Bhushan and Vinay were pursuing Electrical Engineering from a prestigious engineering college. During their third year, they developed a solar LED bulb which can be used indoors. The bulb had a small panel which had to be charged at a stretch for 10 hours in the sun and it would last for 200 hours of usage. The idea was risky as there was a possibility that the market might not accept such a product, but if they do so,then, there would be a revolution in the power industry as it would lead to saving of power in every household. The prototype was made but to manufacture and distribute the same, they required around Rs 5 crores. Both Bhushan and Vinay approached some affluent individuals who were ready to invest in their business in exchange for a convertible debt. Identify the type of investors and state the features of the same.

Asked by Jaleeluddin 19/01/2018 Last Modified 11/03/2018

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Bhushan and Vinay were pursuing Electrical Engineering from a prestigious engineering college. During their third year, they developed a solar LED bulb which can be used indoors. The bulb had a small panel which had to be charged at a stretch for 10 hours in the sun and it would last for 200 hours of usage. The idea was risky as there was a possibility that the market might not accept such a product, but if they do so,then, there would be a revolution in the power industry as it would lead to saving of power in every household. The prototype was made but to manufacture and distribute the same, they required around Rs 5 crores. Both Bhushan and Vinay approached some affluent individuals who were ready to invest in their business in exchange for a convertible debt. Identify the type of investors and state the features of the same.

Asked by Jaleeluddin 19/01/2018 Last Modified 11/03/2018

1 Answer

Learn Entrepreneurship +1 Class XI-XII Tuition (PUC)

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Apex Academy · Accepted Answer

The idea here is innovative and it requires considerably huge amount of investment as well inherent risk is also prevailing. The kind of investors which invest in such kind of ideas / industry are known as venture capitalist / angel investors. Further the kind of finance which Bhusan and Vinay are getting is a convertible debt. The features of this kind of debt are as follows:

1) They bear fix amount of interest on debt and have typical debtor creditor relationship.

2) They can be converted into equity at the mutually agreed terms and conditions initially, so in case the business picks up and start generating huge profit the debtors convert the debt into equity and start enjoying the profit sharing.

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