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1.docx - QUESTION “1” (A) IMPORTANCE OF SEED FUNDING IN...

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QUESTION “1”(A)IMPORTANCE OF SEED FUNDING IN SCALABLE FORM OF ENTERPRENUERSHIP:Seed funding or seed stage funding is a very early investment which aims at helping a business grow and generating its own capital. Also referred to as seed money or seed capital, investors often get equity stake in exchange for the capital invested. The investors can themselves be the founders and use their savings as seed money for their new company. It is a fact that starting a new business and lifting it up off the ground is a huge ask for most entrepreneurs and it only gets tougher with capital constraints. Seed funding helps get things started before the business earns any revenue. It is an effective solution for startups and growing businesses as it provides the much-needed early monetary support.It can cover everything from infrastructure costs, marketing and development costs as well as the cost of initial hiring. Investment is the fuel of any business and seed funding is the first drop of this fuel. As seed money becomes much-needed cash reserve or working capital, not having it is one of the main reasons for failure. Entrepreneurship is viewed by economists to be a combination of innovation and risk taking. When such activity thrives, high growth rates are achieved as well as opportunities offered to all segments of society, including the poor. The latter benefit from growth and employment as well as through opportunities for entrepreneurship. In Pakistan innovation and risk taking is severely inhibited by the intrusive role of government in the marketplace. From the early days of planning when protection and1
subsidy policies determined winners in the market place, entrepreneurship has been diverted to seeking government favors. Government economic policy also seeks to promote growth through a basically ‘mercantilist’ approach where domestic commerce through seriously neglect is heavily regulated. This sector either employs most of the poor or offers them entrepreneurial opportunities. Hence deregulating this sector could be a priority in and anti-poor strategy. The paper alsoargues that land distribution and city zoning and management have also evolved to further reinforce the prevalent rent seeking path to success. The result is that cities are by design not allowedto become clusters of commerce that will be entrepreneur friendly. These clusters of dense urban commerce are magnets of employment and opportunity for the poor. To develop an entrepreneurship culture in the country, the system of incentives (laws and policies) that promote rent seeking will have to be dismantled. This paper presents an analysis of the state of entrepreneurship/rent seeking prevailing in Pakistan. This analysisallows us to obtain and understanding of the kinds of reforms (including legislative changes) that are required to develop entrepreneurship.

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