Aarav Unmanned Systems Inc.: operating break-evens.

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Company Information

Aarav Unmanned Systems Inc. founded by three engineers viz. Nikhil Upadhye (Civil Engineer from IIT Kanpur), Vipul Singh (Aerospace Engineer from Amity University) and Suhas Banshiwala (Electrical Engineer from IIT Kanpur) is a company incubated under the premises of SIIC, IIT Kanpur on 26th September (officially incorporated). The three founders are the active directors/partners in the company. There are no other Active Directors / Partners in the company except these 3 officials.

SIIC (SIDBI Innovation and Incubation Centre) provides a platform to Start-ups prospective entrepreneurs and intrapreneurs to convert their innovative ideas into commercially viable products.

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Aarav Unmanned Systems Private Limited's Corporate Identification Number (CIN) is U35122UP2013PTC059774, Registration Number is 059774. Their registered address on file is D-15/49dashashvmedh Ward-3, Varanasi - 221001, Uttar Pradesh, India. The company has a registered domain with the address http://www.aaravunmannedsystems.com.

The company has handled 4 projects till now from clients like DRDO, Indian Army etc. The company deals in robotics especially unmanned air vehicles (UAV) or drones. Generally UAVs are more specifically used in defence applications/sector. The company vies for launching such products for civil applications. Currently the company deals in providing services like designing (DRDO) / fabrication, microcontroller applications and software applications (Indian Army). Fabrication projects currently being outsourced to other facilities. Main focus for the company now is to enter market with a product which is capable of aerial surveillance. Since the technology available overseas is very sophisticated and expensive, the company aims at providing an economically viable and efficient solution.

With the recent development within this small technology consultancy firm, the firm is eager to hire bright and enthusiastic internees for their short term projects and for further value addition. The prerequisite of interning in Aarav Unmanned Systems Inc. is strong background in coding and embedded systems. And most importantly lot of zeal to learn new technologies and the passion to deliver. In December 2013 they hired 4 internees from IIT Kanpur itself for its DST (Department of Science & Technology) project. They hired them for a sum of ` 5k + ` 5k (performance based). Also due to the growing needs related to designing and 3D-modelling of air-borne miniature vehicles (drones) the firm has hired a designing professional for an amount of ` 15k/ month. The company also has procured a single user licence for the 3-D modelling software viz. Catia.

Business Model

Astartup companyorstartupis acompany, a partnership or temporary organization designed to search for a repeatable and scalablebusiness model.These companies, generally newly created, are in a phase ofdevelopmentand research formarkets. The term became popular internationally during thedot-com bubblewhen a great number ofdot-com companieswere founded. Later on a lot of start-ups came into existence which were of varied nature. Entrepreneurs started venturing into services and products which were more than click and click initiatives. A new breed of entrepreneurs started using their technical expertise gained from their engineering institutions and applying it to provide solutions for real time problems.

An important task in setting up a business is to conduct a proper research in order to validate, assess and develop the ideas or business concepts in addition to opportunities to establish further and deeper understanding on the ideas or business concepts as well as their commercial potential. In fact a venture may cease to be a start-up as it go through a number of milestones,such as becoming a public company and issuing shares, or ceasing to exist as an independent entity via amergeroracquisition. In this case a company may also fail and cease to operate.

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Usually investors who may be angel or seed investors are generally attracted to those new ventures which are distinguished by their risk/reward profile and scalability. Therefore they have lowerbootstrappingcosts, higher risk, and higher potentialROI. Generally successful technical startups are more scalable than an established business, in the sense that they can potentially grow rapidly with limited investment of capital, labor or land.

Startup Financing Cycle

To have a proper idea of a start-up and its functioning one needs to also get an in depth understanding of its financing cycle. Usually Start-ups encounter several unique options for funding.In many case it is the entrepreneur himself who invests capital from his pocket as in the case of the start-up taken up in the present case study of Aarav Unmanned Systems Inc. Also Venture capitalfirms andangel investorsmay help startup companies begin operations, exchangingseed moneyfor anequitystake.Factoringis another option, though not unique to startups. Some new funding opportunities are also developing incrowd funding. One can have a precise understanding of a start up financing cycle from the following exhibit. The exhibit elaborately depicts various phases of financing in a start-up. As clearly evident from the graph, revenue in the initial phase is negative until break-even is reached and after which the company starts making profit. Hence it’s very important for a start up to handle properly its expenses during the initial phase.

C:\Users\Puneet Kujur\Documents\Management Acc\700px-Startup_financing_cycle.svg.png

A lot of examples of technical and non-technical start-ups can be cited which have gone through more than half of the phases i.e, managed to get funding from angel investor or VCs. A host of companies like Hector Beverages, E-mart solutions, Aurus Networks etc have presented a great success story in front of the budding and aspiring entrepreneurs.

HECTOR BEVERAGES LOCATION:National Capital Region BUSINESS:Functional Beverage FOUNDED IN:October 2009 LED BY:Neeraj Kakkar, Suhas Misra, James Nuttall, Neeraj Biyani COOL QUOTIENT:A great-tasting energy drink with a crazy name The company was the outcome of a meeting between Neeraj Kakkar and Suhas Misra in 2009. Both had previously worked with Coca-Cola India, Misra till 2006 and Kakkar till 2008.

Start-up Hector Beverages put in their own funds, and began scouting boutique research and development firms in Europe for a "magic" formula that would provide an affordable energy drink that "did not taste weird",

They put in their own funds, and began scouting boutique research and development firms in Europe for a "magic" formula that would provide an affordable energy drink that "did not taste weird", as Misra puts it. "The trick was in getting the taste, price and packaging right," he adds. They finally settled on one such formula, adding their own touch to it with natural ingredients such as lemon and ginseng and choice fruit flavours - all three variants of Tzinga taste of different fruit. They also expanded their team.

EMART SOLUTIONS INDIA LOCATION:Mumbai BUSINESS:Creating and managing e-commerce platforms for brands COOL QUOTIENT:Has found a niche in a cluttered e-commerce market The duo Aditya Bhamidipaty and Srikanth Chunduri set up Emart in July 2009 to create exclusive e-commerce platforms for brands and provide other web related services, such as managing loyalty programmes and product delivery. Emart differs from regulare-commercecompanies, such as Flipkart, in that it not only sells products through its domain GoVasool. com, but also builds e-commerce marketplaces for brands. This model is called 'white-labelled e-commerce'. Emart works with 250 brands, including Adidas, Fastrack, Nikon, Procter & Gamble, and Samsung.

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AURUS NETWORK LOCATION:Bangalore BUSINESS:Online distance learning infrastructure FOUNDED IN:July 2010 LED BY:Piyush Agrawal COOL QUOTIENT:It charges far less than other such service providers, delivering online lectures remotely at super-low bandwidths Aurus Network provides the tools for video creation, video management and video delivery. It does not create any content, but gives customers a 'proprietary box' programmed with its own software. The software, compressing the feed from a high-definition camera and a microphone, sends it to servers in Singapore, Delhi and Hyderabad, from which it can be accessed by distance learners using their laptops. It already has around 25 customers, including the Academy of Commerce in Delhi and tutorial institutes such as Career Launcher and Career Point. Institutes can deliver live lectures to as many as 70 centres from a single location. It charges just Rs 10 per end point per hour - if an institute delivers lectures to four locations, there are in all five end points and Aurus earns an hourly Rs 50.

Abstract

Title– Aarav Unmanned Systems Inc.: operating break-evens.

Subject Area

The case dealt in the following assignment is an attempt to address the initial level decision making processes in an entrepreneurship venture. The case is hence suitable for the following courses: post graduate programs in

Entrepreneurship; executive training programs for middle and senior level employees; and MBA/post-graduate programs in management in strategic management. Also since the nature of venture is mainly of developmental nature as it is in the nascent stage it will help the budding entrepreneurs to decide their pathway while planning for the same. The venture under study is primarily a technological start-up getting support from the R&D department of IIT Kanpur.

Study Level/Applicability

The case can use in following courses:

  • The case takes into account the cash flows of the company and goes into detail of cash flows related to specific projects. It also considers the changing perspective regarding cash flows of certain projects which have affected the company in the recent past. The case deals with decision making at the highest level which might affect the selection of projects or timeline of projects in order to get finances in order.
  • It also helpful for students pursuing Under-graduate/Post-graduate programs in entrepreneurship. Students can be introduced to different cost concepts to be considered in cost benefit analysis while making.
  • It can be used to explain and test the concepts of SWOT analysis, Porter’s five forces model and PEST analysis. Students are also introduced to the technique of breakeven analysis and its relationship with operating leverage.

Case Overview

Aarav Unmanned Systems Inc. founded by three engineers viz. Nikhil Upadhye (Civil Engineer from IIT Kanpur), Vipul Singh (Aerospace Engineer from Amity University) and Suhas Banshiwala (Electrical Engineer from IIT Kanpur) is a company incubated under the premises of SIIC, IIT Kanpur on 26th September (officially incorporated). SIIC provides a platform to Start-ups prospective entrepreneurs and intrapreneurs to convert their innovative ideas into commercially viable products. The company has handled 4 projects till now with clients like DRDO, Indian Army etc. The company deals in robotics especially unmanned air vehicles (UAV) or drones. Generally UAVs are more specifically used in defence applications/sector. The company vies for launching such products for civil applications. Currently the company deals in providing services like designing (DRDO) / fabrication, microcontroller applications and software applications (Indian Army). Fabrication projects currently being outsourced to other facilities. Main focus for the company now is to enter market with a product which is capable of aerial surveillance. Since the technology available overseas is very sophisticated and expensive, the company aims at providing an economically viable and efficient solution. Given the success rate of completion of projects handled by the firm the expected breakeven is duly reported in the report further.

Expected Learning Outcomes

  • The case provides the opportunity to assess different kinds of scenarios a business could face and how they tackle them. In this particular case the company needs to formulate the right strategy in order to meet their cash balance targets and at the same time keep the profits generated at the same level.
  • The case shows how changing economic scenarios can affect the strategy of a business. The reaction of the company in such a situation helps us analyse the risk it is willing to take or forego certain profits in order to keep other factors at the current levels.
  • Use of SWOT analysis to identify the strengths, weaknesses, opportunities and threats to a company. PEST analysis discusses the political, economic, social and technological factors that affect the operations of a company. Also, application of Porter’s five forces model to analyse an industry.

Supplementary Materials

  • The company provided us with the Executive Summary which describes the company’s journey over the years and how have they managed to establish themselves. It describes the values the company believes in and the projects/products that have attributed to their success.
  • The company also provided with the document describing their business model which helped us to analyse their strategy. It showed how the company has adapted to the changing requirement and has gained market share over the years.
  • An excel sheet covering the details of the cash flows of all the projects was provided.
  • We also referred to certain text, Cost Accounting: A Managerial Emphasis, 14th edition.

Practical Implications

The case describes the issue of increasing cash deficit of the company. The issue needs to be addressed soon else the profitability of the company would be severely affected. The resolution of the issues in the case gives us the strategy that needs to be followed in the coming period. The solution to the problems will take the company’s cash balance back to the level it is desired but this could mean better selection of projects to be undertaken.

Social Implications

  • The company works in the technology domain and creates products which are becoming a necessity in today’s advanced world. The company also deals with a number of projects of the Defence sector which makes the company’s operation crucial to the security of the nation.
  • It introduces students to the concept of sustainability in the organization and emerging global challenges.