Question

The most likely problem encountered by innovative entrepreneurs in raising finance is:

a.) Limited security since R&D is an intangible asset

b.) The costs of the patenting system

c.) The exhaustion of personal equity in R&D

d.) Inability of potential external funders to understand technology

Answer 1

Ans: c) The exhaustion of personal equity in R&D

This the major problem faced by entrepreneurs who are trying to do R&D for an innovative product. Personal equity is that portion of equity that is held to ones own benefit or invested as an integral part of the assets of a comapny. Research and development is an expensive and time taken process, which some time takes years without provding a final outcome. In such a case, there is a danger of exhausting whatever seed money the entrepreneur put into the funding. The other problems like limited security of R&D, costs of patenting system and inability of external funders to undertand technology only occur after the research has been done and the prodct is ready.