Unit 4
Resources
Resource Mobilization
• Resource mobilization is when a business or organization secures new or additional resources to
meet needs. This process can also include strategies that maximize the efficiency of existing
resources. In some cases, organizations may take count of what's currently available and develop a
plan to use those resources as efficiently as possible. If necessary, the business can acquire new or
enhanced resources to supplement any existing options. Especially in times of great business need
or demand, it can be important to understand what an organization has and needs to successfully
cover expenses and maintain standard quality.
• Resource mobilization advocates upon having the right type of resource, at the right time, at right
price with making right use of acquired resources thus ensuring optimum utilization of the same.
Why is resource mobilization important?
Resource mobilization is important to an organization for these reasons:
• Allows the company to continue service for customers: By making sure that a business always
has the required resources to meet customer demand, it can guarantee that customers never
experience dips in service. This can create loyal and long-lasting customer relationships with the
company, which can make strong relationships with customers that can be influential to its
success.
• Maintains sustainability: If a business is to sustain its operations, then it may require sufficient
resources to successfully complete regular tasks and projects. Understanding the number of
resources necessary to sustain business practices can help maintain regular production in the event
of great demand or any challenges.
• Leads to product and service improvement: If an organization isn't struggling to find sufficient
resources and has complied extra resources for the case of emergency, then it can focus its energy
on improving products or services rather than worrying about resource acquisition. In a regular
resource mobilization cycle, a business can spend designed time periods acquiring resources, and
it can follow this period with innovation and advancement.
• Helps a business expand: To expand its operations, a business can consider generating new
products and services and acquiring new customers. To do this, the business may need the correct
amount of available resources.
Types of resources
(i) Financial resource
(ii) Intellectual resource
(iii) Human resource
(iv) Physical resource
(v) Educational Resources
(vi) Emotional Resources
(vii) Moral Resources
(viii) Cultural Knowledge resource
(ix) Relational Resource
(i) Financial resource
The most important element in starting a business is funding. Even the most basic home business
incurs a multitude of startup costs, including registering a business name, obtaining a business
telephone line and printing business cards.
Financial resources can be obtained from a variety of sources, the easiest being from:
a. The personal accounts of the company’s founder.
b. Alternatively, loans and lines of credit may be granted from financial institutions,
c. Friends and relatives,
d. Private investors
In addition, many grants are offered from private and public sources to entrepreneurs of all
demographics and personal situations.
“If you want to know the value of money, go and try to borrow some.” – Benjamin Franklin
Financing sources for a startup business:
(a) Personal Investment: When borrowing, you invest some of your own money either in the form
of cash or collateral on your assets. This proves to your banker that you have a long- term
commitment to your project.
(b) Love Money: This is money loaned by a spouse, parents, family or friends. A banker considers
this as “patient capital”, which is money that will be repaid later as your business profits increase.
(c) Grants and Subsidies: a grant is a sum of money conditionally given to your business that you do
not have to repay. However, you are bound legally to use it under the terms of the grant, or otherwise
you may be asked to repay it.
(d) Crowdfunding: Crowdfunding is a method of raising money from a large number of people—
usually through online platforms—to fund a project, business, product, or [Link] of seeking a
large sum from one source (like a bank or investor), crowdfunding collects small contributions from
many individuals.
(e) Equity
Importance of financial resources
• Start the business
• Maintain stability
• Enable growth
• Debt management
• Building investor confidence
(ii) Intellectual Resource
• Intellectual resource is the intangible value of a business, covering its people, the value inherent in
its relationships, and everything that is left when the employees go home, of which Intellectual
property (IP) is but one component. It is the sum of everything everybody in a company knows
that gives it a competitive edge.
• The term is used in academia in an attempt to account for the value of intangible assets not listed
explicitly on a company’s balance sheets. On a national level intellectual capital refers to National
Intangible Capital NIC.
• A second meaning that is used in academia and was adopted in large corporations is focused on the
recycling of knowledge via Knowledge management; Intellectual capital is used in the context of
assessing the wealth of organizations. Understanding the intellectual capital in an enterprise allows
leveraging of its intellectual assets
• The start-ups also require this resource and can mobilize it from within the close circle.
Importance of Intellectual Resource
• Unique identity
• Protection against competition
• Encouraging innovation
• Value addition
• Proprietary knowledge
Components of Intellectual Resource
• Copyright: Copyright protects original works of authorship such as books, music, films, software,
and artistic creations. It gives the creator the exclusive right to reproduce, distribute, perform, or
display their work. Copyright is automatically granted once the work is created and fixed in a
tangible form, though registering it provides additional legal protection. It typically lasts for the
lifetime of the author plus 70 years.
• Patent: A Patent protects new and useful inventions, such as machines, processes, or chemical
compositions. It grants the inventor the exclusive right to make, use, or sell the invention for a
limited period, usually 20 years from the date of filing. Obtaining a patent requires a formal
application process and approval from a national patent office. Patents encourage innovation by
giving inventors time-limited control over their inventions.
• Trademark: A Trademark protects brand identifiers like logos, names, symbols, and slogans that
distinguish goods or services in the marketplace. It helps build brand recognition and prevents
others from using similar marks that could cause confusion. Trademarks can be renewed
indefinitely as long as they are in use and properly maintained. While not always required,
registering a trademark offers stronger legal protection.
• Trade secret: Trade secrets are confidential business information that provide a competitive
advantage, such as recipes, formulas, strategies, or client lists. Unlike other forms of intellectual
property, trade secrets are not registered with a government body. Their protection relies on
keeping the information secret through legal and security measures, such as non-disclosure
agreements (NDAs). Trade secret protection lasts as long as the information remains confidential.
(iii) Human Resource
• The success of an organization is heavily reliant on the talent and strength of its employees. The
hiring of experienced professionals with track records of excellence within their area of expertise
ensures that the mission and goals of the company will be carried out efficiently and with
competence.
• Strong team members can be recruited using a variety of methods. Staffing agencies and executive
search firms specialize in placing talent of all levels within every industry. An alternative is to find
employees through referrals from individuals whose judgment is trusted.
• Though initially the start-ups cannot do a large hiring, but whatever human resource, they hire,
must be “High Potential Individuals”.
• “Teams should be able to act with the same unity of purpose and focus as a well-motivated
individual.” – Bill Gates
Importance of human resources
• Skilled workforce
• Efficient operations
• Innovation and creativity
• Team spirit and motivation
• Retention and growth
Critical areas in human resources
• Recruiting
• Hiring
• Managing talent
• Employee well being
(iv) Physical Resource
• Whether a small home business or a retail operation with multiple locations, every organization must have the
appropriate physical resources to survive. This includes a proper workspace, working telephone line,
adequate information systems and effective marketing materials. This aspect of business planning can be one
of the costliest. As such, it is important for an entrepreneur to realistically assess his needs before making any
purchases.
• Most of the start-ups have had the history of starting the operations from home, garage of a very small place
initially.
• Examples – equipment, technology, infrastructure
Importance of physical resources
• Production efficiency
• Technology for better operations
• Customer experience
• Infrastructure for growth
• Scalability
(v) Educational Resources
• Perhaps the greatest thing an entrepreneur can do when establishing a new business is to gain as
much education possible. By understanding his/her competition and gaining an in-depth
knowledge of his/her industry, he/she will be better prepared to make smarter decisions regarding
the direction of his/her firm.
• Educational resources can be found through professional trade associations that are geared toward
his/her industry, local chamber of commerce as well as the Small Business Administration.
(vi) Emotional Resources:
Starting a business can be an extremely stressful endeavour for an entrepreneur to undertake. To
maintain the sanity as well as stay motivated, it is important to have a support team that can give
inspirations and guidance as needed. This team may be composed of friends and family as well as a
mentor or professional group.
(vii) Moral Resources:
Moral Resources include solidarity support, legitimacy and sympathetic support. These resources
can be easily retracted, making them less accessible than other resources.
(viii) Cultural Knowledge Resource:
Cultural Knowledge resource has become widely necessary and universal. Known Examples include
how to accomplish specific tasks like enacting a protest event, holding a news conference, running a
meeting, forming an organization, initiating a festival, or surfing the web.
(ix) Relational Resource
It consists of such elements as customer relationships, supplier relationships, trademarks and trade
names, which have value only by virtue of customer relationships, licenses, and franchises. In fact
relational resource is separate from human and structural resource and therefore, it indicates its
immense importance to an organization’s worth.
The value of the relationships a business maintains with its customers and suppliers is also referred
as goodwill, but often poorly booked in corporate accounts, because of accounting rules.
HIPOs, as they are called, high potential employees are the ones who have exceptional potential,
ability and aspiration for successive leadership positions.
Sources of funds
The sources of funds can broadly be divided into two categories:
1. Traditional sources of funds
2. Modern sources of funds
1. Traditional sources of funds
a. Owner’s funds/ Personal savings
It is one of the earliest sources of funds which are still prevalent. While starting a business, an
entrepreneur is the first person to invest in it. These funds are either in cash form or come in
collaboration with assets. It proves to outside investors or banks that you have a long term
commitment to the project and are ready to take risk.
b. Financing by Friends and Family
This is money loaned from the entrepreneur’s spouse, parents, friends and [Link] form of
capital investment is considered patience lending by the banks and other external investors. Patience
lending is repaid when the business starts growing or the share of profit increases. However, while
this option of financing is optional the entrepreneur should keep in mind that the relative may have
less capital than required, or they want ownership rights in the organisation, among other things.
c. Bank Loans
• Term loans
• Demand loans
d. Crowdfunding- This modern take on traditional financing involves raising funds from a large
number of people, typically via online platforms. Crowdfunding campaigns can be used for various
purposes, including product development, charitable causes, or creative projects.
e. Grants- Grants are funds provided by governments, foundations, or organizations for specific
purposes, such as research, innovation, or community development. Unlike loans, grants do not need
to be repaid, making them an attractive source of financing for certain projects.
f. Trade credit- This form of financing involves purchasing goods or services on credit from
suppliers or vendors. Trade credit arrangements allow businesses to defer payment for a specified
period, helping to manage cash flow.
g. Shares and Equity (for companies)
h. Retained Earnings
2. Modern sources of funds
a. Angel investment funds-The term Angel Investors was first addressed by William Wetzel,
founder of the Center for Venture Research, he completed his study from the University of New
Hampshire on how entrepreneurs gather capital. Angel’s investors invest in small start-ups or
entrepreneurs. They are typically one of the earliest equity investments made in new startup
companies usually in exchange for convertible debt or ownership equity. The angel investor is
defined as “an individual who invests in small start-ups or entrepreneurships.” Angels are high-
net-worth individuals who invest their personal funds in start-ups.
The capital provided by angel investors may be one-time investment to meet the initial huge
expenditure at the time of setting up an entrepreneurship firm or an on-going injection of money to
support the working capital needs of the firm. Some angel investors invest through crowd funding
platforms.
• Most often, angel investors organise themselves into an Angel group or Angel network to pool
their investable capital, share the researches of relevant industries and other key resources that can
help them reap profitable opportunities. Since these networks are enriched with a good amount of
research and analysis, they provide advice their portfolio companies as well.
• Angel investors are often experienced entrepreneurs, who can become valuable advisers to a
young company. Angels, often take an ownership stake in the enterprise in exchange of their
personal funds’ investments. Such sale of company’s stake holding is called “private placement”.
b. Incubators
• The concept of incubators was first used in the United States of America when Joseph Mancuso
opened the Batavia Industrial Centre in New York. By 1980s, it spread to the United Kingdom,
United States of America and Europe. A business incubator is a company that helps start-ups and
new entrepreneurs to grow by providing them development services as management training,
affordable office space and other physical infrastructure, shared offices, marketing support or
financial aids.
• Dulf defined business incubators as, “an organisation which offers a range of business
development services and access to small space on flexible terms, to meet the needs of new firms.
The package of services offered by business incubators is designed to enhance the success and
growth rate of new enterprise thus maximising their impact on economic development.”
• Business incubators provide all adequate support from a pure business idea to a successful
enterprise and mentoring at various stages of the business lifecycle. Financial support is one of
these crucial [Link] way, business incubators play an important role in the development of
new business enterprise by providing them support at different stages of its lifecycle.
• In the context of India, there are various participating departments and agencies for setting up new
incubators like Department of Science and Technology, Department of Biotechnology, Department
of Higher Education, Ministry of Micro, Small and Medium Enterprises, Department of
Electronics and Information Technology. The Niti Aayog under Atal Innovation Mission has
pledged to provide the funds to these agencies for setting up of the business incubators. These are
some well-known business incubators:
• Seed funds founded in 2011-12.
• Science and Technology Entrepreneurship Park, a technology business incubator based in IIT
Kharagpur established in 1989.
• Angel Prime Location, founded in 2011. Ezetap and Hacker Earth are major start-ups in India.
• Centre for Innovation Incubation and Entrepreneurship,set up by IIM Ahmedabad with support
from the Government of India and Government of Gujarat, founded in 2002 as a research institute
and turned into a full-fledged incubation centre in 2007.
• The Amity Innovation Incubation, a pioneering concept in context of Indian Universities, founded
in 2008 and located in Noida, Uttar Pradesh.
c. Venture Capital
• Venture capital is the process of raising capital from individuals and firms that invest in high
growth and high risk firms. It is the source of long-term finance, for investors investing in new
start-up businesses and small businesses in the belief that they have long term growth potential.
The venture capital generally comes from investors, investment banks and other financial
institutions. This investment could be in monetary form or in the form of technical or managerial
expertise.
• In other words, venture capital is the long term stable capital provided to high potential and
growth-oriented start-up companies. Venture capital funding is a risky affair for investors who
invest in start-ups but has the potential for above average returns, considering these are highly
risky projects.
• To invest venture capital wisely requires domain knowledge and expertise. This form of raising
capital is popular among start-ups that donot have access to capital market, or raising bank loan
and funds by issuing debentures.
• Remember, venture capitalists get a stake in the firm and hence they have a say in crucial
decisions made by the firm. However, raising venture capital is difficult and may not be the ideal
option for all kinds of enterprises.
• Hence, the entrepreneur needs to research thoroughly and think twice before raising funds from
this source. For the venture capitalist, crucial investment criteria to consider:
• Management team
• Technology and product
• Proprietary product or service
• Scalability and market
Some popular venture capitalists in India are:
• Accel Partners
• Blume Ventures
• Sequoia capital India
• IDG Ventures
• SAIF Partners
• Kalaari Capital
d. Private Equity Funds
• Private equity funds a collective investment scheme. It is typically a limited liability partnership
contract with a term of 10 years, generally with annual renewals. In other words, private equity is
an alternative investment class and consists of capital that is not listed on a public exchange
market.
• It comprises of funds and investors that directly invest in private companies. Private equity fund
investors invest at the later stages of the company. They generally take interest in operating
activities of the firm and help they improve.
• A private equity fund is raised and managed by investment professionals of a specific private
equity firm.
• There are more than 100 private equity funds in India. Senior Associate, India Alternatives;
principal, GajaCpital; Senior analyst, Capvent; TVS Capital, and India Fund Advisor are some of
the emerging private equity firms in India
Advantages of Private Equity Funds
1. Allows firms more liquidity unlike other conventional modes of funds i.e. high risk bank loans,
or listing to public exchanges.
2. Certain specific private equities finance new ideas and provide funding at initial stages.
Disadvantages of Private Equity Funds
1. It can be difficult to liquidate holdings if the firm winds up.
2. Prices of shares of the company are determined by mutual negotiations between buyers and sellers
and not by market demand and supply forces, which mostly leads to under-pricing of the holdings.
Some other sources of funds
1. Retained earnings: are profits that a business chooses to reinvest rather than distribute as
dividends. Though more common in established ventures, early-stage businesses can also retain
profits for growth. It's a cost-free and low-risk internal source of funding.
Example: A small business earns 50,000 in profit and reinvests it into expanding its operations.
2. Debentures: Debentures are a type of long-term debt instrument that companies issue to raise
funds from the public or institutions. Investors lend money and receive a fixed interest over time, but
they don’t get any ownership. Debentures are useful for ventures that want to raise capital without
giving up control.
Example: A growing company issues debentures worth ₹10 lakh with 8% interest to fund its new
product line.
3. Public Deposits: Public deposits are unsecured loans taken directly from the public (like
customers, employees, or investors) for a fixed period and interest rate. They are a cheaper
alternative to bank loans and are used by companies with a good reputation. However, they come
with regulatory restrictions.
Example: A company invites the public to deposit money for 3 years at 7% interest to support
expansion.
4. Lease Finance: Lease finance allows a business to use assets (like equipment or vehicles) without
owning them. Instead of buying, the venture pays rent or lease fees over time. It’s ideal for startups
that need expensive assets but want to conserve cash or avoid debt.
• Example: A tech startup leases computers and servers instead of buying them upfront.
5. Share Capital: Share capital is the money a company raises by issuing shares to investors. This
includes founders, private investors, or the public (in case of public companies). Investors become
part-owners of the business and share in its profits (dividends) and risks.
• No repayment obligation like a loan.
• Investors gain ownership and possibly voting rights.
• Divided into:
o Equity Share Capital – carries ownership and risk.
o Preference Share Capital – fixed dividend, priority over equity in payouts.
• Common in startups and growing businesses looking for long-term funds.
Example: A startup raises 100,000 from an investor in exchange for 10% of the company.
6. Peer-to-Peer (P2P) Lending: P2P lending is a way for businesses or individuals to borrow
money directly from lenders through online platforms, bypassing traditional banks.
• Debt-based: Borrowers repay the loan with interest.
• Faster access to funds than banks, with fewer formalities.
• Interest rates may vary based on borrower risk.
• Ideal for short-term or medium-term financing needs.
Example: A small business takes a ₹5 lakh loan from multiple individuals via a P2P platform like
LendingClub or Faircent, and repays it with 10% interest over 2 years.
Process of resource mobilization
a) Objectives and goal setting
b) Identification of resources
c) Evaluating of the resources
d)Building the capacity
e)Making appeals
f)Accountability and reporting
Funding proposal
A funding proposal is a formal written document submitted to potential investors, donors, banks, or
funding agencies to request financial support for a business, project, or initiative.
• It clearly explains what the money is needed for, how it will be used, and what the expected results
or benefits will be. The proposal aims to convince the funder that the project is valuable, feasible,
and worth investing in.
Importance of a funding proposal
• Clear communication of ideas
• Demonstrate preparedness
• Highlights potential returns
• Builds confidence and trust
• Attracts support
Components of a funding proposal
• Executive summary
• Financial projections
• Business and marketing strategy
• Risk assessment and mitigation plans
Steps in writing and presenting the proposal
• Research and data collection
• Writing the proposal
• Designing an investor pitch
• Presentation strategies
Challenges faced by entrepreneurs while raising funds
• Lack of collateral
• High interest rates
• Limited credit history
• Unclear business plan
• Strong competition
• Investors hesitation
• Lengthy approval process
• Equity dilution