Report on Capital Sources, Challenges for ABC Limited New Venture

This report examines the factors involved in establishing a new venture, focusing on ABC LIMITED's plans to open a home decor shop in India. It details various capital sources, including angel investors, bank loans, business incubators, venture capital, and crowdfunding, evaluating their suitability and challenges. The report further explores the challenges faced by new ventures, such as funding, hiring employees, marketing strategies, and competition. Additionally, it delves into legal, technological, political, economic, environmental, social, and cultural challenges that ABC LIMITED might encounter. The report also highlights the risks associated with starting a new business and provides a comprehensive analysis of the entrepreneurial landscape, offering valuable insights for those looking to start their own ventures. The report emphasizes the importance of financial planning, market analysis, and strategic decision-making for success in the competitive business environment. The report also includes a discussion on how to manage the challenges faced by new ventures and how to mitigate the risks involved in the process of business venture. The report aims to provide a comprehensive overview of the key aspects of starting and running a successful business, particularly in the home decor sector.

Entrepreneurship and
innovations

EXECUTIVE SUMMARY
This report describes factors considered while establishing a new venture. It includes legal,
political, technological risk in establishing a new venture. It also describes funding requirements
of the business. This project undertakes several factors which effect the commercial practices in
long term growth and development of organization. The report describes several kinds of sources
of finance such as bank loan, angel investors that help the company in fulfilling its financial
need. It explains the suitability of these sources with references to ABC LIMITED.

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
DISCUSSION..................................................................................................................................1
1. The capital sources for the new venture..................................................................................1
2. Various challenges and difficulties faced by the new ventures..............................................3
3. Legal, technological, political, economic, environmental, social and cultural challenges
faced by ABC LIMITED............................................................................................................5
4. Determining the risks involved in the process of business venture........................................7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Entrepreneurship is a process or activities which promotes new ideas and innovations
with a motive of financial earnings. This practice is done with the purpose of providing new
concepts and ideas regarding the consumption of commodity. In this report. further it will cover
new concepts and ideas of entrepreneurship and also factors involved with setting up new
venture. This study also provides some measures to establish a new venture. It also covers some
sources which are related to finding and capital investment. Below context will also provide the
challenges which are faced to develop a new business entrepreneurial activities. It will also
reflect some risks which are undertaken for the smooth functioning of a new venture. ABC
limited is the private ownership firm that plans to offer home decor items to consumers and entity
wants to open new shop or its new venture in India. Entrepreneur of this organization requires
large investment, so this context will also throw some light on the financial requirements for
establishing new venture.
DISCUSSION
1. The capital sources for the new venture
New venture is considered as a start-up entity which is developed with the purpose of
inter-exchange of goods and services in order to generate profits. Capital sources are termed as
the investment required to start up the business (Bruton and et.al., 2015). It determines the
funding of a new venture of ABC LIMITED at the time of establishing the enterprise. When an
entrepreneur starts up its commercial practices in order to develop a company, then it requires
capital investment to grow and setup a new business. Entrepreneur of ABC LIMITED needs to
find out the capital sources for establishing new retail shop in India. Financial need can be
fulfilled by various methods such as bank loans personal savings outsider investment etc. It
involves lot of fund obtaining capabilities of business, following are some capital investment
sources:
Angel investors
This source of capital investment is obtained through outsiders who take interest to
finance and expand a home decor and interior designing ideas (Jimoh and Ezeana, 2014). Angel
investors are people who have surplus cash and they finance small ventures to support those
venture in development and growth. Angel investors may be the retired persons of the company
who can provide fund to the company if there is a requirement. Angel investors risk their money
1

in order to get the rights to supervise the new business activities of ABC LIMITED. They are
highly experienced individuals who help new ventures in future growth and development of
newly established organisation. They support new venture by providing financial support
(Konda, Starc and Rodica, 2015). This company do not finds a suitable investor so it needs better
option to invest in the home shop and interior designing ideas.
Angel investors might hold their control in the company. It is harder to be obtained. This type of
source is not suitable for those who require capital below 10000 or more then 500000. They need
to be convinced to invest their capital in business.
This source of funding can be acquired by family and friends, retired people who are
ready to invest their funds in new businesses.
Bank loans
Generally, entrepreneurs of the small business choose this option to get the capital
investment for their organization. It is a source where banks provide money with assurity of
repayment of amount within a fixed time period.
It is most suitable source of capitalising the new venture. Banks provides the fund with lower
rate of interest. This is also considered as flexible method of funding the business.
It creates liability on the entrepreneurs to repay back the amount. Bank loans are strict in taking
their monthly instalments. Loans requires irregular payments at the fixed intervals of time.
These funds can be obtained through banks in exchange of a security deposits (Kumar,
2015). ABC LIMITED is a new company in India with a average start-up budget so it finds bank
loans as a suitable option and bank promotes new company by providing loans in lower rate of
interest.
Business incubators
These are also considered as accelerators they contribute in providing financial support to
innovative home designing and decor ideas. Basically they ask other companies to share their
resources or assets in managing operation practices of new venture in india, ABC limited. The
new ventures generally get supported by incubators for a specific time period.
They share basic operating costs for the functioning of operational activities. These incubators
assist and provide the necessary consultant advice to grow business. They also provide cost free
workspace for conducting commercial practices (Sarkar, 2016).
2

It could be rigorous and competitive in finding the correct incubator for organization. They
invest their fund after the complete analysis of the business plans and strategies. These are hard
to find.
Venture capital
These investors mainly consider new designing and home decor concepts in
organizations (Schaltegger, Lüdeke-Freund and Hansen, 2016). Venture capitalists search for
those firms which possess high growth potential in interior designing and such new concepts
with a wide range of home based products. These capitalists hold their equity positions in the
new venture of ABC LIMITED at India.
This type of investors helps in getting the expertise knowledge of planning organizational
strategies. This lead to the increment of additional resources in the company and these venture
capitalists also provides sources to build new home decor items. Venture capitalists are also
responsible for the new entrepreneur in losing their control in operating business activities.
Capitalists who invests in new venture have right to acquire more than half equity shares in
company. It is difficult to get venture capitalists.
Venture capitalists are the big entrepreneurs and this funding can be obtained by
attracting them towards the particular organization.
Crowd funding
This source of funding is generally used by popular personalities as it involves the
investment by large number of people. It requires attention of the people to hold the interest in
providing their financial contribution. Here, entrepreneur will put a description of the planning
and strategies of making profits and also mention the specific amount to be required for funding.
If people like the concept and idea they will contribute towards growth of ABC LIMITED. Such
new designing concepts are generally appreciated by the large number of people. This is typical
way to finance the small ventures. It is an online process to get capitalised with wide range of
common peoples (Servoss and et.al., 2018).
Crowd funding can be considered as fast way to raise funds. This source also promotes the
business publicly. It is also helpful in holding the trust of customers
It is tough process to raise money. This funding might be responsible for damaging the
reputation of business in market. New ventures have to develop trust and attention in acquiring
the capital of people.
3

This amount can be obtained through online investment of large group of people. They
may be small business man or common people.
2. Various challenges and difficulties faced by the new ventures
Establishment of a new entity of home decor items in India requires lots of efforts to
achieve the stated objective of the industry. New business needs to be well planned in order to
achieve the future growth and development of ABC limited. Many challenges and difficulties are
expected in setting up of a new firm. Such challenges are as follows:
 Funding: It is a major problem of the new venture as it is not mandatory that new
concepts and home designing ideas will get popularity quickly and that time funding is
considered as biggest challenge to start up new venture (Veselovsky and et.al., 2018).
Although there are many sources to get finance, but if the company cannot generate the
profits then it will not be able to sustain its future growth. Every organization needs to be
financially capable in order to earn the profits of the company. Without the appropriate
funding an entity cannot be able to survive in this global world. Organization needs
financial support to function various operation activities of business. Funding is required
to execute various business operations or activities. The major challenge is to arrange the
funds from such sources which involves less risk. Following are the major challenges
which are faced at the time of funding.
1. To keep his focus on long term vision and differentiation became hard for an
entrepreneur due to short term metrics set by the investors.
2. Investors can get attract towards the tested models old ideas rather than newer and risky
ideas of interior designing.
 Hiring of employees: For executing the operational activities of the company employees
are the priority requirements. These practices can be carry out by the effective workforce
of the organization. Hiring process is a highly time consuming activities. So it can be
considered as a major problem to run the business activities of a new venture. Flow of
operational activities require efforts of human resources. So organization requires various
human resources to carry out the operational activities. So they need to hire the
employees to perform the task. Selecting and recruitment is a very time and energy
4

consuming procedure, so it is bigger difficulty for the enterprise to select the required
candidate (Specialization in Entrepreneurship & Innovation, 2018.).
 Marketing strategies: planning and strategies play important part to sustain the growth
of an enterprise. Production home decor and extensively new designing concepts require
marketing of the commodity in order to increase the sale of company. It can be possible
through advertisements, online ads, big hoardings etc. these practices are done to make
aware the customer about the product and its uses (Jimoh and Ezeana, 2014). If the
product does not get proper attention of public, then business fails to increase its sale. It
affects the company for long term and it will also be responsible for sustaining the
position of business in this highly globalised world (Veselovsky & et.al,2018). If the
people are unaware about the uses of the commodity, then they lose their interest in
buying the goods and services. This will affect the sales of the company and ultimately it
will be a great challenge for a new venture to balance demand and supply of market of
India.
 Competitive firms: it determines the competitive brands of the product. Customers are
the people who change their perception and tastes according to the changing scenario of
world. So ABC LIMITED needs to identify its competition and restructure its operating
ideas. Manufacturing of interior designing products requires timely innovative
techniques. If other firms are dealing with same type of products, then it will increase the
competition among the other organisations in market. If company fails to provide new
products to customer, then might be responsible to lose their consumers and it will be
result in financial imbalance of supply chain.
3. Legal, technological, political, economic, environmental, social and cultural challenges faced
by ABC LIMITED
An external and internal factor influences functioning of business activities in starting a
new venture at india. These challenges affect the new venture unto a great extent that
organization feels hard to survive in this modern world. To sustain the position of new venture,
entrepreneur has to think broader in avoiding the negative effects of these factors entering into
business. Pestle analyses of establishing a new venture are as follows:
 Legal: This implies of legislative changes in the country. This issue is created due to
changes in laws and government policies in India. It effects the working techniques and
5

procedure of the new business. ABC LIMITED plans to establish new venture so it will
have to consider the regulation of Indian government. Changes in Indian laws and
taxation ratescan create risk for the firm because this will have to alter entire operations
accordingly. This will impact on trade of the firm. In this initial position of the company
gets largely affected by the changing legislations of government (Schaltegger, Lüdeke-
Freund and Hansen, 2016).
 Technological: These changes determine the technology related issues and it might bring
major effects in sustaining the new venture of interior designing in India. These changes
bring lot of difficulties in performing the effective task. If technology cannot be
understood properly then it effects the working potential of employees. Workers of the
ABC LIMITED could not sustain their position in the new venture and ABC LIMITED
might for lose its effective labours. Changes in technology create necessity for the firm to
implement new techniques but this increases financial risk for the firm. Apart from this it
may be possible that employee resist the change that is another challenge for the
company.
 Political: This factor may be responsible for long term effects on the new entity of
providing home decor items for interior designing. Change in the government laws and
regulation may directly impact the revenue generation of the company. When the
government alter its taxation policies it will lead to the increase in cost of manufacturing.
This modification in pricing of the product will be ultimately responsible for increased
prices of goods and services. In this situation, ABC LIMITED may lose its valuable and
permanent consumers. These way political challenges have negative effect on the
functioning of business (Veselovsky and et.al, 2018).
 Economic: Company has to bear the kind of challenges in long term pace of indian
market. It restricts growth and development of the organization. These factors include
inflation, interest rate and financial stability of the business (Schaltegger, Lüdeke-Freund
and Hansen, 2016). If the situation of inflation arises in country, it will affect the
purchasing power of the customers and this will further result in decrease in sale of the
goods and services. It will affect the profit generation of company. It can be considered
as biggest challenge in sustaining the new home decor industry.
6

 Environmental: Environment provides motivation and encourages the working
capabilities of the workers. Providing the challenging working environment to the
employees can affect their production capabilities and hence, manufacturing of goods and
services will be highly influenced. Decrease in the production of goods and services
result in less profit generation of the company and creates difficulty in sustaining the
growth of ABC LIMITED new venture inIndia (Bruton and et.al., 2015).
 Social and Cultural challenges: These factors deal with demographical and cultural
aspects. Establishing a new venture of ABC LIMITED, entrepreneur needs to firstly
analysis the requirements of the customer properly in order to develop the marketing
strategies of interior designing products. People living in different area of world have
assorted tastes and perception related to consuming the product. So company have to
focus on Indian cultures. It can be considered as biggest challenge in sustaining the
growth and development of new organization.
4. Determining the risks involved in the process of business venture
Entrepreneur need to identify various ups and downs of operating large business activities
of home decor items and interior designing concepts. Starting up a new venture require certain
measures to meet the marketing strategies and needs of the customer. Risks are commonly
considered as the possibility of loses and uncertainties due to the change in preference of people.
Initially start up plan of a new venture consists of such uncertain situations where strong
decision-making required overcoming those risks of business. It may be internal risk or external
both affects the business and restricts the growth (Sarkar, 2016). These potential risk are
involved in establishing the interior designing company and have impact on overall performance.
Strategic risks can be considered as situation where the planning and strategies fails to
meet its requirements. Development of new venture involve lot of predictions and these
assumptions when cannot happen they affect the existing business. These loses can arise due to
unsuccessful planning of ABC LIMITED. Company is required to look upon the rules and
regulation of India so that it can make plan and design activities accordingly. If this thing is
being ignored then it may face financial, legal issues.
Financial risks are also involved in the process of establishing new venture of ABC
LIMITED in India because it have to continuously plan new designing concepts and innovative
7

home decor items that would increase its cost. In this situation if entity fails to attract people then
it would not be able to recover this cost. This will improve financial burden on business unit to
great extent.
Operational uncertainties occurred at the time of manufacturing of home decor items. These
loses can influence producing capabilities of enterprise. It might be happened due to
unnecessary wastage of inventory in order to produce the goods and services. Operation
activities of the business can also be affected due to the change in the customer requirements
of product (Sarkar, 2016).
CONCLUSION
It has been concluded from the above context, that setting a new venture requires strong
planning and strategies. Establishment of a new company cannot be possible without the efficient
sources of funding. It is also being described that various factors affect the functioning of
business. This report has provided the kinds of risk involved in starting a new venture of ABC
limited. The study has also provided effects of external and internal factors in sustaining the
growth and development of business. Above study have also mentioned the capital investment
can be obtained through various sources.
8

REFERENCES
Books and Journals
Bruton, G. & et.al (2015). New financial alternatives in seeding entrepreneurship: Microfinance,
crowdfunding, and peer‐to‐peer innovations. Entrepreneurship Theory and Practice. 39(1).
9-26.
Jimoh, M., & Ezeana, P. C. (2014). entreprenuership education and employability of tertiary
education graduates in nigeria. journal of educational review. 7(1).
Konda, I., Starc, J., & Rodica, B. (2015). Social challenges are opportunities for sustainable
development: tracing impacts of social entrepreneurship through innovations and value
creation. Economic Themes. 53(2). 211-229.
Kumar, D. (2015). Entrepreneurship in Agriculture. Satish Serial Publishing House.
Sarkar, A. (2016). Startup India-A New Paradigm for Young Entrepreneurs (A Conceptual
Study).
Schaltegger, S., Lüdeke-Freund, F. & Hansen, E. G. (2016). Business models for sustainability:
A co-evolutionary analysis of sustainable entrepreneurship, innovation, and transformation.
Organization & Environment. 29(3). 264-289.
Servoss, J. & et.al (2018). The Surgery Innovation and Entrepreneurship Development Program
(SIEDP): an experiential learning program for surgery faculty to ideate and implement
innovations in health care. Journal of surgical education. 75(4). 935-941.
Veselovsky, M. Y. & et.al (2018). Financial and economic mechanisms of promoting innovative
activity in the context of the digital economy formation. Entrepreneurship and
Sustainability Issues. 5(3). 672-681.
Online
Specialization in Entrepreneurship & Innovation. 2018. [online]. Available
through<https://mgmt.wharton.upenn.edu/programs/undergraduate/manaABC limitedent-
specializations/entrepreneurship-and-innovation/>.
9