital to run their business
successfully . Finance required by the entrepreneur may be classified on the
basis of source of generation as :
a.

Internal Finance

b. External Finance

Internal Sources of Finance

1. The type of funds most frequently employed by the entrepreneur is internally
generated funds . Internally generated funds can come from several sources to
the entrepreneurs i.e., profits , sales of assets , reduction in working capital ,
depreciation fund , extended payment terms , accounts receivable etc.
2. In every new venture , the start-up years involve putting all the profits back
into the venture ; even outside equity investors do not expect any payback in
these early years . Sometimes the needed fund can be obtained by selling little
used assets .
3. A short-term , internal source of funds can be obtained by reducing short-term
assets such as inventory , cash , and other capital items . Although care must
be taken to ensure good supplier relations and continuous sources of supply ,
taking a few extra days in paying can generate needed short-term funds .

Internal Sources of Finance

Internal sources of financing consist following sources :
1) Retained Profit
2) Controlling Working Capital
3) Sale of Assets
4) Owners Personal Saving
5) Reducing Stocks
6) Trade Credit

External Sources of Finance

Types of Finance:
1. Short-Term:
Period of Repayment : Less than a year
Purpose : purchase of raw materials , payment of wages , rent , insurance , etc.
2. Medium-Term:
Period of Repayment : 1-5 years.
Purpose : Expenditure on modernization , renovation , heavy advertising , etc.

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Types of Finance:
3. Long-Term:
Period of Repayment : More than five years.
Purpose : Purchase of land and building , plant and machineries , etc.

1. Short-Term Finance
Short-Term Finance
Indigenous Bankers

Installment Credit

Advances

Accrued Expenses and

Deferred Income

Account Payable

Trade Credit

Bills Discounting
Commercial Banks

Factoring

2. Medium-Term Finance
Medium-Term Finance
Special Financial
Institutions

Commercial Banks

Public Deposits

Investment Companies

Hire Purchase

Lease Financing

Internal Sources

Loans from Government

1. Short-Term Finance
Long-Term Finance
Equity Shares

Preference Shares

Debentures

Retained Earning

Loans from Financial

Institutions

Commercial Banks

Venture Capital

Institutional
Financing

Sources of Finance
1. Non-Institutional Sources of Finance .
2. Institutional Sources of Finance .

Non-Institutional Financial Assistance

Introduction:
1. The major non-institutional sources of finance , operating in the district are
money leaders , traders , commission agents and relatives . Although it is not
possible to have appropriate figure of their number and their credit
deployment over the years , it is noticed that they have been playing a pivotal
role in financing both productive and unproductive activities of rural and urban
people . It is also observed that the rate of interest charged by these private
sources ranges from one per cent per month , which is quite high in
comparison with the institutional credit sources .
2. Despite all this , non-institutional sources continue to perform an important
role in the agrarian economy , particularly for unproductive loans . The
government has taken a number of steps to regularize the activities of the
money lenders and to protect the borrowers form the exploitation of money
lenders .

Sources of Non-Institutional Financial

1. Personal Savings
2. Family and Friends
3. Angels
4. Traders and Commission Agents

Personal Funds
1. A significant proportion of the initial capital both fixed and working- for SSEs
is obtained from personal saving accumulated from other activities . Similarly ,
expansion of SSEs is mainly financed from internally generated funds . This
situation has frequently led to the argument that SSEs , particularly rural
SSEs , do not exhibit a high demand for external sources of finance . It should
be noted , however , that whereas the initial capital is required to establish a
small enterprise may appear meager , these amounts may account for a
substantial proportion of the gross annual family income.
2. Self reliance is one of the most common traits of successful entrepreneurs ,
and that characteristics extends to business start-up finding . Most people
starting a business would just as soon rely on their own resources to do it .
They dont want to depend on others or on any form of debt to begin building
towards their entrepreneurial dream .
3. If the personal financial assets are ample , one has probably already got other

Family and Friends

1. Family and friends are a common sources of capital for a new venture . They
are most likely to invest due to their relationship with the entrepreneur . This
helps to overcome one portion of uncertainty felt by impersonal investors that
is knowledge of the entrepreneur .
2. Family and friends provide a small amount of equity funding for new ventures ,
reflecting in part the small amount of capital needed for most new ventures .
Although it is relatively easy to obtain money from family and friends , like all
sources of capital , there are positive and negative aspects.
3. Although the amount of money provided may be small , if it is in the form of
equity financing , the family members or friends then have an ownership
position in the venture and all rights and privileges of that position . This may
make them feel they have a direct input into the operations of the venture ,

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which may have a negative effect on employees , facilities , or sales and profits .
Although this possibility must be guarded against as much as possible , frequently
family and friends are not problem investors and in fact are more patient that
other investors in desiring a return on their investment .
In order to avoid these problems in the future , the entrepreneur must present the
positive and negative aspects and the nature of the risks of the investment
opportunity to try to minimize the negative impact on the relationships with family
and friends should problems occur .

Angel Funding /Angel Investors

1. Angel funding is generally considered the entry level of funding for
entrepreneur and their ideas and/or start-up companies . Historically , angels
have been defined as high net worth individuals that have an interest in using
their resources to fund and grow start-up companies . Generally speaking ,
many of these same high net worth individuals have been through the
entrepreneur start-up process with some level of success and would like to use
their experience and personal resources to facilitate individuals with the same
type of interest in developing a company from scratch and later see it become
successful in the marketplace .
2. Business angels or Angel investors are the investors who invest their own
money , along with their time and expertise , in unquoted firms in the hope of
any financial gain . Business angels activity constitutes what is also known as
informal venture capital market , in contrast to the formal source of equity
funding , namely the institutional venture capital

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industry made up of private partnership or closely-held corporations funded by
pension funds , endowments , foundations , wealthy individuals , foreign
investors , and venture capitalists themselves .

Types of Angels Investors

I.

Corporate Angel

II.

Professional Angel

III. Professional Angel Investors

IV. Enthusiastic Angel Investors
V.

Micromanagement Angel Investors

Benefits of Angels Funding

I.

Provides Capital for Start-Ups

II.

Flexible Business Agreements

III. No-Debt Financing

IV. Community Involvement
V.

Brings Vast Knowledge and Experience to a New Company

Limitations of Angels Investors

I.

Rarely make Follow-on Investments

II.

Deceptive

III. Costly
IV. Active Company Involvement Creates Problems
V.

No National Recognition

VI. Control

Institutional Financial
Assistance

Introduction
1. Institutional finance means long-term credit provided by the specialized
financial institutions to industry and business . Industrial units can raise longterm loans from special financial institutions for the purpose of fixed assets
and financing modernization and expansion programs . In India , we have such
institutions both at the national and state levels .
2. Financial assistance to entrepreneurs is granted by commercial banks , state
financial corporations , state directorate of industries , national small industries
corporation , state small industries corporations , and all-India development
banks .
3. Credit facilities granted , by commercial banks and state financial corporations
are covered under the credit guarantee scheme for industries , which offers
protection to credit institutions against possible loss on their lending to this
sector .

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4 . Institutional agencies grant financial assistance to small-scale industrial units
for :
I.

Participation in equity capital ;

II.

Acquisition of fixed assets by way of terms loans ; and

III. Working capital .

Sources of Institutional Finance

1. Government Financial Institutions
2. Commercial Banks
3. Venture Capitalists
4. Cooperative Financial Institutions
5. Insurance Companies

Bank Loan/Bank Financing

Borrowing money from the bank for the specified terms and conditions is known
as bank loan . In the case of bank loan , interest is charged on the entire
amount loan . Bank loan may be for any amount depending upon the securities
offered by the borrower against the loan . Loans are to be paid back after the
expiry of credit period .
For renewal , fresh negotiations are to be made . For the bank loan security of
tangible assets is an essential requirement besides the personal security of the
borrower . Rate of interest is generally higher in case of bank loan . The amount
sanctioned is fixed . The interest is paid on the whole amount of loan , whether
it is withdrawn or not . But the amount of entire bank loan has to be repaid on
the expiry of credit period .

Forms of Bank Loans

1. Unsecured Loans
2. Secured Loans
3. Lines of Credit
4. Installment Loans

Types of Bank Loans

1. Accounts Receivable Loans
2. Inventory Loans
3. Equipment Loans
4. Stock Hedge Loan
5. Pre-Settlement Loan
6. Real Estate Loans

Procedure of Granting Loan

1. Decide how much Money is Needed
i.

Start-Up Business

ii.

Existing Business

iii. Set the Expectations

2 . Find-Out the Credit Score
3 . Start Researching the Options
4 . Start Writing the Business Plan and Create the Financial Projections

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5 . Find a Lender
i.

Commercial Banks

ii.

Non-Bank Lenders

iii. Region Specific Lenders

iv. Micro and Alternative Lenders
6 . Prepare the Loan Application Package
v.

Business plan ,

vi. Business financial projections ,

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iii . Personal financial information ,
iv . Personal tax statements ,
v . Information about business , location , sales contracts , ect.
vi . Business owners resumes .
7 . Waiting

Venture Funding /
Venture Capital

Meaning & Definition

Meaning:1. Venture funding is more commonly known as venture capital funding or
venture capital . It is a formal risk capital market . Venture Capital is an
important source of external finance for those small and medium-sized firms ,
which have very few avenues for raising funds .
2. Venture capital refers to an equity/equity-related investment in a growthoriented small/medium business to enable the investors to accomplish
corporate objectives , in return for monetary shareholding in the business or
the irrevocable right to acquire to it . Venture capital is a typical private
equity investment .
3. Venture capital is a popular method by which investors support entrepreneurial
talent with finance and business skills to exploit market opportunities with a
view to obtaining long-term capital gains . It involves the provision of riskbearing capital , usually in the form of equity participation , to companies with
high growth potential , besides providing some value addition in the form of

Meaning & Definition

Definition: Venture capital is defined as providing seed , startup and first stage financing
and also funding expansion of companies that have already demonstrated their
business potential but do not yet have access to the public securities market or
to credit-oriented institutional funding sources . Venture Capital also provides
management in leveraged buy out financing .
--by Jame Koloski
Morries
Venture capital investment is defined as an activity by which investors
support entrepreneurial talent with finance and business skills to exploit market
opportunities and thus obtain long-term capital gains .
--by Bank of England

Need of Venture Capital

1. Lack of Capital for the Investment
2. To Enable the Start-Up Phase
3. Motivation to Increase the Profits
4. Experience of Venture Capitalist
5. Involvement of Venture Capital
6. Innovation
7. Job Creation
8. Patient Capital
9. Creating New Industry Clusters

Forms of Venture Capital

1) Early Stage Financing
2) Expansion Financing
3) Acquisition or Buyout Financing

Benefits of Venture Capital

1) Business Consultations
2) Management Consultations
3) Human Resources
4) Additional Resources

Government Financial Institutions

Government Financial Institutions

Khadi and Village
Industries Board(KVIB)

National Small
Industries Corporation
Ltd. (NSIC)

Mahatma Gandhi Institute for

Rural Industrialization(MGIRI)


Khadi and Village Industries
Board(KVIB)

KVIB
The Khadi and Village Industries Board is a statutory body formed by the
Government of India , under the Act of Parliament , Khadi and Village
Industries Commission Act , 1956 . It is an apex organization under Ministry of
Micro , Small and Medium Enterprises Govt. of India , with regard to khadi and
village industries within India , which seeks to plan , promote , facilitate ,
organize and assist in the establishment and development of khadi and village
industries in the rural areas in coordination with other agencies engaged in
rural development wherever necessary . In April 1957 , it took over the work
of former All India Khadi and Village Industries Board .
Its head office is based in Mumbai , with its six zonal offices in Delhi , Bhopal ,
Bangalore , Kolkata , Mumbai and Guwahati . Other than its zonal offices , it has
offices in 29 states for the implementation of its various . Its functions also
comprise building up of a reserve of raw materials and implements for supply
to producers .

Objectives of KVIB
1. Social Objective : Providing employment in rural areas .
2. Economic Objective : Providing saleable articles .
3. Wider Objective : Creating self-reliance amongst people and building-up
strong rural community spirit .

Assistance Provided by KVIB

1. To plan and organize training of persons employed or desirous of seeking
employment in khadi and village industries ;
2. To build up reserves of raw material and implements and supply them to
persons engaged or likely to be engaged in production of hand spun yarn or
khadi or village industries at such rates as the Commission may decide ;
3. To encourage and assist in the creation of common service facilities for the
processing of raw material or semi-finished goods and for otherwise facilitating
production and marketing of khadi or products of village industries ;
4. To promote the sale and marketing of khadi or products of village industries or
handicrafts and for this purpose to forge links with established marketing
agencies wherever necessary and feasible ;

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5 . To encourage and promote research in the technology used in khadi and village
industries , including the use of non-conventional energy and electric power with a
view to increasing productivity , eliminating drudgery and otherwise enhancing
their competitive capacity and to arrange for dissemination of salient results
obtained from such research;
6 . To undertake directly or through oher agencies studies of the problems of khadi
and village industries ;
7 . To provide financial assistance to institutions or persons engaged in the
development and operation of khadi and village industries and guide them
through supply of designs , prototypes and other technical information for the
purpose of producing goods and services for which there is effective demand in
the opinion of the commission;
8 . To undertake experiments or pilot projects which in the opinion of the
Commission are necessary for the development of khadi and village industries ;

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9 . To establish and maintain separate organizations for the purpose of carryingout any or all of the aforesaid matters ;
10 . To promote and encourage cooperative efforts among the manufacturers of
khadi or persons engaged in village industries ;
11 . To ensure genuineness and to set up standards of quality and ensure that
products of khadi and village industries do conform to the said standards ,
including issue of certificates or letters of recognition to the concerned persons;
12 . To promote cooperative efforts; and
13 . To carry-out any other matters incidental to the above .


National Small Industries
Corporation Ltd. (NSIC)

NSIC
The National Small Industries Corporation Ltd(NSIC) was set up in 1955 as a
central government undertaking , the main aim of which is to fulfill the
requirement of machinery and equipment for the development of the small
entrepreneurs . It is observed that the main constraint faced by the
entrepreneurs is the dearth of investible funds to purchase machinery and
equipment . Non-availability of finance deprives many new entrepreneurs from
availing entrepreneurial opportunities . NSIC is established to cater to this need
of the entrepreneur .
In India , NSIC has 5 technical centers , 9 zonal offices , 33 branches , 14 subbranches , 10 business development offices , and 2 tech-parks . The
corporations Head Office is at Delhi . The company employs over 500
professionals and it also has an office in Johannesburg from where it handles its
operations pertaining to South African nations . In the 54 years of its existence ,
the NSIC Limited has gone from strength to strength and has successfully
managed to modernize small-scale industries in India by making them

Objectives of NSIC
1. NSIC is to promote entrepreneurship development in the country .
2. To explore , support , and promote the growth and development of small-scale
industries and allied services in India .
3. To assist small scale industrial undertakings through promotional , marketing
and financial activities .
4. To collect and disseminate both domestic as well as international marketing
intelligence for the benefit of MSMEs .
5. To supply machinery and equipment to small enterprises on hire purchase
basis and assist small scale industries in procuring government orders for
various items of stores with a view to promote any faster the development of
SSI in the country .

Role of NSIC in Development of SMEs

1. Financial assistance by way of hire purchase scheme for purchase of local and
imported machinery.
2. Provision of various equipment's on lease basis .
3. Assistance for marketing the produce in the country and also to help in
exporting the products of SSI units .
4. Enlisting quality conscious good SSI units for sending enquiries of government
stores and purchase departments .
5. Training of workers in various trades required for SSI units .
6. Assistance in up-gradation of technology , processes , and modernization of
plant and machinery .

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7 . To make bulk purchases of important raw-materials and distribute to SSI units
at reasonable rates . This avoids speculation and exploitation by the traders .
8 . To develop industrial estates and testing facilities in the industrial areas .


Mahatma Gandhi Institute for
Rural Industrialization(MGIRI)

MGIRI
The Cabinet Committee on Economic Affairs , Govt. of India in its meeting held
on 28.12.2006 have approved setting up of Mahatma Gandhi Institute for Rural
Industrialization(MGIRI) Wardha as an Autonomous body registered under
societies registration act .
The objective behind establishment of this institute is to undertake Research
and Development , extension , training and education in the area of Rural
Industrialization . This institute is required to focus on the technology need of
artisans engaged in KVI Sector and to upgrade their technology in order to
increase productivity level and in turn their wages .
Now the institute is under project mode being run in collaboration with IIT Delhi
and is likely to start functioning in regular mode during the year 2008-09 .

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Adequate infrastructure has been developed with the assistance of IIT , Delhi in
the form of building , road , Power supply , installation of equipment's , etc.
MGIRI has established following 6 R&D divisions in which the R&D activity
pertaining to Khadi and V.I. Sector is being under taken :
1) Khadi and Textile Division ;
2) Bio-processing and Biochemical Division;
3) Chemical and Analytical Division;
4) Energy and Infrastructure Division;
5) Craft and Engineering Division; and
6) Management Information Systems Division .

Objectives of MGIRI
1) To accelerate rural industrialization for sustainable village economy so that
KVI sector co-exists with the main stream .
2) Attract professionals and experts to Gram Swaraj .
3) Empower traditional artisans .
4) Innovation through pilot .
5) R&D for alternative technology using local resources .

Achievements of MGIRI
1) Organization of consultative workshops/seminars and training programmes .
2) Day-to-day monitoring of various in-house on-going projects like bio-efficacy
trials on maize , soya-based products , fermentation technology based
pharmaceutical products , food and bakery related products , panchgavya
related products development .
3) Preparation of reports related to various problems identified in SFURTI
clusters .
4) Design and development of low cost packaging machines .
5) Standardization of new shampoo , hair oil and hair dye(natural) formulation
and making project proposals for new entrepreneurs .
6) Developed natural clay colors and their commercial application in terracotta
jewellery .

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7) Solar based product and LED enterprise development .
8) Two entrepreneurs started Solar Fab Mart(SFM) under the guidance of MGIRI .
9) Development of prototype for biomass briquetting .


Government Schemes for
Financial Assistance to Small
Enterprise

Government Scheme for Financial Assistance to

Small Enterprise

Government Scheme for Financial

Assistance to Small Enterprise
Self-Employment Scheme
of Government of
Maharashtra

Rajeev Gandhi Udyami

Mitra

Prime Minister Employment

Generation
Programme(PMEGP)


Self-Employment Scheme of
Government of Maharashtra

Self-Employment Scheme of Government of Maharashtra

Self-employment schemes of government of Maharashtra are provided to those
who are less educated and also to unskilled workforce . Various schemes are
included under this which are below :
1. Swarnjayanti Gram Swarojgar Yojana(SGSY) :
i.

Training Rural Youth for Self-Employment(TRYSEM) ,

ii.

Development of Women and Children in Rural Areas(DWCRA),

iii. Supply of Toolkits in Rural Areas(STRA),

iv. Ganga Kalyan Yojana(GKY), and
v.

Millions Wells Scheme .

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The other programs are no more in operation with the launching of SGSY . The
basic objective of the SGSY is to bring the assisted poor families above the
poverty line by providing them income-generating assets through a mix of bank
credit and governmental subsidy .The program is financed on 75 : 25 cost-sharing
basis between Centre and the States . The SGSY aims to cover all aspects of rural
employment , the chiefly are the following :
i.

Social mobilization , i.e., organization of the poor into Self Help Groups(SHGs).

ii.

Activity Cluster , Planning and Selection , i.e., identifying and selecting a key
activity in terms of its economic viability in an area .

iii. Financial Assistance in the form of credit and subsidy in which credit is a major
component .

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iv . Training of Swarozgaris is through well-designed training courses .
v . Infrastructure development .
vi . Marketing and technology support .

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2 . Hunar Se Rozgaar Scheme :
i.

Food and beverage service , and

ii. Food production .

The program will target the youth of weaker sections of societies who
are interested in joining he hospitality industry and are in need to
acquire skills facilitating employment .

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3. Swarna Jayanti Shahari Rozgar Yojana :
The SJSRY has been comprehensively revamped with effect from
01.04.2009 . The SJSRY has three key objectives namely :
i.

Addressing urban poverty alleviation through gainful employment to

the urban unemployed or under-employed poor .

ii. Supporting skill development and training to enable the urban poor
have access to employment opportunities provided by the market or
undertake self-employment .
iii. Empowering to tackle the issues of urban poverty through suiutable
self-managed community structures and capacity building programs .

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The scheme is proposed to be implemented through Urban Local Bodies
and community structures .
The revamped SJSRY has five major components , namely :
i.

Urban Self-Employed Program(USEP) ,

ii. Urban Women Self-help Program(UWSP) ,

iii. Skill Training for Employment Promotion amongst Urban Poor(STEPUP)
iv. Urban Wage Employment Program(UWEP) , and
v.

Urban Community Development Network(UCDN) .

Cntd
4. Training of Rural Youth for Self-Employment(TRYSEM) :
Objective:
i.

Provide training to rural youth for self-employment by providing basic

technical and entrepreneurial skills to rural youth from BPL to enable them to
take up self-employment in agriculture , industry and service sector .

ii.

Take wage employment to the trained youth and also facilitate in

diversification of activities under IRDP .

iii. TRYSEM seeks to impart new skills and upgrade existing skills of
beneficiaries .

Cntd
Training of Rural Youth for Self-Employment(TRYSEM) :
Assistance:
i.

The TRYSEM trainees are paid a stipend varying from 200 to 500 per month
during training .

ii.

To enable the participants to take up employment , there is a provision of 800 as

an allowance for purchase of tool kit by trainees .

iii. The share of Centre and States in on 50:50 basis . The assistance is released to the
DRDAs(District Rural Development Agency) in 2 installments .
iv. The assistance to State Government on 50:50 basis and the Central share is limited
to 20 lac per Exclusive TRYSEM Training Center(ETTC) or 50% of total cost of the
centre whichever is less . The funds are directly released to the State Government .

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Training of Rural Youth for Self-Employment(TRYSEM) :
Monitoring and Supervision:
i.

At the State level , sub-committee of the SLCC(State Level Coordination

Committee) is constituted .

ii.

A Project Director/Officer designed as Director (TRYSEM) acts in IRDP monitoring

cell .

iii. At district level there is TRYSEM Committee under the Chairmanship of Chairman
DRDA .
iv. Monthly monitoring is done by Ministry of Rural Development Area Officers
regularly inspect the implementation of the scheme in the field during visits .

Cntd
5 . Self-Employment Scheme for Educated Unemployment
Youth(SEEUY) :
i.

The scheme for providing Self-employment to Educated Unemployed

Youth was started in 1983 with an annual target of 2.5 lac
beneficiaries .

ii. Unemployed youth in the age group of 19-35 years who are
Matriculates and above are eligible for assistance under this scheme
. ITI passed , women , technically trained persons are given due
weightage training plus two level are given preference . A ceiling of
income of 10,000 per annum , per family has been fixed for eligible under
the scheme .
iii. During the year 1992-93 an outlay of 45 crore was provided for the
scheme , out of which 40 crore were released to Reserve Bank of India , as

Cntd
6 . Self-Help Group :
i.

A Self-Help Group (SHG) is a registered or unregistered group of

micro entrepreneurs having homogenous social and economic
backgrounds , voluntarily coming together to save regular small
. Self-Help Group :
sums of money , mutually 6agreeing
to contribute to a common fund
and to meet their emergency needs on the basis of mutual help.

ii. Self-help groups are started by non-profit organizations(NGOs) that

generally have broad anti-poverty agendas . Self-help groups are
seen as instruments for a variety of goals including empowering
women , developing leadership abilities among poor people ,
increasing school enrolments , and improving nutrition and the use
of birth control .

Cntd
iii . Financial intermediation is generally seen more as an entry point to
these other goals , rather than as a primary objective . This can hinder
their development as sources of village capital , as well as their efforts
to aggregate locally controlled pools of capital through federation , as
was historically accomplished by credit unions .


Rajeev Gandhi Udyami Mitra
Yojana(RGUMY)

RGUMY
Rajiv Gandhi Udyami Mitra Yojana (RGUMY) is to provide
handholding support and assistance to the potential first
generation entrepreneurs , who have already successfully
completed EDP/SDP/ESDP/VT programs , through the selected
lead agencies , i.e. Udaymi Mitras , in the establishment and
management of the new enterprise , in dealing with various
procedural and legal hurdles and in completion of various
formalities required for setting up and running of the
enterprise .

Eligibility of RGUMY
I.

Existing national level Entrepreneurship Development

Institutions(EDIs).

II. Micro , Small and Medium Enterprises Development

Institutes(MSMEDIs)/Branch MSMEDIs .
III. Central/State Government Public Sector Enterprises(PSEs) involved
in promotion and development of MSEs , e.g. National Small
Industries Corporation (NSIC) and State Industrial Development
Corporations ,etc.
IV. Selected state level EDIs and Entrepreneurship Development
Centers(EDCs) in public or private sectors .
V. Khadi and Village Industries Commission(KVIC) .

Eligibility of RGUMY
VI . Special Purpose Vehicles (SPVs) set up for cluster development
involved in entrepreneurship development .
VII . Capable associations of MSEs/SSIs .

Objectives of RGUMY
I. To provide handholding support and assistance to the
potential first generation entrepreneurs , who have already
successfully completed or undergoing Entrepreneurship
Development Training Program (EDP)/Skill Development
Training Program (SDP)/Entrepreneurship cum Skill
Development Training Program(ESDP)/ Vocation Training
Programs(VT) , through the selected lead agencies , i.e.
Udyami Mitras , in the establishment and management of
the new enterprises , in dealing with various procedural and
legal hurdles and in completion of various formalities
required for setting up and running of the enterprise .

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II . To provide information , support , guidance and assistance to
first generation entrepreneurs as well as other existing
entrepreneurs through an Udyami Helpline (a Call Center for
MSMEs) ,to guide them regarding various promotional schemes
of the government , procedural formalities required for setting
up and running of the enterprise and help them in accessing
bank Credit ,etc .

Udyami Mitras
1. Existing national level Entrepreneurship Development
Institutions(EDIs).
2. Micro , Small and Medium Enterprises Development
Institutes(MSMEDIs)/Branch MSMEDIs .
3. Central/State Government Public Sector Enterprises(PSEs) involved
in promotion and development of MSEs , e.g. National Small
Industries Corporation (NSIC) and State Industrial Development
Corporations ,etc.
4. Selected state level EDIs and Entrepreneurship Development
Centers(EDCs) in public or private sectors .
5. Khadi and Village Industries Commission(KVIC) .

Cntd
6 . Special Purpose Vehicles (SPVs) set up for cluster development
involved in entrepreneurship development .
7 . Capable associations of MSEs/SSIs .
8 . Other organizations/training institutions/NGOs , etc., involved in
entrepreneurship development/skill development .

Roles & Responsibilities of Udyami Mitras

1. Networking , coordinating and follow-up with various government
departments /agencies/organization and regulatory agencies on the
one hand and with support agencies like banks/financial institutions ,
District Industries Centers(DICs) , technology providers,
infrastructure providers on the other hand , to help the first
generation entrepreneurs in setting up their enterprise . Udyami
Mitras are expected to help the first generation entrepreneurs in :
i.

Identification of suitable project/product/enterprise and preparation

of bankable project report for the same ;

ii. Creation of the proprietorship firm/partnership

firm/Company/Society/Self Help Group(SHG) , etc. ;
iii. Filing Memorandum(as prescribed under MSMED Act 2006) ;

Roles & Responsibilities of Udyami Mitras

iv . Accessing bank loans , admissible capital subsidy/assistance under
various schemes of the Central/State Government and other
agencies/organizations/financial institutions/banks , etc., by networking
with respective agencies .
v . Assistance and support in establishment of work shed/office .
vi . Sanction of power load/connection .
vii . Selection of appropriate technology and installation of plant and
machinery/office equipment , etc. ;
Viii . Obtaining various registrations/licenses/clearances/No Objection
Certificates(NOCs) , etc. , from the concerned regulatory
agencies/Government departments/local bodies/Municipal authorities ,
etc.;

Cntd
ix . Allotment of Income Tax Permanent Account Number(PAN) and
Service Tax/Sales Tax/ VAT registrations , etc.;
x . Sanction of working capital loan from the banks ;
xi . Arranging tie-up with raw material suppliers;
xii . Preparation and implementation of marketing strategy for the
product/service and market development; and
xiii . Establishing linkage with a mentor for providing guidance in
future .
xiv . Creation of web page and e-mail identity .

Cntd
2 . Once the enterprise has been successfully set-up , the
Udyami Mitras would also monitor and follow-up on the
functioning of the enterprise for a future period of minimum 6
months and provide help in overcoming various managerial ,
financial and operational problems .


Prime Minister Employment
Generation Programme
(PMEGP)

PMEGP
Prime Ministers Employment Generation Program (PMEGP) is
a credit linked subsidy program of Government of India . It has
been introduced by merging the two schemes , namely , Prime
Ministers Rojgar Yojana(PMRY) and Rural Employment
Generation Program (REGP) . The scheme was launched on
15th August , 2008 .

Objectives of PMEGP
1. To generate employment opportunities in rural as well as urban areas
of the country through setting up of new self-employment
ventures/project/micro enterprises .
2. To bring together widely dispersed traditional artisans/rural and
urban unemployed youth and give them self-employment
opportunities to the extent possible , at their place .
3. To provide continuous and sustainable employment to a large
segment of traditional and prospective artisans and rural and urban
unemployed youth in the country , so as to help arrest migration of
rural youth to urban areas .
4. To increase the wage earning capacity of artisans and contribute to
increase in the growth rate of rural and urban employment .

Scope of PMEGP
1. The scheme is applicable to all viable(technically as well as
economically) projects in rural as well as urban areas , under Microenterprises sector .
2. The maximum cost of the project admissible under manufacturing
sector is 25lac and business/services sector is 10 lac .
3. Only one person from family is eligible for obtaining financial
assistance under the scheme .
4. Assistance under the scheme is available only for new projects .
5. The scheme is aimed at encouraging manufacturing sector .

Scope of PMEGP
6 . The assistance under the scheme will not be available to
activities indicated in the negative list including business
activities like grocery shop , stationary shops , etc.; farm related
activities like goatery , piggery , poultry , etc.; and urban/rural
transport activities (except auto rickshaw , tourist boat and
house boat in Andaman and Nicobar Islands ; Shikara and tourist
boat in Jammu and Kashmir , and cycle rickshaw) .

Eligible Entrepreneurs/Borrowers
1. Any individual , above 18 years of age .
2. There will be on income ceiling for assistance for setting up projects
under PMEGP.
3. The beneficiaries should have passed at least VIII standard , for
setting up of project costing above 10 lac in the manufacturing sector
and above 5 lac in the business/service sector .
4. Self Help Groups(including those belonging to BPL provided that they have not
availed benefits under any other scheme) are also eligible for assistance under
PMEGP .
5. Institutions registered under Societies Registration Act , 1860 .
6. Production Cooperative Societies .

Eligible Entrepreneurs/Borrowers
7 . Charitable Trusts .
8 . Existing units(under PMRY ,REGP or any other scheme of Government
of India or State Government) and the units that have already availed
government subsidy under any other scheme of Government of India or
State Government are not eligible .

Thankyou!!!