UNIVERSITY OF MUMBAI

Academic Year
2007 - 2008
SHRI CHINAI COLLEGE OF COMMERECE
AND ECONOMICS
ANDHERI (EAST)
Project Report On
Venture Capital
Project Guide
Prof. Nishikant Jha

Presented By:
PRIYA CHATURVEDI

T.Y.B.COM (Banking & Insurance)
Ro !o."#
$e%es&er V
Declaration
I, Miss. Priya Chaturvedi student of T.Y.B.Com (Banking &
Insurance) Semester V
th
, SHRI CHINAI COLLEGE OF
COMMERCE & ECONOMICS. Hereby declare that I have
completed this project on VENTURE CAPITAL in the
academic year 2007-2008. The information submitted is
true and original to the best of my knowledge.

Signature of the Student
(PRIYA CHATURVEDI)

CERTIFICATE
I, Prof. NISHIKANT JHA hereby certify that Miss.Priya
Chaturvedi student of T.Y.B.Com (Banking & Insurance),
SHRI CHINAI COLLEGE OF COMMERCE & ECONOMICS,

has completed her project on VENTURE CAPITAL in the
academic year 2007-2008. The information submitted is
true and original to the best of my knowledge.

Signature of Project Guide
(NISHIKANT JHA)
ACKNOWLEDGEMENT
T'is goes &o a ('o 'a)e kno(ing* or unkno(ing*
+een a grea& su,,or& -or %e &o acco%,is' &'is ,iece o- (ork.
En&rance. 'ar/ (ork. gra/ua ,rogress an/ an e0ci&ing *ear.
&'a& is 'o( I 'a)e reac'e/ &'is e)e an/ no( as I s&an/ a& &'e &'res'o/ o-
&'e asi/e (or/. I &ake a ook o- &'e ,as& *ear ('ic' I 'a)e s,en& in &'is
coege. our ,er-or%ance (i&' &'e /e)o&ion o- &'e ,ro-ession an/ a &'e
-un I 'a/ (as ike a +eau&i-u /rea% co%e &rue.
1irs& o- a I (ou/ ike &o &ake &'is o,,or&uni&* &o &'ank &'e
Mu%+ai Uni)ersi&* -or 'a)ing ,ro2ec&s as a ,ar& o- &'e Banking an/
Insurance curricuu%.
Man* ,eo,e 'a)e in-uence/ &'e s'a,e an/ con&en& o- &'is
,ro2ec&. an/ %an* su,,or&e/ %e &'roug' i&. $econ/*. I (ou/ ike &o
&'ank %* Coege Princi,a Dr. MALINI JOHARI -or su,,or&ing in
e)er*&'ing an/ &'en our Coor/ina&or. Prof. NISHIKANT JHA -or
encouraging %e in e)er*&'ing I /i/ an/ -or su,,or&ing %e. I e0,ress %*
sincere gra&i&u/e &o Prof. NISHIKANT -or +eing %* Pro2ec& 3ui/e an/
-or assigning %e a ,ro2ec& on Ven&ure Ca,i&a ('ic' is an in&eres&ing an/

e0'aus&i)e su+2ec&.
Prof. NISHIKANT JHA 'as +een an ins,ira&ion an/ roe
%o/e -or &'is &o,ic. His gui/ance an/ ac&i)e su,,or& 'as %a/e i& ,ossi+e
&o co%,e&e &'e assign%en&.
I aso (ou/ ike &o &'ank %* ,aren&s an/ -rien/s ('o 'a)e
'e,e/ an/ encourage/ %e &'roug'ou& &'e (orking o- &'e ,ro2ec&. I (ou/
aso ike &o &'anks &'e cus&o%ers ('o 'a)e 'e,e/ in %aking %* sur)e*
success-u.

EXECUTIVE SUMMARY
Ven&ure Ca,i&a is /e-ine/ as ,ro)i/ing see/. s&ar&4u, an/ -irs& s&age -inance &o
co%,anies an/ aso -un/ing e0,ansion o- co%,anies &'a& 'a)e /e%ons&ra&e/ +usiness
,o&en&ia +u& /o no& 'a)e access &o ,u+ic securi&ies %arke& or o&'er cre/i& orien&e/
-un/ing ins&i&u&ions.
A Ven&ure Ca,i&a 1un/ (VC1) s&ri)es &o ,ro)i/e en&re,reneurs (i&' &'e su,,or& &'e*
nee/ &o crea&e u,4scaa+e +usiness (i&' sus&aina+e gro(&'. ('ie ,ro)i/ing &'eir
con&ri+u&ors (i&' ou&s&an/ing re&urns on in)es&%en&. -or &'e 'ig'er risks &'e* assu%e.
T'e in/us&r*5s gro(&' in In/ia can +e consi/ere/ in &(o ,'ases. T'e -irs& ,'ase (as
s,urre/ on soon a-&er &'e i+erai6a&ion ,rocess +egan in "77". T'e secon/ ,'ase (as
consi/ere/ -ro% "778. ('ere $EBI ca%e ou& (i&' gui/eines -or )en&ure ca,i&a -un/s
'as &o a/'ere &o. in or/er &o carr* ou& ac&i)i&ies in In/ia. T'is (as &'e +eginning o- &'e
secon/ ,'ase in &'e gro(&' o- )en&ure ca,i&a in In/ia.
T'e In/ian )en&ure ca,i&a in/us&r*. a& &'e ,resen&. is a& crossroa/s. T'ere are so%e
%a2or issues -ace/ +* &'is in/us&r* ('ic' are as -oo(s. ike 9i%i&a&ions on
s&ruc&uring o- )en&ure ca,i&a -un/s. Pro+e% in raising o- -un/s. A+sence o- :ange
in)es&ors5. 9i%i&a&ion on in)es&%en& ins&ru%en&. 9i%i&a&ion on E0i& Mec'anis%.
9ega -ra%e(ork. e&c.
Ven&ure ca,i&a in/us&r* in In/ia is s&i in i&s ear* s&ages an/ &o gi)e i& a ,ro,er -ii,
i& is i%,or&an& &o /e)eo, rea&e/ in-ras&ruc&ure as 'as +een success-u* /one

in&erna&iona* s,ecia* in U$. Tai(an an/ Israe. 1oo(ing areas nee/ /ue a&&en&ion.
T'e In/ian go)ern%en& 'as +een 'ig'* su,,or&i)e o- gro(&' in &ec'noog* an/
kno(e/ge;+ase/ sec&ors. A VC -un/s regis&ere/ (i&' $EBI are e0e%,&e/ -ro%
inco%e &a0. T'e +ene-i&s recei)e/ +* con&ri+u&ors &o &'e VC -un/s are aso &a0
e0e%,&. T'e go)ern%en& 'as o,ene/ u, ne( sec&ors -or )en&ure -un/ing ike rea
es&a&e. +uion. 1DIs 'a)e +een ,ro,ose/ &'roug' au&o%a&ic rou&e -or )en&ure -un/s
ike +io&ec'noog*. Tec'noog* +ase/ co%,anies 'a)e a(a*s +een &'e anc'ors -or
)en&ure ca,i&ais&s. In &'e ,as&. &'e -ocus 'as +een on IT. co%%unica&ion an/
+io&ec'noog*. Bu& &'ere are %an* nic'e areas ('ere signi-ican& )aue can +e crea&e/.
En&er&ain%en& an/ /igi&a %e/ia is aso a ne(. e%erging area.
T'e Ven&ure Ca,i&a %arke& in i&s nascen& s&age so. &'ere is a goo/ sco,e -or &'e
)en&ure ca,i&ais& in In/ia in near -u&ure. I& 'as a 'uge ,o&en&ia &o es&a+is' i&se- in
&'e e%erging %arke&
INDEX
SR.NO. CONTENTS PAGE NO.
". 1ore(or/ "4"
#. Origin o- Ven&ure Ca,i&a "4#
<. Ven&ure Ca,i&a 4 Meaning #4<
=. Ven&ure Ca,i&a 1o( C'ar& <4<
>. Ven&ure Ca,i&a in In/ia
8. T*,es o- Ven&ure Ca,i&a In)es&ors >4>
?. Cassi-ica&ion O1 Ven&ure Ca,i&a -un/s 848
@. $&ages o- - -inancing +* Ven&ure Ca,i&ais& 84?
7. Ven&ure Ca,i&a In)es&%en& Process ?4@
"A. Assessing Ven&ure Ca,i&a Un/er&aking @4@
"". Assessing Ven&ure Ca,i&a 1un/ 74"#
"#. E0i& Rou&es "#4"=
"<. Regua&or* 1ra%e(ork 1or Ven&ure Ca,i&a In In/ia "=4"8
"=. $BOT Ana*sis o- &'e In/ian Ven&ure Ca,i&a In/us&r* "?4"?

">. Issue/ 1ace/ +* &'e In/ian Ven&ure Ca,i&a In/us&r* "@4#A
"8. 1u&ure o- Ven&ure Ca,i&a in In/ia #"4#"
"?. Curren& Tren/s #"4##
"@. $ur)e* C 3an/'i & Associa&es ##4#<
"7. $ur)e* 1or%
Consu%ers Re,or&
#=4#>
#A. Anne0ure #84#8
#". Concusion #?4#@
##. Bi+iogra,'* #@4#7

1 .FORWARD
T'e Ven&ure ca,i&a sec&or is &'e %os& )i+ran& in/us&r* in &'e -inancia %arke& &o/a*.
Ven&ure ca,i&a is %one* ,ro)i/e/ +* ,ro-essionas ('o in)es& aongsi/e %anage%en&
in *oung. ra,i/* gro(ing co%,anies &'a& 'a)e &'e ,o&en&ia &o /e)eo, in&o
signi-ican& econo%ic con&ri+u&ors. Ven&ure ca,i&a is an i%,or&an& source o- eDui&* -or
s&ar&4u, co%,anies.
Ven&ure ca,i&a can +e )isuai6e/ as your ideas and our money conce,& o-
/e)eo,ing +usiness. Ven&ure ca,i&ais&s are ,eo,e ('o ,oo -inancia resources -ro%
'ig' ne& (or&' in/i)i/uas. cor,ora&e. ,ension -un/s. insurance co%,anies. e&c. &o
in)es& in 'ig' risk ; 'ig' re&urn )en&ures &'a& are una+e &o source -un/s -ro% reguar
c'annes ike +anks an/ ca,i&a %arke&s. T'e )en&ure ca,i&a in/us&r* in In/ia 'as
rea* &aken o-- in. Ven&ure ca,i&ais&s no& on* ,ro)i/e %one&ar* resources +u& aso
'e, &'e en&re,reneur (i&' gui/ance in -or%ai6ing 'is i/eas in&o a )ia+e +usiness
)en&ure.
Five critica !"cce!! factor! #ave $ee% i&e%tifie& for t#e 'ro(t# of )C i% I%&ia*
%a+e,-
T'e regua&or*. &a0 an/ ega en)iron%en& s'ou/ ,a* an ena+ing roe as
in&erna&iona* )en&ure -un/s 'a)e e)o)e/ in an a&%os,'ere o- s&ruc&ura
-e0i+ii&*. -isca neu&rai&* an/ o,era&iona a/a,&a+ii&*.
Resources raising. in)es&%en&. %anage%en& an/ e0i& s'ou/ +e as si%,e an/
-e0i+e as nee/e/ an/ /ri)en +* go+a &ren/s.
Ven&ure ca,i&a s'ou/ +eco%e as ins&i&u&ionai6e/ in/us&r* &'a& ,ro&ec&s
in)es&ors an/ in)es&or -ir%s. o,era&ing in an en)iron%en& sui&a+e -or raising
&'e arge a%oun&s o- risk ca,i&a nee/e/ an/ -or s,urring inno)a&ion &'roug'
s&ar&4u, -ir%s in a (i/e range o- 'ig' gro(&' areas.

In )ie( o- increasing go+a in&egra&ion an/ %o+ii&* o- ca,i&a i& is i%,or&an&
&'a& In/ian )en&ure ca,i&a -un/s as (e as )en&ure -inance en&er,rises are a+e
&o 'a)e go+a e0,osure an/ in)es&%en& o,,or&uni&ies.
In-ras&ruc&ure in &'e -or% o- incu+a&ors an/ R & D nee/ &o +e ,ro%o&e/ using
go)ern%en& su,,or& an/ ,ri)a&e %anage%en& as 'as success-u* +een /one +*
coun&ries suc' as &'e U$. Israe an/ Tai(an. T'is is necessar* -or -as&er
con)ersion o- R&D an/ &ec'noogica inno)a&ion in&o co%%ercia ,ro/uc&s.
Bi&' &ec'noog* an/ kno(e/ge +ase/ i/eas se& &o /ri)e &'e go+a econo%* in
&'e co%ing %ienniu%. an/ gi)en &'e in'eren& s&reng&' +* (a* o- i&s 'u%an
ca,i&a. &ec'nica skis. cos& co%,e&i&i)e (ork-orce. researc' an/
en&re,reneurs'i,. In/ia can uneas' a re)ou&ion o- (ea&' crea&ion an/ ra,i/
econo%ic gro(&' in a sus&aina+e %anner. Ho(e)er. -or &'is &o 'a,,en. &'ere is a
nee/ -or risk -inance an/ )en&ure ca,i&a en)iron%en&. ('ic' can e)erage
inno)a&ion. ,ro%o&e &ec'noog* an/ 'arness kno(e/ge +ase/ i/eas.

ORIGIN OF VENTURE CAPITAL
T'e s&or* o- )en&ure ca,i&a is )er* %uc' ike &'e 'is&or* o- %ankin/. In &'e -i-&een&'
cen&ur*. C'ris&o,'er Cou%+us soug'& &o &ra)e (es&(ar/s ins&ea/ o- eas&(ar/s -ro%
Euro,e an/ so ,anne/ &o reac' In/ia. His -ar4 -e&c'e/ i/ea /i/ no& -in/ -a)our (i&'
&'e Eing o- Por&uga. ('o re-use/ &o -inance 'i%. 1ina*. Fueen Isa+ea o- $,ain
/eci/e/ &o -un/ 'i% an/ &'e )o*ages o- C'ris&o,'er Cou%+us are no( e%,anee/ in
'is&or*. An/ &'us e)o)e/ &'e conce,& o- Ven&ure Ca,i&a.
T'e %o/ern )en&ure ca,i&a in/us&r* +egan &aking s'a,e in &'e ,os& Bor/ Bar #. I& is
o-&en sai/ &'a& ,eo,e /eci/e &o +eco%e en&re,reneurs +ecause &'e* see roe %o/es in
o&'er ,eo,e ('o 'a)e +eco%e success-u en&re,reneurs +ecause &'e* see roe %o/es
in o&'er ,eo,e ('o 'a)e +eco%e success-u en&re,reneurs. Muc' &'e sa%e can +e
sai/ a+ou& )en&ure ca,i&ais&s. T'e earies& %e%+ers o- &'e organi6e/ )en&ure ca,i&a
in/us&r* 'a/ se)era roe %o/es. incu/ing &'ese &'ree C
A+erica% Re!earc# a%& Deveo.+e%t Cor.oratio%-
1or%e/ in "7=8. ('ose +igges& success (as Digi&a EDui,%en&. T'e -oun/er o- ARD
(as 3enera 3eorges Doroi&. a 1renc'4+orn %ii&ar* %an ('o is consi/ere/ G&'e
-a&'er o- )en&ure ca,i&aH. In &'e "7>As. 'e &aug'& a& &'e Har)ar/ Business $c'oo. His
ec&ures on &'e i%,or&ance o- risk ca,i&a (ere consi/ere/ Duirk* +* &'e res& o- &'e
-acu&*. ('o concen&ra&e/ on con)en&iona cor,ora&e %anage%en&.
J.H. W#it%e, / Co-
Aso -or%e/ in "7=8. one o- &'ose ear* 'i&s (as Minu&e Mai/ 2uice. Iock B'i&ne* is
consi/ere/ one o- &'e in/us&r*5s -oun/ers.
T#e Roc0efeer Fa+i,-
9 $ Rocke-eer. one o- &'ose earies& in)es&%en&s (as in Eas&ern Airines. ('ic' is
no( /e-unc& +u& (as one o- &'e earies& co%%ercia airines.

3. VENTURE CAPITAL
Ven&ure Ca,i&a is /e-ine/ as ,ro)i/ing see/. s&ar&4u, an/ -irs& s&age -inance &o
co%,anies an/ aso -un/ing e0,ansion o- co%,anies &'a& 'a)e /e%ons&ra&e/
+usiness ,o&en&ia +u& /o no& 'a)e access &o ,u+ic securi&ies %arke& or o&'er
cre/i& orien&e/ -un/ing ins&i&u&ions.
Ven&ure Ca,i&a is genera* ,ro)i/e/ &o -ir%s (i&' &'e -oo(ing c'arac&eris&icsC
!e(* -oa&e/ co%,anies &'a& /o no& 'a)e access &o sources suc' as
eDui&* ca,i&a an/Jor o&'er rea&e/ ins&ru%en&s.
1ir%s. %anu-ac&uring ,ro/uc&s or ser)ices &'a& 'a)e )as& gro(&'
,o&en&ia.
1ir%s (i&' a+o)e a)erage ,ro-i&a+ii&*.
!o)e ,ro/uc&s &'a& are in &'e ear* s&ages o- &'eir i-e c*ce.
Pro2ec&s in)o)ing a+o)e4a)erage risk.
Turnaroun/ o- co%,anies
Ven&ure Ca,i&a /eri)es i&s )aue -ro% &'e +ran/ eDui&*. ,ro-essiona i%age.
cons&ruc&i)e cri&icis%. /o%ain kno(e/ge. in/us&r* con&ac&sK &'e* +ring &o &a+e
a& a signi-ican&* o(er %anage%en& agenc* cos&.
A Ven&ure Ca,i&a 1un/ (VC1) s&ri)es &o ,ro)i/e en&re,reneurs (i&' &'e su,,or&
&'e* nee/ &o crea&e u,4scaa+e +usiness (i&' sus&aina+e gro(&'. ('ie
,ro)i/ing &'eir con&ri+u&ors (i&' ou&s&an/ing re&urns on in)es&%en&. -or &'e
'ig'er risks &'e* assu%e.
T'e &'ree ,ri%ar* c'arac&eris&ics o- )en&ure ca,i&a -un/s ('ic' %ake &'e%
e%inen&* sui&a+e as a source o- risk -inance areC
T'a& i& is eDui&* or Duasi eDui&* in)es&%en&
I& is ong &er% in)es&%en& an/

I& is an ac&i)e -or% o- in)es&%en&.
)e%t"re ca.itai!t!
B'en so%eone re-ers &o )en&ure ca,i&ais&. &'e i%age &'a& co%es in %in/ is Mr.
Mone* +ags. Be a &'ink o- )en&ure ca,i&ais&s as so%eone ('o is si&&ing on %iions
o- /oars an/ ('o (i&' &'e (a)e o- 'is %agic (an/ &urns *our /rea%s in&o reai&*.
Be. i- &'a&5s ('a& *ou &'ink is a a+ou& ('* run a-&er 'i% ; G,a* $an&a *ourse-H
Ven&ure Ca,i&ais&s is ike an* o&'er ,ro-essiona ('o is ,ai/ -or /oing 'is 2o+.
*es. )en&ure ca,i&ais& is no&'ing +u& a -un/ %anager ('ose 2o+ is &o %anage -un/s
&'a& are raise/. A )en&ure ca,i&ais& ge&s a -ee &o in)es& in co%,anies &'a& in&eres& 'is
in)es&ors.
Differe%ce $et(ee% a )e%t"re Ca.itai!t a%& 1a%0er!2Mo%e, Ma%a'er!.
Banker is a %anager o- o&'er ,eo,e5s %one* ('ie &'e )en&ure ca,i&ais&
is +asica* an in)es&or.
Ven&ure ca,i&ais& genera* invests in new ventures s&ar&e/ +* &ec'nocra&s
('o genera* are in nee/ o- en&re,reneuria ai/ an/ -un/s.
Ven&ure ca,i&ais&s genera* in)es& in co%,anies &'a& are no& is&e/ on
an* s&ock e0c'anges. T'e* %ake ,ro-i&s on* a-&er &'e co%,an* o+&ains
is&ing.
T'e %os& i%,or&an& /i--erence +e&(een a )en&ure ca,i&ais& an/
con)en&iona in)es&ors an/ %u&ua -un/s is &'a& 'e is a s,eciais& an/
en/s %anage%en& su,,or& an/ aso
1inancia an/ s&ra&egic ,anning
Recrui&%en& o- ke* ,ersonne
O+&ain +ank an/ /e+& -inancing
Access &o in&erna&iona %arke&s an/ &ec'noog*

In&ro/uc&ion &o s&ra&egic ,ar&ners an/ acDuisi&ion &arge&s in &'e
region
Regiona e0,ansion o- %anu-ac&uring an/ %arke&ing o,era&ions
O+&ain a ,u+ic is&ing
)ENT3RE CAPITAL FLOW CHART

VENTURE CAPITAL IN INDIA

I%!tit"tio%ai4atio% of )C i% I%&ia
To es&a+is' &'e ,rocess o- ins&i&u&ionaisa&ion o- Ven&ure Ca,i&a 1un/ing (VC1) in
In/ia i& is i%,or&an& &o e0a%ine &'e gro(&' o- &'is in/us&r* (i&'in &'e con&e0& o- &'e
arger ,oi&ica an/ econo%ic s*s&e%.
T'e /e)eo,%en& o- &'e )en&ure ca,i&a in/us&r* in In/ia in &'e "7@A5s see%e/ a%os&
u&o,ian. In/ia5s 'ig'* +ureaucra&ise/ econo%*. a conser)a&i)e socia an/ +usiness
ou&ook an/ a risk a)erse -inancia s*s&e% ,ro)i/e/ i&&e encourage%en& an/
ins&i&u&iona s,ace -or &'e )en&ure ca,i&a in/us&r* &o a/)ance.
T'e earies& %en&ion o- )en&ure ca,i&a ca%e in "7?<. A co%%i&&ee a,,oin&e/ +* &'e
In/ian go)ern%en& &o e0a%ine &'e ,ro%o&ion o- /e)eo,%en& o- $ME5s 'ig'ig'&e/
&'e nee/ &o en/orse )en&ure ca,i&a as a source o- -un/ing ne( en&re,reneurs an/
&ec'noog*.
T'e In/ian econo%* is a /uais&ic econo%*. /o%ina&e/ +* a -e( %assi)e Pu+ic
$ec&or Un/er&akings (P$U5s) on &'e one 'an/ an/ ,ri)a&e sec&or in/us&r* gian&s suc'
as &'e Ta&as an/ Biras on &'e o&'er. An en&re,reneur s&ar&ing a sunrise in/us&r* (ou/
'a)e &o /o so on 'is o(n ,ersona sa)ings or oans raise/ &'roug' ,ersona con&ac&s
an/ -inancia ins&i&u&ions.
In "7@@. &'e Bor/ Bank. encouraging econo%ic i+erai6a&ion in &'ir/ (or/
coun&ries. un/er&ook a s&u/* &o e0a%ine &'e ,ossi+ii&* o- /e)eo,ing )en&ure ca,i&a
-un/ing c'ie-* in &'e ,ri)a&e sec&or. Accor/ing*. &'e In/ian go)ern%en& issue/ i&s
-irs& gui/eines &o egaise )en&ure ca,i&a o,era&ions. T'e* ao(e/ s&a&e con&roe/
+anks an/ -inancia ins&i&u&ions &o es&a+is' )en&ure ca,i&a su+si/iaries. As a resu&
)en&ure ca,i&a -un/ing +eca%e an e0&ension -or /e)eo,ing -inancia ins&i&u&ions suc'
as ICICI. IDBI. $IDBI. an/ $&a&e 1inance Cor,ora&ions.
In &'e a+sence o- an in/e,en/en& an/ organi6e/ )en&ure ca,i&a in/us&r* in In/ia un&i
a%os& "77@. in/i)i/ua in)es&ors an/ /e)eo,%en&a -inancia ins&i&u&ions ,a*e/ &'e

roe o- )en&ure ca,i&ais&s. En&re,reneurs (ere arge* /e,en/en& on ,ri)a&e
,ace%en&s. ,u+ic o--erings an/ en/ing +* -inancia ins&i&u&ions.
T#e 'ro(t# of t#e ve%t"re ca.ita i%&"!tr, i% I%&ia ca% $e &ivi&e& i%to 5 .#a!e!.
T#e fir!t .#a!e +egan ,os& ;re-or% (i&' i+erai6a&ion o- &'e In/ian econo%*. T'e
Tec'nica De)eo,%en& an/ In-or%a&ion Cor,ora&ion o- In/ia (TDICI. no( ICICI
)en&ures) an/ &'e 3u2ara& Ven&ure 1inance 9i%i&e/ (3V19) (ere se& u,. $ources o-
&'ese -un/s (ere -inancia ins&i&u&ions. -oreign ins&i&u&iona in)es&ors or ,ension -un/s
an/ 'ig' ne&4(or&' in/i)i/uas.
T#e !eco%& .#a!e o- )en&ure ca,i&a gro(&' in In/ia +egan (i&' &'e reai6a&ion &'a&
)en&ure ca,i&a -un/ing. as an in/us&r* 'as &o +e regua&e/. $u+seDuen&*. &'e
3o)ern%en& o- In/ia issue/ gui/eines in $e,&e%+er "77> -or o)erseas in)es&%en& in
)en&ure ca,i&a in In/ia.
In "778. &'e $ecuri&ies an/ E0c'ange Boar/ o- In/ia ($EBI) ca%e ou& (i&' gui/eines
-or )en&ure ca,i&a -un/s. T'e %o)e i+era&e/ &'e in/us&r* -ro% a nu%+er o-
+ureaucra&ic 'asses an/ ,a)e/ &'e (a* -or grea&er access &o ca,i&a. Moreo)er.
co%,e&i&ion +roug'& ,ro-essiona +usiness ,rac&ices -ro% &'e %a&ure %arke&s in &'e
(es&.
In "77?. )en&ure ca,i&a -un/ing +eca%e ,ro%inen& in &'e IT sec&or. A )en&ure
ca,i&a -un/s &'a& (ere as o- &'en +eing e%,o*e/ in o&'er sec&ors. c'ange/ &'eir -ocus
&o &'e IT an/ Teeco% in/us&r*.
Bi&' &'e IT +oo% &o/a*. &'e In/ian )en&ure ca,i&a in/us&r* 'as -ina* &urne/ &'e
cur)e. Ho(e)er i& is s&i s&ri)ing 'ar/ &o success-u* an/ ('o* &ake o--.
During &'e recession -ro% "777 ; #AA" %os& o- &'e )en&ure ca,i&ais&s ei&'er cose/
/o(n or s'i-&e/ -ocus. A%os& a o- &'e% (i&' &'e e0ce,&ion o- one or &(o ike 3)19
cen&ere/ on success-u -ir%s -or &'eir gro(&' an/ e0,ansion. Ven&ure ca,i&a -ir%s
aso go& engage/ in&o -un/ing +u*ou&s. ,ri)a&i6a&ion an/ res&ruc&uring. Curren&*. 2us&

a -e( -ir%s are &aking &'e risk o- in)es&ing in&o &'e s&ar&4u, &ec'noog* +ase/
co%,anies.
T'e success ac'ie)e/ in &'e IT sec&or. 'as encourage/ VC1 in se)era o&'er sec&ors
ike +io4&ec'noog*. ,'ar%aceu&icas an/ /rugs. agricu&ure. -oo/ ,rocessing.
&eeco%%unica&ions. ca cen&ers. +usiness ,rocess ou&sourcing (BPO) an/ ser)ices.
Bi&' ,ro,er ,oic* su,,or& an/ -inancing o- risk ca,i&a. en&re,reneurs'i, in s%a
an/ %e/iu% sec&or can succee/.
$&a&e 3o)ern%en&s 'a)e no( s&ar&e/ &aking an ac&i)e ,ar& in &'e )en&ure ca,i&a
In/us&r*. $&a&es ike An/'ra Pra/es' 'a)e APIDC4VC9. ('ic' is a 2oin& )en&ure
+e&(een &'e Ven&ureas& 3rou, an/ &'e An/'ra Pra/es' In/us&ria De)eo,%en&
Cor,ora&ion -un/ing $ME5s ike +io4&ec'noog* -ir%s. ,'ar%a e&c.
1irs&4genera&ion en&re,reneurs are no( -in/ing i& easier &o raise )en&ure -un/s. More
)en&ure -un/s are no( +eing in)es&e/ in o( &ec'noog* en&er,rise as is seen in &'e
case o- ICICI Ven&ures &'a& 'as a s&ake in $'o,,ers $&o,.
T'ere are a nu%+er o- -un/s. ('ic' are curren&* o,era&iona in In/ia an/ in)o)e/ in
-un/ing s&ar&4u, )en&ures. Mos& o- &'e% are no& &rue )en&ure -un/s. as &'e* /o no&
-un/ s&ar&4u,s. B'a& &'e* /o is ,ro)i/e %e66anine or +ri/ge -un/ing an/ are +e&&er
kno(n as ,ri)a&e eDui&* ,a*ers. Ho(e)er. &'ere is a s&rong o,&i%is&ic un/er&one in
&'e air. Bi&' &'e In/ian kno(e/ge in/us&r* -ina* s'o(ing signs o- rea/iness
&o(ar/s co%,e&ing go+a* an/ a(areness o- )en&ure ca,i&ais&s a%ong en&re,reneurs
'ig'er &'an e)er +e-ore. &'e s&age see%s a se& -or an o)er/ri)e.
T'e In/ian Ven&ure Ca,i&a Associa&ion (IVCA). is &'e no/a cen&er -or a )en&ure
ac&i)i&* in &'e coun&r*. T'e associa&ion (as se& u, in "77# an/ o)er &'e as& -e( *ears.
'as +ui& u, an i%,ressi)e /a&a+ase. Accor/ing &o &'e IVCA. &'e ,oo o- -un/s
a)aia+e -or in)es&%en& &o i&s #A %e%+ers in "77? (as Rs#>.8+n. Ou& o- &'is. Rs"A
+n 'a/ +een in)es&e/ in 87" ,ro2ec&s.
Cer&ain )en&ure ca,i&a -un/s are In/us&r* s,eci-ic(ie &'e* -un/ en&er,rises on* in
cer&ain in/us&ries suc' as ,'ar%aceu&icas. in-o&ec' or -oo/ ,rocessing) ('ereas
o&'ers %a* 'a)e a %uc' (i/er s,ec&ru%. Again. cer&ain -un/s %a* 'a)e a geogra,'ic
-ocus ; ike U&&ar Pra/es'. Ma'aras'&ra. Eeraa. e&c ('ereas o&'ers %a* -un/ across
/i--eren& &erri&ories. T'e -un/s %a* +e ei&'er cose4en/e/sc'e%es ((i&' a -i0e/ ,erio/

o- %a&uri&*) or o,en4en/e/. T'e gro(&' o- )en&ure ca,i&a in In/ia -ro% #AAA4#AA8 is
as -oo(sC
As in &'e a+o)e c'ar&. i& is o+ser)e/ &'a& )en&ure ca,i&a 'a/ a grea& -a -ro% #AAA &o
#AA< -ro% U$L #@A %iion &o U$L >8 %iion. #AA= (as a goo/ s&ar& -ro% )en&ure
ca,i&a in In/ia. An/ &'ere %ore c'ances o- increase in )en&ure ca,i&a in In/ia.

TYPES OF VC INVESTORS
T'e G)en&ure -un/sH a)aia+e cou/ +e -ro%
Incu+a&ors
Ange in)es&ors
Ven&ure Ca,i&ais&s (VCs)
Pri)a&e EDui&* Pa*ers
I%c"$ator!
An incu+a&or is a 'ar/core &ec'nocra& ('o (orks (i&' an en&re,reneur &o /e)eo, a
+usiness i/ea. an/ ,re,ares a co%,an* -or su+seDuen& roun/s o- gro(&' & -un/ing.
E-Ventures, Infinity is e0a%,es o- incu+a&ors in In/ia.
A%'e I%ve!tor!
An ange is an e0,erience/ in/us&r*4+re/ in/i)i/ua (i&' 'ig' ne& (or&'.
T*,ica*. an ange in)es&or (ou/C
In)es& on* 'is c'osen -ie/ o- &ec'noog*
Take ac&i)e ,ar&ici,a&ion in /a*4&o4/a* running o- &'e co%,an*
In)es& s%a su%s in &'e range o- U$D "4< %iion
!o& insis& on /e&aie/ +usiness ,ans
$anc&ion &'e in)es&%en& in u, &o a %on&'
He, co%,an* -or Gsecon/ roun/H o- -un/ing

T'e I!DU$ En&re,reneurs (TiE) is a cassic grou, o- anges ikeC Vino/ /'a%.
$aies' Me'&a. Ean(a Rek'i. Pra+'u 3oe. $u'as Pa&i. Prakas' Agra(a. E.B
C'an/ras'ek'ar. In In/ia &'ere is a ack o- 'o%e gro(n anges e0ce,& a -e( ike
$aura+' $ri)as&a)a & A&u C'okse* (e04 Asian ,ain&s).
)e%t"re Ca.itai!t! 6)C!7
VCs are organi6a&ions raising -un/s -ro% nu%erous in)es&ors & 'iring e0,erience/
,ro-essiona %anagers &o /e,o* &'e sa%e. T'e* &*,ica*C
In)es& a& Gsecon/H s&age
In)es& o)er a s,ec&ru% o)er in/us&r*Jies
Ha)e 'an/4'o/ing G%en&orH a,,roac'
Insis& on /e&aie/ +usiness ,ans
In)es& in&o ,ro)en i/easJ+usinesses
Pro)i/e G+ran/H )aue &o in)es&ee
In)es& +e&(een U$D #4> %iion
Private E8"it, Pa,er!
T'e* are es&a+is'e/ in)es&%en& +ankers. T*,ica*C
In)es& in&o ,ro)enJes&a+is'e/ +usinesses
Ha)e G-inancia ,ar&nersH a,,roac'
In)es& +e&(een U$D >4 "AA %iion

6.Classifcation of VC funds
Ven&ure -un/s in In/ia can +e cassi-ie/ on &'e +asis o-C
1a!e for+atio%
Financial Institutions Led By ICICI Ventures, RCTC, ILFS, etc.
Pri)a&e )en&ure -un/s ike In/us. e&c.
Regiona -un/s ike Bar+urg Pincus. I1 Eec&ra (%os&* o,era&ing ou& o- Hong
Eong).
Regiona -un/s /e/ica&e/ &o In/ia ike Dra,er. Ba/en. e&c.
O--s'ore -un/s ike Barings. TCB. H$BC. e&c.
Cor,ora&e )en&ures ike In&e.
To &'is is& (e can a// Anges ike $i)an $ecuri&ies. A&u C'okse* (e0 Asian Pain&s)
an/ o&'ers. Merc'an& +ankers an/ !B1Cs ('o s,eciai6e/ in M+oug'& ou&M /eas aso
-un/ co%,anies. Mos& %erc'an& +ankers e/ +* Ena% $ecuri&ies no( in)es& in IT
co%,anies.
I%ve!t+e%t P#io!o.#,
Ear* s&age -un/ing is a)oi/e/ +* %os& -un/s a,ar& -ro% ICICI )en&ures. Dra,er.
$IDBI an/ Anges. 1un/ing gro(&' or %e66anine -un/ing &i ,re IPO is &'e seg%en&
('ere %os& ,a*ers o,era&e. In &'is con&e0&. %os& -un/s in In/ia are ,ri)a&e eDui&*
in)es&ors.
Si4e Of I%ve!t+e%t
T'e si6e o- in)es&%en& is genera* ess &'an U$L"%n. U$L"4>%n. U$L>4"A%n. an/
grea&er &'an U$L"A%n. As %os& -un/s are o- a ,ri)a&e eDui&* kin/. si6e o- in)es&%en&s
'as +een increasing. IT co%,anies genera* reDuire -un/s o- a+ou& Rs<A4=A%n in an

ear* s&age ('ic' -a ou&si/e -un/ing i%i&s o- %os& -un/s an/ &'a& is ('* &'e
go)ern%en& is ,ro%o&ing sc'e%es &o -un/ s&ar& u,s in genera. an/ in IT in ,ar&icuar.
)a"e A&&itio% 4
T'e )en&ure -un/s can 'a)e a &o&a* M'an/s onM a,,roac' &o(ar/s &'eir in)es&%en&
ike Dra,er or M'an/s o--M ike C'ase. ICICI Ven&ures -as in &'e i%i&e/ e0,osure
ca&egor*. In genera. )en&ure -un/s ('o -un/ see/ or s&ar& u,s 'a)e a coser
in&erac&ion (i&' &'e co%,anies an/ a/)ice on s&ra&eg*. e&c ('ie &'e ,ri)a&e eDui&*
-un/s &rea& &'eir e0,osure ike an* o&'er is&e/ in)es&%en&. T'is is ,ar&ia* 2us&i-ie/.
as &'e* &en/ &o in)es& in %ore %a&ure s&ories.
A is& o- &'e %e%+ers regis&ere/ (i&' &'e IVCA as o- Iune "777. 'as +een ,ro)i/e/ in
&'e Anne0ure. Ho(e)er. in a//i&ion &o &'e organi6e/ sec&or. &'ere are a nu%+er o-
,a*ers o,era&ing in In/ia ('ose ac&i)i&* is no& %oni&ore/ +* &'e associa&ion. A//
&oge&'er &'e in-usion o- -un/s +* o)erseas -un/s. ,ri)a&e in/i)i/uas. :ange5 in)es&ors
an/ a 'os& o- -inancia in&er%e/iaries an/ &'e &o&a ,oo o- In/ian Ven&ure Ca,i&a
&o/a*. s&an/s a& Rs>A+n. accor/ing &o in/us&r* es&i%a&esN
T'e ,ri%ar* %arke&s in &'e coun&r* 'a)e re%aine/ /e,resse/ -or Dui&e so%e &i%e
no(. In &'e as& &(o *ears. &'ere 'a)e +een 2us& ?= ini&ia ,u+ic o--erings (IPOs) a& &'e
s&ock e0c'anges. ea/ing &o an in)es&%en& o- 2us& Rs"=.#=+n. T'a&5s ess &'an "#O o-
&'e %one* raise/ in &'e ,re)ious &(o *ears. T'a& %akes &'e conser)a&i)e es&i%a&e o-
Rs<8+n in)es&e/ in co%,anies &'roug' &'e Ven&ure Ca,i&aJ,ri)a&e EDui&* rou&e a &'e
%ore signi-ican&.
$o%e o- &'e co%,anies &'a& 'a)e recei)e/ -un/ing &'roug' &'is rou&e incu/eC
Mas&ek. one o- &'e o/es& so-&(are 'ouses in In/ia
3eo%e&ric $o-&(are. a ,ro/ucer o- so-&(are sou&ions -or &'e CADJCAM
%arke&
Ruksun $o-&(are. Pune4+ase/ so-&(are consu&anc*
$F9 $&ar. H*/era+a/ +ase/ &raining an/ so-&(are /e)eo,%en& co%,an*
Microan/. ne&(orking 'ar/(are an/ ser)ices co%,an* +ase/ in Bangaore
$a&*a% In-o(a*. &'e -irs& ,ri)a&e I$P in In/ia

Hin/i&ron. %akers o- e%+e//e/ so-&(are
Po(erTe Boca. /is&ri+u&or o- &eeco%,u&ing ,ro/uc&s -or &'e In/ian %arke&
Re/i-- on &'e !e&. In/ian (e+si&e -ea&uring eec&ronic s'o,,ing. ne(s. c'a&.
e&c
En&e)o. securi&* an/ en&er,rise resource %anage%en& so-&(are ,ro/uc&s
Pane&asia.co%. Microan/5s su+si/iar*. one o- In/ia5s ea/ing ,or&as
Torren& !e&(orking. ,ioneer o- 3iga+i&4scae/ IP rou&ers -or in&erJin&ra ne&s
$eec&ica. ,ro)i/er o- in&erac&i)e so-&(are seec&ion
T'oug' &'e in-o&ec' co%,anies are a%ong &'e %os& -a)ore/ +* )en&ure ca,i&ais&s.
co%,anies -ro% o&'er sec&ors aso -ea&ure eDua* in &'eir ,or&-oios. T'e 'ea&'care
sec&or (i&' ,'ar%aceu&ica. %e/ica a,,iances an/ +io&ec'noog* in/us&ries aso ge&
%uc' a&&en&ion in In/ia. Bi&' &'e /eregua&ion o- &'e &eeco% sec&or.
&eeco%%unica&ions in/us&ries ike Pi, Teeco% an/ %e/ia co%,anies ike UTV an/
Tee)ision Eig'&een 'a)e 2oine/ &'e is& o- -a)ori&es. $o -ar. &'ese &ren/s 'a)e +een in
kee,ing (i&' &'e go+a course.
Ho(e)er. recen& /e)eo,%en&s 'a)e s'o(n &'a& In/ia is %a&uring in&o a %ore
/e)eo,e/ %arke&,aceK uncon)en&iona in)es&%en&s in a ga%u& o- in/us&ries 'a)e
s,rung u, a o)er &'e coun&r*. T'is incu/esC
In/us 9eague Co&'ing. a co%,an* se& u, +* eig'& -or%er e%,o*ees o- rea/*%a/e
gar%en&s gian& Ma/ura. ('o se& u, s'o, on &'eir o(n &o /e)eo, a uniDue )ir&ua
organi6a&ion &'a& (i icense go+a a,,are +ran/s an/ se &'e%. (i&'ou& o(ning an*
%anu-ac&uring uni&s. T'e* /rea% &o +ui/ a ne&(ork o- #.>AA ou&e&s in &'ree *ears
an/ &o +e a%ong &'e &o, &'ree rea/*%a/e +ran/s.
$'o,,ers $&o,. Mu%+ai5s ,re%ier /e,ar&%en&a s&ore inno)a&es (i&' re&aiing an/
/eci/es &o go go+a. T'is /ea is -acing so%e ,ro+e%s in ge&&ing regua&or*
a,,ro)as.
Air-reig'&, &'e courier4co%,an* ('ic' 'as +een gro(ing a& a ra,i/ ,ace an/ nee/e/
-un/s -or 'ea)* in)es&%en&s in &ec'noog*. ne&(orking an/ aircra-&s.

Pi66a Corner. a C'ennai +ase/ ,i66a /ei)er* co%,an* &'a& is se& &o &ake on go+a
gian&s ike Pi66a Hu& an/ Do%inos Pi66a (i&' i&s inno)a&i)e ser)icing s&ra&eg*.
Co%!orti"+ fi%a%ci%'
B'ere &'e ,ro2ec& cos& is 'ig' (Rs "AA %iion or %ore) an/ a singe -un/ is no& in a
,osi&ion &o ,ro)i/e &'e en&ire )en&ure ca,i&a reDuire/ &'en )en&ure -un/s %ig'& ac& in
consor&iu% (i&' o&'er -un/s an/ &ake a ea/ in %aking in)es&%en& /ecisions. T'is
'e,s in /i)ersi-*ing risk +u& 'o(e)er i& 'as no& +een )er* success-u in &'e In/ia
case.

STAGES OF FINANCING BY VENTURE CAPITALIST
Ven&ure ca,i&a can +e ,ro)i/e/ &o co%,anies a& &iffere%& !ta'e!. T'ese incu/eC
I. Ear,9 !ta'e Fi%a%ci%'
See& Fi%a%ci%'- $ee/ -inancing is ,ro)i/e/ -or ,ro/uc& /e)eo,%en&
& researc' an/ &o +ui/ a %anage%en& &ea% &'a& ,ri%ari* /e)eo,s &'e
+usiness ,an.
Start". Fi%a%ci%'- A-&er ini&ia ,ro/uc& /e)eo,%en& an/ researc' is
&'roug'. s&ar&u, -inancing is ,ro)i/e/ &o co%,anies &o organi6e &'eir
+usiness. +e-ore &'e co%%ercia aunc' o- &'eir ,ro/uc&s.
Fir!t Sta'e Fi%a%ci%'- Is ,ro)i/e/ &o &'ose co%,anies &'a& 'a)e
e0'aus&e/ &'eir ini&ia ca,i&a an/ reDuire -un/s &o co%%ence arge4scae
%anu-ac&uring an/ saes.
II. E:.a%!io% Fi%a%ci%'
Seco%& Sta'e Fi%a%ci%'- T'is &*,e o- -inancing is a)aia+e &o ,ro)i/e
(orking ca,i&a -or ini&ia e0,ansion o- co%,anies. &'a& are e0,eriencing
gro(&' in accoun&s recei)a+e an/ in)en&ories. an/ is on &'e ,a&' o-
,ro-i&a+ii&*.
Me44a%i%e Fi%a%ci%'- B'en saes )ou%es increase &re%en/ous*.
&'e co%,an*. &'roug' %e66anine -inancing is ,ro)i/e/ (i&' -un/s -or
-ur&'er ,an& e0,ansion. %arke&ing. (orking ca,i&a or -or /e)eo,%en&
o- an i%,ro)e/ ,ro/uc&.

1ri&'e Fi%a%ci%'- Bri/ge -inancing is ,ro)i/e/ &o co%,anies &'a& ,an
&o go ,u+ic (i&'in si0 &o &(e)e %on&'s. Bri/ge -inancing is re,ai/
-ro% un/er(ri&ing ,rocee/s.
III. Ac8"i!itio% Fi%a%ci%'
As &'e &er% /eno&es. &'is &*,e o- -un/ing is ,ro)i/e/ &o co%,anies &o
acDuire ano&'er co%,an*. T'is &*,e o- -inancing is aso kno(n as +u*ou&
-inancing. I& is nor%a* a/)isa+e &o a,,roac' %ore &'an one )en&ure
ca,i&a -ir% si%u&aneous* -or -un/ing. as &'ere is a ,ossi+ii&* o- /ea*
/ue &o &'e )arious Dueries ,u& +* &'e VC. I- &'e a,,ica&ion -or -un/ing
(ere -ina* re2ec&e/ &'en a,,roac'ing ano&'er VC a& &'a& ,oin& an/ going
&'roug' &'e sa%e ,rocess (ou/ cause /ea*. I- %ore &'an one VC
re)ie(s &'e +usiness ,an &'is /ea* can +e a)oi/e/. as &'e ,ro+a+ii&* o-
acce,&ance (i +e %uc' 'ig'er. T'e on* ,ro+e% (i&' &'e a+o)e
s&ra&eg* is &'e ,rocessing -ee reDuire/ +* a VC aong (i&' &'e +usiness
,an. I- *ou (ere a,,*ing &o %ore &'an one VC &'en &'ere (ou/ +e a
cos& escaa&ion -or ,rocessing &'e a,,ica&ion. Hence a cos& +ene-i&
ana*sis s'ou/ +e gone in&o +e-ore using &'e a+o)e s&ra&eg*.
!or%a* &'e re)ie( o- &'e +usiness ,an (ou/ &ake a %a0i%u% o- one
%on&' an/ /is+ursa -or &'e -un/s &o reac' &'e en&re,reneur i& (ou/ &ake
a %ini%u% o- < %on&'s &o a %a0i%u% o- 8 %on&'s. Once &'e ini&ia
screening an/ e)aua&ion is o)er. i& is a/)isa+e &o 'a)e a ,erson (i&'
-inance +ackgroun/ ike a -inance consu&an& &o &ake care o- /e&ais ike
nego&ia&ing &'e ,ricing an/ s&ruc&uring o- &'e /ea. O- course a&erna&i)e*
one can in)o)e a -inancia consu&an& rig'& -ro% &'e +eginning
,ar&icuar* ('en &'e en&re,reneur /oes no& 'a)e a %anage%en&
+ackgroun/.

8. Corporate Venturing (Investment process)
E)en &'oug' in)es&or an/ &'e en&ire ,rocess &'a& goes in&o &'e (ooing &'e )en&ure
ca,i&a (i&' *our ,an.
1irs&. *ou nee/ &o (ork ou& a +usiness ,an. T'e +usiness ,an is a /ocu%en& &'a&
ou&ines &'e %anage%en& &ea%. ,ro/uc&. %arke&ing ,an. ca,i&a cos&s an/ %eans o-
-inancing an/ ,ro-i&a+ii&* s&a&e%en&s.
T'e )en&ure ca,i&a in)es&%en& ,rocess 'as )ariancesJ-ea&ures &'a& are con&e0& s,eci-ic
an/ )ar* -ro% in/us&r*. &i%ing an/ region. Ho(e)er. ac&i)i&ies in a )en&ure ca,i&a
-un/ -oo( a &*,ica seDuence. T'e &*,ica s&ages in an in)es&%en& c*ce are as
+eo(C
3enera&ing a /ea -o(

Due /iigence
In)es&%en& )aua&ion
Pricing an/ s&ruc&uring &'e /ea
Vaue A//i&ion an/ %oni&oring
E0i&
I; Ge%erati%' A Dea Fo(
In genera&ing a /ea -o(. &'e )en&ure ca,i&a in)es&or crea&es a ,i,eine o- :/eas5 or
in)es&%en& o,,or&uni&ies &'a& 'e (ou/ consi/er -or in)es&ing in. T'is is ac'ie)e/
,ri%ari* &'roug' ,ugging in&o an a,,ro,ria&e ne&(ork. T'e %os& ,o,uar ne&(ork
o+)ious* is &'e ne&(ork o- )en&ure ca,i&a -un/sJin)es&ors.
I& is aso co%%on -or )en&ure ca,i&as &o /e)eo, (orking rea&ions'i,s (i&' R&D
ins&i&u&ions. aca/e%ia. e&c. ('ic' cou/ ,o&en&ia* ea/ &o +usiness o,,or&uni&ies.
Un/ers&an/a+* &'e co%,osi&ion o- &'e ne&(ork (ou/ /e,en/ on &'e in)es&%en&
-ocus o- &'e )en&ure ca,i&a -un/sJco%,an*. T'us )en&ure ca,i&a -un/s -ocussing on
ear* s&age &ec'noog* +ase/ /eas (ou/ /e)eo, a ne&(ork o- R&D cen&ers (orking
in &'ose areas. The network is crucial to the success of the venture capital investor. I&
is a%os& i%,era&i)e -or &'e )en&ure ca,i&a in)es&or &o recei)e a arge nu%+er o-
in)es&%en& ,ro,osas -ro% ('ic' 'e can seec& a -e( goo/ in)es&%en& can/i/a&es
-ina*. $uccess-u )en&ure ca,i&a in)es&ors in &'e U$A e0a%ine 'un/re/s o- +usiness
,ans in or/er &o %ake &'ree or -our in)es&%en&s in a *ear.4I& is i%,or&an& &o no&e &'e
/i--erence +e&(een &'e ,ro-ie o- &'e in)es&%en& o,,or&uni&ies &'a& a )en&ure ca,i&a
(ou/ e0a%ine an/ &'ose ,ursue/ +* a con)en&iona cre/i& orien&e/ agenc* or an
in)es&%en& ins&i&u&ion. B* /e-ini&ion. the venture capital investor focuses on
opportunities with a high degree of innovation.
T'e /ea -o( co%,osi&ion an/ &'e &ec'niDue o- genera&ing a /ea -o( can )ar* -ro%
coun&r* &o coun&r*. In In/ia. /i--eren& )en&ure ca,i&a -un/sJco%,anies 'a)e &'eir o(n
%e&'o/s )ar*ing -ro% ,ro%o&iona se%inars (i&' R&D ins&i&u&ions an/ in/us&r*
associa&ions &o /irec& a/)er&ising ca%,aigns &arge&e/ a& )arious seg%en&s. A cear

,a&&ern +e&(een &'e in)es&%en& -ocus o- a -un/ an/ &'e cons&i&u&ion o- &'e /ea
genera&ion ne&(ork is /iscerni+e e)en in &'e In/ian con&e0&.
II; D"e Dii'e%ce
Due /iigence is &'e in/us&r* 2argon -or a &'e ac&i)i&ies &'a& are associa&e/ (i&'
e)aua&ing an in)es&%en& ,ro,osa. I& incu/es carr*ing ou& re-erence c'ecks on &'e
,ro,osa rea&e/ as,ec&s suc' as %anage%en& &ea%. ,ro/uc&s. &ec'noog* an/ %arke&.
The important feature to note is that venture capital due diligence focuses on the
qualitative aspects of an investment opportunity. I& is aso no& unusua -or )en&ure
ca,i&a -un/Jco%,anies &o se& u, an :in)es&%en& screen5. T'e screen is a se& o-
Duai&a&i)e (so%e&i%es Duan&i&a&i)e cri&eria suc' as re)enue are aso use/) cri&eria &'a&
'e, )en&ure ca,i&a -un/sJco%,anies &o Duick* /eci/e on ('e&'er an in)es&%en&
o,,or&uni&* (arran&s -ur&'er /iigence. $creens can +e so%e&i%es ea+ora&e an/
rigorous an/ so%e&i%es s,eci-ic an/ +rie-.
T'e na&ure o- screen cri&eria is aso a -unc&ion o- in)es&%en& -ocus o- &'e -ir% a& &'a&
,oin&. Ven&ure ca,i&a in)es&ors re* e0&ensi)e* on re-erence c'ecks (i&' :ea/ing
ig'&s5 in &'e s,eci-ic areas o- concern +eing a//resse/ in &'e /ue /iigence.
A )en&ure ca,i&ais& &ries &o %a0i%i6e &'e u,si/e ,o&en&ia o- an* ,ro2ec&. He &ries &o
s&ruc&ure 'is in)es&%en& in suc' a %anner &'a& 'e can ge& &'e +ene-i& o- &'e u,si/e
,o&en&ia ie 'e (ou/ ike &o e0i& a& a &i%e ('en 'e can ge& %a0i%u% re&urn on 'is
in)es&%en& in &'e ,ro2ec&. Hence 'is /ue /iigence a,,raisa 'as &o kee, &'is -ac& in
%in/.
Ne( Fi%a%ci%'
$o%e&i%es. co%,anies %a* 'a)e e0,erience/ o,era&iona ,ro+e%s /uring &'eir ear*
s&ages o- gro(&' or /ue &o +a/ %anage%en&. T'ese cou/ resu& in osses or cas' -o(
/rains on &'e co%,an*. $o%e&i%es -inancing -ro% )en&ure ca,i&a %a* en/ u, +eing
use/ &o -inance &'ese osses. T'e* a)oi/ &'is &'roug' /ue /iigence an/ scru&in* o- &'e
+usiness ,an.
I%ter9Co+.a%, Tra%!actio%!
B'en in)es&%en&s are %a/e in a co%,an* &'a& is ,ar& o- a grou,. i%ter9co+.a%,
tra%!actio%! +"!t $e a%a,4e&.

III; I%ve!t+e%t )a"atio%
T'e in)es&%en& )aua&ion ,rocess is an e0ercise ai%e/ a& arrivi%' at <a% acce.ta$e
.rice= for t#e &ea. T*,ica* in coun&ries ('ere -ree ,ricing regi%es e0is&. &'e
)aua&ion ,rocess goes &'roug' &'e -oo(ing s&e,sC
E)aua&e -u&ure re)enue an/ ,ro-i&a+ii&*
1orecas& ike* -u&ure )aue o- &'e -ir% +ase/ on e0,erience/ %arke&
ca,i&ai6a&ion or e0,ec&e/ acDuisi&ion ,rocee/s /e,en/ing u,on &'e an&ici,a&e/
e0i& -ro% &'e in)es&%en&.
Targe& an o(ners'i, ,osi&ion in &'e in)es&ee -ir% so as &o ac'ie)e /esire/
a,,recia&ion on &'e ,ro,ose/ in)es&%en&. T'e a,,recia&ion /esire/ s'ou/
*ie/ a #"r&e rate o- re&urn on a Discoun&e/ Cas' 1o( +asis.
$*%+oica* &'e )aua&ion e0ercise %a* +e re,resen&e/ as -oo(sC
NP) > ?6Ca!#726Po!t7; : ?6PAT : PER7; : 0* (#ere
!PV Q !e& Presen& Vaue o- &'e cas' -o(s rea&ing &o &'e in)es&%en&
co%,rising ou&-o( +* (a* o- in)es&%en& an/ in-o(s +* (a* o-
in&eres&J/i)i/en/s (i- an*) an/ reai6a&ion on e0i&. T'e ra&e o- re&urn use/ -or
/iscoun&ing is &'e 'ur/e ra&e o- re&urn se& +* &'e )en&ure ca,i&a in)es&or.
Pos& Q Pre R Cas'
Ca!# re,resen&s &'e a%oun& o- cas' +eing +roug'& in&o &'e ,ar&icuar roun/ o-
-inancing +* &'e )en&ure ca,i&a in)es&or.
<Pre= is &'e ,re4%one* )aua&ion o- &'e -ir% es&i%a&e/ +* &'e in)es&or. B'ie
&ec'nica* i& is %easure/ +* &'e in&rinsic )aue o- &'e -ir% a& &'e &i%e o-
raising ca,i&a. I& is %ore o-&en a %a&&er o- nego&ia&ion /ri)en +* &'e o(ners'i,
o- &'e co%,an* &'a& &'e )en&ure ca,i&a in)es&or /esires an/ &'e o(ners'i, &'a&
-oun/ersJ%anage%en& &ea% is ,re,are/ &o gi)e a(a* -or &'e reDuire/ a%oun&
o- ca,i&a
PAT is &'e -orecas& Pro-i& a-&er &a0 in a *ear an/ o-&en agree/ u,on +* &'e
-oun/ers an/ &'e in)es&ors (as o,,ose/ &o +eing :arri)e/ a&5 unia&era*). I&
(ou/ aso +e &'e ne& o- ,re-erre/ /i)i/en/s. i- an*.

PER is &'e Price4Earning %u&i,e &'a& cou/ +e e0,ec&e/ o- a co%,ara+e -ir%
in &'e in/us&r*. I& is no& a(a*s ,ossi+e &o -in/ suc' a :co%,ara+e -i&5 in
)en&ure ca,i&a si&ua&ions. T'a& necessi&a&es. &'ere-ore. a signi-ican& /egree o-
2u/ge%en& on &'e ,ar& o- &'e )en&ure ca,i&a &o arri)e a& a&erna&e PER
scenarios.
:k5 is &'e ,resen& )aue in&eres& -ac&or (corres,on/ing &o a /iscoun& ra&e :r5) -or
&'e in)es&%en& 'ori6on.
I& is Dui&e a,,aren& &'a& PER &i%e PAT re,resen&s &'e )aue o- &'e -ir% a& &'a& &i%e an/
&'e co%,e&e e0,ression rea* re,resen&s &'e in)es&or5s s'are o- &'e )aue o- &'e
in)es&ee -ir%. T'e -oo(ing e0a%,e ius&ra&es &'is -ra%e(orkC
E0a%,eC Bes& Mouse&ra, 9i%i&e/ (BM9) 'as /e)eo,e/ a ,ro&o&*,e &'a& nee/s &o +e
co%%erciai6e/. BM9 nee/s cas' o- Rs#%n &o es&a+is' ,ro/uc&ion -acii&ies an/ se&
u, a %arke&ing ,rogra%. BM9 e0,ec&s &'e co%,an* (i go ,u+ic in &'e &'ir/ *ear
an/ 'a)e re)enues o- Rs?A%n an/ a PAT %argin o- "AO on saes. Assu%e. -or &'e
sake o- con)enience &'a& &'ere (ou/ +e no -ur&'er a//i&ion &o &'e eDui&* ca,i&a o- &'e
co%,an*.
Pru/en& 1un/ Managers (P1M) ,ro,ose &o ea/ a s*n/ica&e o- ike %in/e/ in)es&ors
(i&' a #"r&e rate of ret"r% of @AB (/iscoun&e/) o)er a -i)e *ear ,erio/ +ase/ on
BM95s saes an/ ,ro-i&a+ii&* e0,ec&a&ions. 1ir%s (i&' co%,ara+e saes an/
,ro-i&a+ii&* an/ risk ,ro-ies &ra/e a& "# &i%es earnings on &'e s&ock e0c'ange. T'e
-oo(ing (ou/ +e &'e seDuence o- co%,u&a&ionsC
In or/er &o ge& a ?>O re&urn ,.a. &'e ini&ia in)es&%en& o- Rs# %iion %us& *ie/ an
accu%ua&ion o- # 0 (".?>)
>
Q Rs<#.@%n on /isin)es&%en& in *ear >.
BM95s %arke& ca,i&ai6a&ion in -i)e *ears is ike* &o +e Rs (?A 0 A." 0 "#) %iion Q
Rs@=%n.
Percen&age o(ners'i, in BM9 &'a& is reDuire/ &o *ie/ &'e /esire/ accu%ua&ion (i
+e (<#.@J@=) 0 "AA Q <7O
T'ere-ore &'e ,os& %one* )aua&ion o- BM9 A& &'e &i%e o- raising ca,i&a (i +e
eDua &o Rs(#JA.<7) %iion Q Rs>." %iion ('ic' i%,ies &'a& a ,re4%one* )aua&ion
o- Rs<." %iion -or BM9

Ano&'er ,o,uar )arian& o- &'e a+o)e %e&'o/ is &'e 1irs& C'icago Me&'o/ (1CM)
/e)eo,e/ +* $&ane* 3o/er. a ea/ing ,ro-essiona )en&ure ca,i&a %anager. 1CM
assu%es &'ree ,ossi+e scenarios ; :success5. :si/e(a*s sur)i)a5 an/ :-aiure5.
Ou&co%es un/er &'ese &'ree scenarios are ,ro+a+ii&* (eig'&e/ &o arri)e a& an
e0,ec&e/ ra&e o- re&urnCIn reai&* &'e )aua&ion o- &'e -ir% is /ri)en +* a nu%+er o-
-ac&ors. T'e %ore signi-ican& a%ong &'ese areC
Overa eco%o+ic co%&itio%!C A +uo*an& econo%* ,ro/uces an o,&i%is&ic ong4 &er%
ou&ook -or ne( ,ro/uc&sJser)ices an/ &'ere-ore resu&s in %ore i+era ,re4%one*
)aua&ions.
De+a%& a%& !".., of ca.itaC ('en &'ere is a sur,us o- )en&ure ca,i&a o-
)en&ure ca,i&a c'asing a rea&i)e* i%i&e/ nu%+er o- )en&ure ca,i&a /eas.
)aua&ions go u,. T'is can resu& in un'ea&'* e)es o- o( re&urns -or )en&ure
ca,i&a in)es&ors.
S.ecific rate! of &ea!C suc' as &'e -oun/er5sJ%anage%en& &ea%5s &rack
recor/. inno)a&ionJ uniDue seing ,ro,osi&ions (U$Ps). &'e ,ro/uc&Jser)ice
si6e o- &'e ,o&en&ia %arke&. e&c a--ec&s )aua&ions in an o+)ious %anner.
T'e &e'ree of .o."arit, o- &'e in/us&r*J&ec'noog* in Dues&ion aso
in-uences &'e ,re4%one*. Co%,u&er Ai/e/ $kis $o-&(are Engineering
(CA$E) &oos an/ Ar&i-icia In&eigence (ere one &i%e /arings o- &'e )en&ure
ca,i&a co%%uni&* &'a& 'a)e no( gi)en ,ace &o +io&ec' an/ re&aiing.
T'e !ta%&i%' of t#e i%&ivi&"a ve%t"re ca.ita Be es&a+is'e/ )en&ure
ca,i&as ('o are soug'& a-&er +* en&re,reneurs -or a nu%+er o- reasons cou/
ge& a(a* (i&' &ig'&er )aua&ions &'an &'eir ess kno(n coun&er,ar&s.
In)es&or5s consi/era&ions cou/ )ar* signi-ican&*. A s&u/* +* an A%erican
)en&ure ca,i&a. :Ven&ureOne5. re)eae/ &'e -oo(ing &ren/. 9arge
cor,ora&ions ('o in)es& -or s&ra&egic a/)an&ages suc' as access &o
&ec'noogies. ,ro/uc&s or %arke&s ,a* &(ice as %uc' as a ,ro-essiona )en&ure
ca,i&a in)es&or. -or a gi)en o(ners'i, ,osi&ion in a co%,an* +u& on* 'a- as
%uc' as in)es&ors in a ,u+ic o--ering.
Vaua&ion o--ere/ on co%,ara+e /eas aroun/ &'e &i%e o- in)es&ing in &'e /ea.

Fui&e o+)ious*. )aua&ion is one o- &'e %os& cri&ica ac&i)i&ies in &'e in)es&%en&
,rocess. I& (ou/ no& +e i%,ro,er &o sa* &'a& &'e success -or a -un/ (i +e /e&er%ine/
+* i&s a+ii&* &o )aueJ,rice &'e in)es&%en&s correc&*.
$o%e&i%es &'e )aua&ion ,rocess is +roa/* +ase/ on &'u%+ rue %e&rics suc' as
%u&i,e o- re)enue. T'oug' suc' %e&'o/s (ou/ a,,ear roug' an/ rea/*. &'e* are
o-&en +ase/ on -air* (e es&a+is'e/ in/us&r* a)erages o- o,era&ing ,ro-i&a+ii&* an/
asse&sJca,i&a &urno)er ra&ios
$uc' )aua&ion as ou&ine/ a+o)e is ,ossi+e on* ('ere co%,e&e -ree/o% o- ,ricing
is a)aia+e. In &'e In/ian con&e0&. ('ere un&i recen&*. &'e ,ricing o- eDui&* issues
(as 'ea)i* regua&e/. un-or&una&e* )aua&ion (as 'ea)i* cons&raine/.
I); Str"ct"ri%' A Dea
$&ruc&uring re-ers &o ,u&&ing &oge&'er &'e -inancia as,ec&s o- &'e /ea an/ nego&ia&ing
(i&' &'e en&re,reneurs &o acce,& a )en&ure ca,i&a5s ,ro,osa an/ -ina* cosing &'e
/ea. To /o a goo/ 2o+ in s&ruc&uring. one nee/s &o +e kno(e/gea+e in areas o-
accoun&ing. cas' -o(. -inance. ega an/ &a0a&ion. Aso &'e s&ruc&ure s'ou/ &ake in&o
consi/era&ion &'e )arious co%%ercia issues (ie ('a& &'e en&re,reneur (an&s an/ ('a&
&'e )en&ure ca,i&a (ou/ reDuire &o ,ro&ec& &'e in)es&%en&). Docu%en&a&ion re-ers &o
&'e ega as,ec&s o- &'e ,a,er(ork in ,u&&ing &'e /ea &oge&'er.
T'e ins&ru%en&s &o +e use/ in s&ruc&uring /eas are %an* an/ )arie/. T'e o+2ec&i)e in
seec&ing &'e ins&ru%en& (ou/ +e &o %a0i%i6e (or o,&i%i6e) )en&ure ca,i&a5s
re&urnsJ,ro&ec&ion an/ *e& sa&is-* &'e en&re,reneur5s reDuire%en&s. T'e ins&ru%en&s
cou/ +e as -oo(sC
I%!tr"+e%t I!!"e!
9oan cean )s secure/
In&eres& +earing )s non in&eres& +earing
con)er&i+e )s one (i&' -ea&ures ((arran&s)
"s& C'arge. #n/ C'arge.

$&ock %a&uri&*
Pre-erence s'ares re/ee%a+e (con/i&ions un/er Co%,an* Ac&)
,ar&ici,a&ing
Par )aue
no%ina s'ares
Barran&s e0ercise ,rice. e0,ir* ,erio/
Co%%on s'ares !e( or )en/or s'ares
Par )aue
,ar&ia*4,ai/ s'ares
O,&ions e0ercise ,rice. e0,ir* ,erio/. ca. ,u&
In In/ia. s&raig'& eDui&* an/ con)er&i+es are ,o,uar an/ co%%on* use/. !o(a/a*s.
(arran&s are issue/ as a &oo &o +ring /o(n ,ricing.
A )aria&ion &'a& (as -irs& use/ +* PACT an/ TDICI (as Mro*a&* on saesM. Un/er &'is.
&'e co%,an* (as gi)en a con/i&iona oan. I- &'e ,ro2ec& (as success-u. &'e co%,an*
'a/ &o ,a* a O age o- saes as ro*a&* an/ i- i& -aie/ &'en &'e a%oun& (as (ri&&en o--.
In s&ruc&uring a /ea. i& is i%,or&an& &o is&en &o ('a& &'e en&re,reneur (an&s. +u& &'e
)en&ure ca,i&a co%es u, (i&' 'is o(n sou&ion. E)en -or &'e ,ro,ose/ in)es&%en&
a%oun&. &'e )en&ure ca,i&a /eci/es ('e&'er or no& &'e a%oun& reDues&e/. is
a,,ro,ria&e an/ consis&en& (i&' &'e risk e)e o- &'e in)es&%en&. T'e risks s'ou/ +e
ana*6e/. &aking in&o consi/era&ion &'e s&age a& ('ic' &'e co%,an* is in an/ o&'er
-ac&ors rea&ing &o &'e ,ro2ec&. (eg e0i& ,ro+e%s. e&c).
Pro+oter S#are!
As )en&ure ca,i&a is &o -inance gro(&'. )en&ure ca,i&a in)es&%en& s'ou/ i/ea* +e
use/ -or -inancing e0,ansion ,ro2ec&s (eg ne( ,an&. ca,i&a eDui,%en&. a//i&iona
(orking ca,i&a). On &'e o&'er 'an/. en&re,reneurs %a* (an& &o se a(a* ,ar& o- &'eir
in&eres&s in or/er &o ock4in a ,ro-i& -or &'eir (ork in +ui/ing u, &'e co%,an*. In suc'
a case. &'e s&ruc&uring %a* incu/e so%e )en/or s'ares. (i&' &'e +uk o- -inancing
going in&o +u*ing ne( s'ares &o -inance gro(&'.
Ha%&i%' Director=! A%& S#are#o&er=! Loa%!

1reDuen&*. a co%,an* 'as e0is&ing /irec&or5s an/ s'are'o/er5s oans ,rior &o in)i&ing
)en&ure ca,i&ais&s &o in)es&. As &'e %one* -ro% )en&ure ca,i&a is ,u& in&o &'e
co%,an* &o -inance gro(&'. i& is ,re-era+e &o s&ruc&ure &'e /ea &o reDuire &'ese oans
&o +e re,ai/ +ack &o &'e s'are'o/ersJ/irec&ors on* u,on IPOsJe0i&s an/ a& so%e
%u&ua* agree/ ,erio/ (eg " or # *ears a-&er in)es&%en&). T'is (i increase &'e
-inancia co%%i&%en& o- &'e en&re,reneur an/ &'e s'are'o/ers o- &'e ,ro2ec&.
A &*,ica ,ro,osa %a* incu/e a co%+ina&ion o- se)era /i--eren& ins&ru%en&s is&e/
a+o)e. Un/er nor%a circu%s&ances. en&re,reneurs (ou/ ,re-er )en&ure ca,i&as &o
in)es& in eDui&* as &'is (ou/ +e &'e o(es& risk o,&ion -or &'e co%,an*. Ho(e)er
-ro% &'e )en&ure ca,i&as ,oin& o- )ie(. &'e sa-es& ins&ru%en&. +u& (i&' &'e eas& re&urn.
(ou/ +e a secure/ oan. Hence. u&i%a&e*. ('a& *ou en/ u, (i&' (ou/ +e so%e
ins&ru%en&s in +e&(een ('ic' are so/ &o &'e en&re,reneur.
); Mo%itori%' a%& Foo( 3.
T'e roe o- &'e )en&ure ca,i&ais& /oes no& s&o, a-&er &'e in)es&%en& is %a/e in &'e
,ro2ec&. T'e skis o- &'e )en&ure ca,i&ais& are %os& reDuire/ once &'e in)es&%en& is
%a/e. T'e )en&ure ca,i&ais& gi)es ongoing a/)ice &o &'e ,ro%o&ers an/ %oni&ors &'e
,ro2ec& con&inuous*.
I& is &o +e un/ers&oo/ &'a& &'e ,ro)i/ers o- )en&ure ca,i&a are no& 2us& -inanciers or
su+scri+ers &o &'e eDui&* o- &'e ,ro2ec& &'e* -un/. T'e* -unc&ion as a /ua ca,aci&*. as
a -inancia ,ar&ner an/ s&ra&egic a/)isor.
Ven&ure ca,i&ais&s %oni&or an/ e)aua&e ,ro2ec&s reguar*. T'e* kee, a 'an/ on &'e
,use o- &'e ,ro2ec&. T'e* are ac&i)e* in)o)e/ in &'e %anage%en& o- &'e o- &'e
in)es&ee uni& an/ ,ro)i/e e0,er& +usiness counse. &o ensure i&s sur)i)a an/ gro(&'.
De)ia&ions or causes o- (orr* %a* aer& &'e% &o ,o&en&ia ,ro+e%s an/ &'e* can
sugges& re%e/ia ac&ions or %easures &o a)oi/ &'ese ,ro+e%s. As ,ro-essiona in &'is
uniDue %e&'o/ o- -inancing. &'e* %a* 'a)e inno)a&i)e sou&ions &o %a0i%i6e &'e
c'ances o- success o- &'e ,ro2ec&. A-&er a. &'e u&i%a&e ai% o- &'e )en&ure ca,i&ais& is
&'e sa%e as &'a& o- &'e ,ro%o&ers ; &'e ong &er% ,ro-i&a+ii&* an/ )ia+ii&* o- &'e
in)es&ee co%,an*.
)I; E:it

One o- &'e %os& crucia issues is &'e e0i& -ro% &'e in)es&%en&. A-&er a. &'e re&urn &o
&'e )en&ure ca,i&ais& can +e reai6e/ on* a& &'e &i%e o- e0i&. E0i& -ro% &'e in)es&%en&
)aries -ro% &'e in)es&%en& &o in)es&%en& an/ -ro% )en&ure ca,i&a &o )en&ure ca,i&a.
T'ere are se)era e0i& rou&es. +u*4+uck +* &'e ,ro%o&ers. sae &o ano&'er )en&ure
ca,i&ais& or sae a& &'e &i%e o- Ini&ia Pu+ic O--ering. &o na%e a -e(. In a cases
s,eciais&s (i (ork ou& &'e %e&'o/ o- e0i& an/ /eci/e on ('a& is %os& ,ro-i&a+e an/
sui&a+e &o +o&' &'e )en&ure ca,i&ais& an/ &'e in)es&ee uni& an/ &'e ,ro%o&ers o- &'e
,ro2ec&.
A& ,resen& %an* in)es&%en&s o- )en&ure ca,i&ais&s in In/ia re%ain on ,a,er as &'e* /o
no& 'a)e an* %eans o- e0i&. A,,ro,ria&e c'anges 'a)e &o +e %a/e &o &'e e0is&ing
s*s&e%s in or/er &'a& )en&ure ca,i&ais&s -in/ i& easier &o reai6e &'eir in)es&%en&s a-&er
'o/ing on &o &'e% -or a cer&ain ,erio/ o- &i%e. T'is -ac&or is e)en %ore cri&ica &o
s%aer an/ %i/ si6e/ co%,anies. ('ic' are una+e &o ge& is&e/ on an* s&ock
e0c'ange. as &'e* /o no& %ee& &'e %ini%u% reDuire%en&s -or suc' is&ings. $&ock
e0c'anges cou/ consi/er 'o( &'e* cou/ assis& in &'is %a&&er -or is&ing o- co%,anies
kee,ing in %in/ &'e reDuire%en& o- &'e )en&ure ca,i&a in/us&r*

9. ACCESSING VENTURE CAPITAL UNDERTAKING
Ven&ure -un/s. +o&' /o%es&ic an/ o--s'ore. 'a)e +een aroun/ in In/ia -or so%e
*ears no(. Ho(e)er i& is on* in &'e ,as& "# &o "@ %on&'s. &'e* 'a)e co%e in&o
&'e i%eig'&. T'e re2ec&ion ra&io is )er* 'ig'. a+ou& "A in "AA ge& +e*on/ ,re
e)aua&ion s&age. an/ I ge& -un/e/.
Ven&ure ca,i&a -un/s are +roa/* o- &(o kin/s ; generais&s or s,eciais&s. I& is
cri&ica -or &'e co%,an* &o access &'e rig'& &*,e o- -un/. i.e. ('o can a// )aue.
T'is +acking is in)aua+e as -ocuse/ J s,eciai6e/ -un/s o,en /oors.assis& in
-u&ure roun/s an/ 'e, in s&ra&eg*. Hence. i& is i%,or&an& &o c'oose &'e rig'&
)en&ure ca,i&ais&.
T'e s&an/ar/ ,ara%e&ers use/ +* )en&ure ca,i&ais&s are )er* si%iar &o an* in)es&%en&
/ecision. T'e on* /i--erence +eing e0i&. I- one +u*s a is&e/ securi&*. one can e0i& a& a
,rice +u& (i&' an unis&e/ securi&*. e0i& +eco%es /i--icu&. T'e ke* -ac&ors ('ic' &'e*
ook -or in
T#e Ma%a'e+e%t
Mos& +usinesses are ,eo,e /ri)en. (i&' success or -aiure /e,en/ing on &'e
,er-or%ance o- &'e &ea%. I& is i%,or&an& &o /is&inguis' &'e en&re,reneur -ro% &'e

,ro-essiona %anage%en& &ea%. T'e )aue o- &'e i/ea. &'e )ision. ,u&&ing &'e &ea%
&oge&'er. ge&&ing &'e -un/ing in ,ace are a%ongs& o&'ers. so%e ke* as,ec&s o- &'e roe
o- &'e en&re,reneur. Ven&ure ca,i&ais&s (i insis& on a ,ro-essiona &ea% co%ing in.
incu/ing a CEO &o e0ecu&e &'e i/ea. One4%an ar%ies are ,asse. In&egri&* an/
co%%i&%en& are a&&ri+u&es soug'& -or.
T'e )en&ure ca,i&ais& can ,ro)i/e &'e s&ra&egic )ision. +u& &'e &ea% e0ecu&es i&. As a
-a%ous $iicon Vae* sa*ing goes M$uccess is e0ecu&ion. s&ra&eg* is a /rea%M.
T#e I&ea
T'e i/ea an/ i&s ,o&en&ia -or co%%erciai6a&ion are cri&ica. Ven&ure -un/s ook -or a
scaa+e %o/e. a& a coun&r* or a regiona e)e. O&'er(ise &'e en&ire ga%e (ou/ +e
re/uce/ &o a %an,o(er or %ac'ine %u&i,ica&ion e0ercise. 1or e0a%,e. i& is )er*
eas* -or Hin/us&an 9e)er &o /ou+e saes o- 9iri 4 a soa, (i&'ou& incre%en&a ca,e0.
('ie 3u2ara& A%+u2a nee/s &o s,en/ a& eas& Rs=+n +e-ore i& can increase saes +*
"%n &on. Dis&inc&i)e co%,e&i&i)e a/)an&ages %us& e0is& in &'e -or% o- scae.
&ec'noog*. +ran/s. /is&ri+u&ion. e&c ('ic' (i %ake i& /i--icu& -or co%,e&i&ion &o
en&er.
)a"atio%
A in)es&%en& /ecisions are sensi&i)e &o &'is. An o/ s&ock %arke& sa*ing ME)er*
s&ock is a +u* a& a ,rice an/ )ice )ersaM. Mos& /eas -ai +ecause o- )aua&ion
e0,ec&a&ion %is%a&c'. In In/ia. ('ie cacua&ing re&urns. )en&ure ca,i&a -un/s (i
&ake in&o accoun& issues ike ru,ee /e,recia&ion. ,oi&ica ins&a+ii&*. ('ic' a//s &o &'e
risk ,re%ia. &'us su,,ressing )aua&ions. 9inke/ &o )aua&ion is &'e s&ake. ('ic' &'e
-un/ &akes. In In/ia. en&re,reneurs are s&i unco%-or&a+e (i&' &'e )en&ure ca,i&a
M&aking con&roM in a see/ s&age ,ro2ec&.

E:it
Bi&'ou& e0i&. gains canno& +e +ooke/. E0i& %a* +e in &'e -or% o- a s&ra&egic sae
orJan/ IPO. Ta0a&ion issues co%e u, a& &'e &i%e. An* -un/ (ou/ /iscuss a e0i&
o,&ions +e-ore cosing a /ea. $o%e&i%es. &'e -un/ insis&s on a +u* +ack cause &o
ensure an e0i&.
Portfoio 1aa%ci%'
Mos& )en&ure -un/s &r* an/ ac'ie)e ,or&-oio +aancing as &'e* in)es& in /i--eren&
s&ages o- &'e co%,an* i-e c*ce. 1or e0a%,e. a )en&ure ca,i&a 'as in)es&e/ in a
,or&-oio o- co%,anies ,re/o%inan&* a& see/ s&age. &'e* (i -ocus on e0,ansion
s&age ,ro2ec&s -or -u&ure in)es&%en&s &o +aance &'e in)es&%en& ,or&-oio. T'is (ou/
ena+e &'e% &o 'a)e a ,'ase/ e0i&.
In su%%ar*. )en&ure ca,i&a -un/s go &'roug' a cer&ain /ue /iigence &o -inai6e &'e
/ea. T'is incu/es e)aua&ion o- &'e %anage%en& &ea%. s&ra&eg*. e0ecu&ion an/
co%%erciai6a&ion ,ans. T'is is su,,e%en&e/ +* ega an/ accoun&ing /ue /iigence.
&*,ica* carrie/ ou& +* an e0&erna agenc*. In In/ia. &'e en&ire ,rocess &akes a+ou& 8
%on&'s. En&re,reneurs are a/)ise/ &o kee, &'a& in %in/ +e-ore ooking &o raise -un/s.
T'e ac&ua cas' in-o( %ig'& ge& /ea*e/ +ecause o- regua&or* issues. I& is in&eres&ing
&o no&e &'a& in U$A. a& &i%es anges (ri&e c'ecks across &'e &a+e.

10. ACCESSING VENTURE CAPITAL FUND
T#e 1"!i%e!! Pa%
T'e -irs& s&e, &o(ar/s accessing )en&ure ca,i&a -un/ing is &'e ,re,ara&ion o- &'e
+usiness ,an. T'e +usiness ,an s'ou/ +e a+e &o ,ro)i/e in-or%a&ion regar/ing
&'e ,ro%o&ers. a%oun& o- -un/ing nee/e/ an/ &'e &i%e ,erio/ -or ('ic' i& is
nee/e/ an/ 'o( &'is -un/ing is going &o +e ,ai/ +ack &o &'e VC. To ans(er &'e
a+o)e -un/a%en&a Dueries o- a )en&ure ca,i&a -ir% &'e +usiness ,an is &o +e
s&ruc&ure/ (i&' &'e necessar* in-or%a&ion.
1"!i%e!! Pa% Covera'e
E:ec"tive !"++ar,
A +rie- /escri,&ion o- &'e co%,an* an/ &'e &*,e o- +usiness
A su%%ar* o- &'e +usiness na&ure
A /escri,&ion o- &'e e0,erience an/ e0,er&ise o- &'e %anage%en& &ea%
A su%%ar* o- &'e ,ro/uc&Jser)ice an/ co%,e&i&ion
A su%%ar* o- -inancia 'is&or* an/ ,ro2ec&ions

1un/s reDuire/ an/ eDui&* o--ere/ &o &'e in)es&ors
A /escri,&ion o- use o- ,rocee/s
T'e &i%ing o- re&urns on in)es&%en& an/ e0i& rou&es o--ere/ &o &'e in)es&or
1"!i%e!! $ac0'ro"%&
A +rie- 'is&or* an/ na&ure o- &'e +usiness
T'e in/us&r* /e&ais o- &'e +usiness in)o)e/ in
A su%%ar* o- &'e -u&ure o- &'e +usiness
Pro&"ct 2 Service
A /escri,&ion o- &'e ,ro/uc& or ser)ice
T'e uniDueness o- &'e ,ro/uc&
T'e ,resen& s&a&us o- &'e ,ro/uc&. &'a& is a conce,&. ,ro&o&*,e or ,ro/uc&
rea/* -or %arke&

Mar0et a%a,!i!
T'e si6e o- &'e ,o&en&ia %arke& an/ %arke& nic'e +eing ,ursue/
A ,ro2ec&ion o- &'e &ren/s an/ -u&ure si6e o- &'e %arke& ,ace
T'e es&i%a&e/ %arke& s'are
A /escri,&ion o- &'e co%,e&i&ion
T'e %arke&ing c'anne
A su%%ar* o- &'e ,o&en&ia cus&o%ers
T'e ,ossi+ii&* o- rea&e/ or ne( %arke&s &'a& can +e /e)eo,e/
Sae! a%& +ar0eti%' !trate',
T'e s,eci-ic %arke&ing &ec'niDues ,anne/ &o +e use/
T'e ,ricing ,ans an/ co%,arisons (i&' ,ricing a/o,&e/ +* co%,e&i&ors
T'e ,anne/ saes -orce an/ seing s&ra&egies -or )arious accoun&s an/
%arke&s

T'e s,eci-ic a,,roac'es -or ca,i&ai6ing on eac' %arke&ing c'anne an/
co%,arison (i&' o&'er ,rac&ices (i&'in &'e in/us&r*
De&ais o- a/)er&ising an/ ,ro%o&iona ,ans
A /escri,&ion o- cus&o%er ser)ice4 ('ic' %arke&s (i +e co)ere/ +*
/irec& saes -orce. ('ic' +* /is&ri+u&ors. re,resen&a&i)e or reseers
Pro&"ctio% o.eratio%!
A /escri,&ion o- &'e ,ro/uc&ion ,rocess
De&ais o- &'e ,ro/uc&ion cos&s. incu/ing a+our -orce. eDui,%en&.
&ec'noog* in)o)e/. e0&en& o- su+con&rac& or ou&sourcing. su,,ier
Ma%a'e+e%t
An organi6a&ion c'ar& s'o(ing &'e cor,ora&e s&ruc&ure
A su%%ar* o- &'e +oar/ o- /irec&ors an/ ke* e%,o*ees an/ /e&ais o-
&'eir skis an/ e0,erience .A is& o- &'e re%unera&ion -or a e)es o-
s&a--
A ,ro,ose/ ,an o- 'o( &o re&ain ke* s&a--
Ri!0 factor!
A /escri,&ion o- &'e %a2or ,ro+e%s an/ risks rea&ing &o &'e in/us&r*. &'e
co%,an* an/ &'e ,ro/uc&s %arke&
F"%&! re8"e!te&
A /escri,&ion o- &'e &*,e o- -inancing. suc' as eDui&* on* or a
co%+ina&ion o- eDui&* an/ oan. an/ s&ock o,&ions &o &'e in)es&or

T'e ca,i&a s&ruc&ure an/ o(ners'i, +e-ore an/ a-&er &'e -inancing
Ret"r% o% i%ve!t+e%t a%& e:it
De&ais o- &'e &i%ing an/ e0,ec&e/ re&urn o- &'e in)es&%en&
A su%%ar* o- &'e e0i& s&ra&egies. suc' as ini&ia ,u+ic o--ering. sae &o a
&'ir/ ,ar&* or %anage%en& +u*ou&
3!e of .rocee&!
$,eci-* 'o( &'e ca,i&a (i +e s,en&. i.e.K ('a& a%oun& o- ca,i&a (i go &o
('ic' i&e%s.
Fi%a%cia !"++arie!
A su%%ar* o- &'e co%,an*5s -inancia 'is&or* an/ ,ro2ec&ions o- &'ree &o
-i)e *ear ,erio/
De&ais o- &'e ,rinci,a accoun&ing ,oicies o- &'e co%,an* an/ &'e %a2or
assu%,&ions %a/e a+ou& &'e ,ro2ec&ions
A..e%&ice!
Resu%es o- ke* %anage%en& an/ e%,o*ees
De&aie/ -inancia -orecas& an/ assu%,&ions
Marke& researc' re,or&
Co%,an* i&era&ure an/ +roc'ures an/ ,ic&ures o- &'e ,ro/uc&
A goo/ +usiness ,an s'o(s in)es&ors &'e Duai&* an/ /e,&' o- a co%,an*5s
cor,ora&e ea/ers'i, an/ in/ica&es %anage%en&5s a+ii&* &o reac' s&a&e/ goas.
T'ese -ac&ors ie a& &'e 'ear& o- &'e /ecision o- a )en&ure ca,i&ais& &o in)es& in
&'e co%,an*5s -u&ure.
Seectio% of )e%t"re ca.ita f"%&
A-&er &'e +usiness ,an is co%,e&e/. &'e ne0& s&e, is &o seec& &'e )en&ure ca,i&a
-un/. ('ic' is sui&a+e &o *our ,ro,osa. T'e en&re,reneur s'ou/ -irs& ascer&ain

as &o &'e in)es&%en& s&ra&eg* o- &'e VC (i&' regar/s &o &'e sec&or in ('ic' &'e
VC is in&eres&e/ as (e as &'e s&age a& ('ic' 'e c'ooses &o -un/ &'e ,ro2ec&.
Base/ on &'is in-or%a&ion &'e en&re,reneur s'ou/ s'or&is& &'e sui&a+e VCs ('o
%a&c' 'is reDuire%en& an/ &'en a,,roac' &'e%
1inancing -ro% )en&ure ca,i&a -un/s is a)aia+e a& )arious s&ages an/ /i--eren&
VCs ,ro)i/e -un/ing in so%e or a o- &'e s&ages.
ECIT RO3TES
A-&er &'e uni& 'as se&&e/ /o(n &o a ,ro-i&a+e (orking an/ &'e en&er,rise is in a
,osi&ion &o raise -un/s &'roug' con)en&iona resources ike ca,i&a %arke&. -inancia
ins&i&u&ion or co%%ercia +anks. &'e )en&ure ca,i&ais& iDui/a&e &'eir in)es&%en& an/
%ake an e0i& -ro% &'e in)es&ee co%,an*.
T'e u&i%a&e o+2ec&i)e o- a Ven&ure Ca,i&ais& is &o reai6e -ro% 'is in)es&%en& +*
seing o-- &'e sa%e a& a su+s&an&ia ca,i&a gain. In-ec& a& &'e &i%e o- %aking &'eir
in)es&%en&. &'e )en&ure ca,i&ais& ,an &'eir ,o&en&ia e0i&.
T'e in)es&ee co%,an* 'as &o ,re,are an/ %ake sui&a+e a/2us&%en&s in i&s ca,i&a
s&ruc&ure a& &'e &i%e o- reai6a&ion +* &'e )en&ure ca,i&ais&. T'e con)er&i+e ,re-erence
s'ares an/ con)er&i+e oans %us& +e con)er&e/ &o or/inar* eDui&* +e-ore &'e e0i& +*

&'e )en&ure ca,i&ais&. In case o- non4 con)er&i+e ,re-erence s'ares an/ oans +* &'e
)en&ure ca,i&ais& &'ese are &o +e re/ee%e/. A& e0i& &'e s,ecia rig'&s gran&e/ &o &'e
)en&ure ca,i&ais& cease &o o,era&e an/ )en&ure ca,i&a -ir%s nor%a* (i&'/ra( &'eir
no%inees -ro% &'e +oar/ o- &'e in)es&ee co%,an*.
T'e )en&ure ca,i&ais& -ir%s 'a)e a %o&&o :e:it at t#e +a:i+"+ .o!!i$e .rofit or at
a +i%i+"+ .o!!i$e o!!= ; in case o- a -aie/ in)es&%en&. T'e e0i& can +e )oun&ar*
or in)oun&ar*. 9iDui/a&ion or recei)ers'i, o- a -aie/ )en&ure is a case o- in)oun&ar*
e0i&. T'e )oun&ar* e0i& can 'a)e -our a&ena&i)e rou&es -or /isin)es&%en&C
Bu* +ack o- s'ares +* ,ro%o&ers or co%,an*.
$ae o- s&ock (s'ares)
$eing &o a ne( in)es&or
$&ra&egicJ Tra/e sae
13D 1ACK 2 SHARES REP3RCHASE
Bu* +ack or s'ares re,urc'ase 'as &'e -oo(ing -or%sC
T'e in)es&ee co%,an* 'as &o +u*+ack i&s o(n s'ares -or cas' -ro% i&s )en&ure
ca,i&ais& using i&s in&erna accruas
T'e ,ro%o&ers an/ &'eir grou, +u*s +ack &'e eDui&* s&ake o- )en&ure ca,i&ais&.
T'e e%,o*ees5 s&ock &rus&s are -or%e/ ('ic'. in &urn. +u* &'e s'are 'o/ing
o- &'e )en&ure ca,i&ais& in &'e co%,an*.
T'e rou&e is sui&e/ &o &'e In/ian con/i&ions +ecause i& kee,s &'e o(ners'i, an/ con&ro
o- &'e ,ro%o&ers in&ac&. In/ian en&re,reneurs are o-&en )er* &ouc'* a+ou& o(ners'i,
an/ con&ro o- &'eir +usiness. Hence in In/ia. -irs& a +u* +ack o,&ion is nor%a* gi)en
&o &'e ,ro%o&ers or &o &'e co%,an* an/ on* on &'eir re-usa &'e o&'er /isin)es&%en&s
rou&es are ooke/ in&o. T'e e0ac& ,rice is %u&ua* nego&ia&e/ +e&(een &'e
en&re,reneur an/ &'e )en&ure ca,i&ais&. T'e ,rice is /e&er%ine/ consi/ering &'e +ook
)aue o- s'ares. -u&ure earning ,o&en&ia o- &'e )en&ure. PriceJEarning ra&io o- si%iar
is&e/ co%,anies.
T'e co%,anies (ere no& ao(e/ &o +u* +ack &'eir s'ares in In/iaK 'o(e)er. (i&'
e--ec& -ro% &'e a%en/%en& in &'e co%,anies ac& ("777) &'e co%,anies can /o so no(.

SALE OF SHARES ON THE STOCK ECCHANGE
T'e )en&ure ca,i&ais& can e0i& +* ge&&ing &'e co%,an* is&e/ on &'e s&ock e0c'ange
an/ seing 'is eDui&* in &'e ,ri%ar* or secon/ar* %arke& using an* o- &'e -oo(ing
&'ree %e&'o/sC
Sae of !#are! o% !toc0 e:c#a%'e after i!ti%' !#are!.
Ven&ure ca,i&ais&s genera* in)es& a& &'e s&ar& u, s&age an/ ,ro,ose &o
/isin)es& &'eir 'o/ing a-&er &'e co%,an* +rings ou& an IPO -or raising -un/s
-or e0,ansion. T'is is&ing on s&ock e0c'ange ,ro)i/es an e0i& rou&e -ro%
in)es&%en&.
I%itia P"$ic Offer 6IPO72 Offer for !ae
B'en &'e e0is&ing en&re,reneurs o,& ou& o- +u* +ack. &'e )en&ure ca,i&ais&s
o,& -or /isin)es&ing &'eir s&ocks &'roug' ,u+ic o--ering.
Di!i%ve!t+e%t! o% OTC
An ac&i)e ca,i&a %arke& su,,or&s &'e )en&ure ca,i&a ac&i)i&ies. I& ena+es &'e
)en&ure ca,i&ais&s &o ge& a sui&a+e )aua&ion -or &'eir in)es&%en&. Besi/es &'e
reguar s&ock e0c'ange a (e /e)eo,e/ OTC %arke& ('ere /eaers can &ra/e
in s'ares. T'e OTC %arke& ena+es &'e ne( an/ s%aer co%,anies no&
eigi+e -or is&ing on a reguar s&ock e0c'ange &o +e is&e/ a& an OTC
e0c'ange an/ &'us ,ro)i/e iDui/i&* &o &'e in)es&ors.
As ,er &'e reco%%en/a&ions o- a nu%+er o- co%%i&&ees. an OTC e0c'ange
(as reDuire/ in In/ia. As a resu& :O)er T'e Coun&er E0c'ange o- In/ia
(OTCEI)5 (as se& u,.
SELLING TO AN IN)ESTORE
Man* a &i%es -or &'eir e0i& )en&ure ca,i&ais& an/ Jor &'e ,ro%o&ers oca&e a
ne( in)es&or. a cor,ora&e +o/* or ano&'er )en&ure ca,i&a -ir%. T'e ne(
in)es&ors are nor%a* &'ose ('o -in/ so%e sor& o- s*nerg* +e&(een &'e
in)es&ee co%,an* an/ &'eir e0is&ing o,era&ions suc' &'a& &'e rea&ions'i, is
use-u &o +o&' &'e co%,anies. T'is rou&e is aso use/ ('en &'e ,ro%o&ers (an&
&o ge& ri/ o- &'e )en&ure ca,i&ais&.

$o%e )en&ure ca,i&ais&s. as a ,oic* concen&ra&e &'eir ac&i)i&ies &o s&ar&u,s an/
ear* s&age in)es&%en&s. $uc' )en&ure ca,i&a -un/s e0i& ,a)ing (a* -or &'e
)en&ure ca,i&a -un/ s,eciai6ing in &'e a&er s&age in)es&%en& or +u* ou& /eas.
O-&en a gro(ing )en&ure nee/s secon/ s&age -inancing. i- &'e e0is&ing )en&ure
ca,i&ais& as a ,oic* /oes no& co%%i& -un/s -or &'e secon/ s&age i& nor%a*
oca&es ano&'er )en&ure ca,i&ais& &'a& -in/s &'e in)es&%en& a&&rac&i)e enoug' &o
en&er.
CORPORATE 2 TRADE SALE
T'e )en&ure ca,i&a -ir% an/ &'e en&re,reneur &oge&'er se &'e en&er,rise &o a
&'ir/ ,ar&* %os&* a cor,ora&e en&i&*. Herein &'e ,ro%o&ers aso e0i& -ro% &'e
)en&ure aong (i&' &'e )en&ure ca,i&ais&.T'is is cae/ a cor,ora&e. s&ra&egic or
&ra/e sae. T'e reasons -or &'is sae can +e )arie/. /i--icu&* in running &'e
+usiness ,ro-i&a+ii&* or a ,ercei)e/ co%,e&i&ion -ro% %ore es&a+is'e/ +ig
+usiness 'ouses 'a)ing 'uge resources an/ +usiness s*nerg*.
On &'e o&'er 'an/. ('ere o,era&ions o- an e0is&ing )en&ure are %o/es&. a
'ig'er e0i& )aua&ion %a* +e ac'ie)e/ in &'e %arke& ra&'er &'an +* a &ra/e sae.
as &'e %arke& in)es&ors are usua* s(a*e/ +* &'e a,,ea o- &'e sec&or in ('ic'
&'e )en&ure o,era&es ra&'er &'an &'e Duai&* o- i&s s,eci-ic +usiness o,era&ions.
Mo&aitie!
T'e %o/ai&ies o- &'e &ra/e sae /i--er -ro% case &o case /e,en/ing u,on &'e
na&ure o- o,era&ions. i&s si6e. &'e reDuire%en&s o- &'e +u*er. e&c. T'e sae can
+e in cas'. agains& &'e s'ares o- &'e acDuiring co%,an* or &'e co%+ina&ion o-
&'e &(o. T'e eDui&* o(ners ge& &'e s'ares o- &'e +u*er co%,an* in ieu o- &'e
s'ares +ein so/ +* &'e%. $uc' saes 'a)e &'e a/)an&age &'a& &'e seer /oes
no& 'a)e &o ,a* an* &a0 as &'e &ransac&ion in)o)es on* e0c'ange o- s'ares.
A& &i%es. i& is &'roug' a %anage%en& +u*4 ou& or +u*4in. ('ic' in &urn %a* +e
-inance/ ,ar&ia* +* ano&'er )en&ure ca,i&a -un/. I& is i%,or&an& &o no&e &'a&
in In/ia i- &'e in)es&ee co%,an* is a is&e/ co%,an* a& &'e &i%e o- &ra/e sae.
&'en &'e ,ro)isions o- is&ing agree%en& are a&&rac&e/ +esi/es &'e ,ro)isions o-
&'e $EBI regua&ions o- %erger an/ acDuisi&ions are aso a,,ica+e.

Ma%a'e+e%t 1",9O"t!
Ven&ure ca,i&a +u*4ou&s are +o&' a success-u in)es&%en& s&ra&eg* -or )en&ure
ca,i&a in)es&%en& as (e as an e--icien& e0i& rou&e. Bu*4ou& -inance/ +*
ano&'er )en&ure ca,i&ais& ,ri%ari* +* ,ro)i/ing /e+& is kno(n as leveraged
buy-out. Bu*4ou& (i&'ou& ,ar&ici,a&ion +* ano&'er in)es&or is cae/
%anage%en& +u*4ou&. Here in &'e curren& %anage%en& grou, ,urc'ases &'e
s&ake o- &'e )en&ure ca,i&ais&. T'e s&ock o,&ions an/ s(ea& eDui&* 'a)e %a/e
%anage%en& +u*4ou& ,ossi+e in In/ia.
Manage%en& +u*4ou&s are i%,or&an& in )en&ure ca,i&a %arke& -or )arious
reasonsC
MBO5s ,ro)i/e an o,,or&uni&* &o %anagers &o +eco%e en&re,reneurs.
Ven&ure ca,i&a in)es&%en& in +u*4ou& 'as a o(er in)es&%en& risk &'an ear*
s&age in)es&%en&.
MBO5s 'e, s%aer en&er,rises &o a/a,& &o &ec'noogica c'anges.
1",9i% is si%iar &o +u*4ou& +u& in)o)es ne( %anage%en& -ro% ou&si/e an/
i%,ro)e%en& in &'e o,era&ions o- &'e )en&ure. Inco%ing ne( %anage%en& is o-&en
un-a%iiar (i&' &'e o,era&ions o- &'e )en&ure 'ence &'e acDuiring co%,an* %a* -ee
&'a& &'e con&inui&* o- &'e e0is&ing en&re,reneur (i +e +ene-icia -or &'e +usinessK &'e
ser)ices o- &'e origina en&re,reneur are re&aine/. T'is 'e,s in i%,e%en&ing &'e
re%aining ,ar&s o- &'e origina i/eas an/ aso ,ro)i/es con&inui&* &o &'e )en&ure.
PRE9REF3ISITE FOR THE EFFICIENT ECIT MECHANISM
9ega -ra%e(ork
$%oo&' ,roce/ures -or sae J &rans-er o- en&er,rises
E--icien& s&ock %arke&
Mec'anis% -or is&ing an/ &ra/ing o- eDui&* o- s%aer co%,anies.

REGULATORY FRAMEWORK FOR VENTURE
CAPITAININDIA.
In 'is +u/ge& s,eec' -or "7@@4@7. &'e -inance %inis&er /ecare/ &'a& a sc'e%e (i +e
-or%ua&e/ un/er ('ic' Ven&ures Ca,i&a Co%,anies J 1un/s (i +e ena+e/ &o in)es&
in ne( co%,anies an/ +e eigi+e -or &'e concessiona &rea&%en& o- ca,i&a gains
a)aia+e &o non4cor,ora&e en&i&ies. $uc' co%,anies (i 'a)e &o co%,* (i&' &'e
-oo(ing gui/eines.
T'e %ini%u% si6e o- a )en&ure ca,i&a co%,an* (ou/ +e Rs."A crore. I- i& /esires &o

raise -un/ -ro% &'e ,u+ic &'e ,ro%o&er5s s'are s'a +e ess &'an "A ,er cen&.
Ven&ure ca,i&a assis&ance s'ou/ go %ain* &o en&er,rises ('ere &'e risk ee%en& is
co%,ara&i)e* 'ig' /ue &o &'e &ec'noog* in)o)e/ +eing rea&i)e* ne(. un&rie/ or
)er* cose* 'e/. an/Jor &'e en&re,reneur +eing rea&i)e* ne( an/ no& a--uen&
&'oug' o&'er(ise Duai-ie/ an/ &'e si6e +eing %o/es&. T'e assis&ances s'ou/ +e
%ain* -or eDui&* su,,or& &'oug' oan su,,or& &o su,,e%en& &'is %a* aso +e gi)en.
T'us. )en&ure ca,i&a assis&ance (i +e gi)en &o &'ose en&re,reneurs ('ic' sa&is-* &'e
-oo(ing ,ara%e&ers C
To&a in)es&%en& no& &o e0cee/ Rs."A crores.
!e( or rea&i)e* un&rie/ or )er* cose* 'e/ or +eing &aken -ro% ,io& &o co%%ercia
s&a&e or ('ic' incor,ora&e so%e signi-ican& i%,ro)e%en& o)er &'e e0is&ing ones in
In/ia.
Rea&i)e* ne(. ,ro-essiona* or &ec'nica* Duai-ie/ (i&' ina/eDua&e resources or
+anking &o -inance &'e ,ro2ec&.
A )en&ure ca,i&a is reDuire/ &o in)es& a& eas& ?> ,er cen& o- i&s -un/s in )en&ure
ca,i&a ac&i)i&*. A )en&ure ca,i&a is -ir% can raise -un/s &'roug' ,u+ic issues an/Jor
,ri)a&e ,ace%en& &o -inance VC1JVCCs. 1oreign eDui&* u,&o #> ,er cen&
%u&ia&era J in&erna&iona -inancia organi6a&ions. /e)eo,%en& -inance ins&i&u&es.
re,u&e/ %u&ua -un/s. e&c.. (ou/ +e ,er%i&&e/ ,ro)i/e &'ese are %anage%en& neu&ra
an/ are -or %e/iu% &o ong4&er% in)es&%en&s.
A )en&ure ca,i&a -un/ (i +e %anage/ +* ,ro-essiona suc' as +ankers. %anagers
an/ a/%inis&ra&ion an/ ,ersons (i&' a/eDua&e e0,erience o- in/us&r*. -inance.
accoun&s e&c.
T'e c'ange/ -inancia an/ -isca en)iron%en& /uring ,os& i+erai6a&ion ,erio/ 'o/
ou& +rig'& -u&ure o- )en&ure ca,i&a in In/ia. Bi&' -aing &a0 ra&es eDui&* +eco%es
a&&rac&i)e. an/ ,ro%o&ers (an& &o ,u& in %a0i%u% -un/s. In ne( co%,anies &o/a*.
T'e /e+&4eDui&* ra&io is genera* #C". T'e ,ro%o&er 'as &o co%,usori* con&ri+u&e #>
,ercen& o- &'e ,ro2ec&s cos&. no& 2us& &'e eDui&*. Ho(e)er +ecause in/us&r* is %ore
co%,e&i&i)e &o/a* ,ro%o&ers are (iing &o con&ri+u&e as %uc' as =A ,er cen& o- &'e
,ro2ec& cos&. Banks an/ o&'er -inance ins&i&u&ions +eing risk a)erse (i -un/ a ne(

)en&ure.
Un/er &'e circu%s&ances &'ese en&re,reneurs (i +e e-& (i&' no o,&ion +u& &o resor&
&o )en&ure ca,i&a -ir%. &o -i &'e ga, in &'eir con&ri+u&ion &o ,ro2ec& cos&. T'is is )er*
ike* &o con&inue as ,ro-essiona s&ar& &'eir con&ri+u&ion &o ,ro2ec& cos&. T'is is )er*
ike* &o con&inue as ,ro-essiona s&ar& &'eir o(n uni&s. anciarisa&ion &akes ,ace an/
arge co%,anies +egan sourcing &'eir reDuire%en& ra&'er &'an %aking e)er* &'ing
&'e%se)es.
SWOT ANALYSIS OF INDIAN VENTURE CAPITAL
$TRE!3HT$ BEAE!E$$
An e--or& ini&ia&e/ -ro% (i&'in ;
Ho%e gro(n
Increase/ a(areness o- )en&ure
ca,i&a
More ca,i&a un/er %anage%en& +*
VC1s In/us&r* crosse/ earning
1a//is'
9i%i&e/ e0i& o,&ion
Uncer&ain&ies
Poic* re,a&ria&ion.
&a0a&ion
Bureaucra&ic %e//ing

cur)e.
More e0,erience/ Ven&ure Ca,i&ais&s.
In&er%e/iaries. an/ En&re,reneurs.
3ro(ing nu%+er o- -oreign &raine/
,ro-essionas.
3o+a co%,e&i&ion gro(ing.
Mo)ing &o(ar/s in&erna&iona
s&an/ar/s
O--s'ore -un/s +ring s&rong -oreign
&ies
Ma&ure/ &o(ar/s %arke& s*s&e%
Eec&ronic &ra/ing ; &'roug' !$E &
B$E.
Vaua&ion a//i&ion
Irre)ersi+e re-or%
Regua&or* -ra%e(ork e)o)ing
an/ rigi/ o--icia a&&i&u/e
In/us&r* -rag%en&e/
an/ ,oari6e/4 Mi0e/ V.C cu&ure
$%aer -un/s (i&'
iiDui/ in)es&%en&s
Do%es&ic -un/ raising
/i--icu&
9ack o- &rans,arenc*
& cor,ora&e go)ernance
Accoun&ing s&an/ar/s
Poor ega
a/%inis&ra&ion
Di--icu& /ue /iigence
Ina/eDua&e
%anage%en& /e,&'
Vaua&ion e0,ec&a&ions
unreais&ic
Tec'nica an/ Marke&
e)aua&ion /i--icu&
!egigi+e %inori&*
,ro&ec&ion rig'&s
Ina/eDua&e cor,ora&e
a(s
OPPORT3NITIES THREATS

3ro(&' ca,i&a -or s&rong co%,anies
an/ Bu*ou&s o- (eak co%,anies /ue
&o gro(ing go+a co%,e&i&ion
1inancia res&ruc&uring 'a)e o)er
e)erage/ co%,anies &aking ,ace.
AcDuisi&ion o- Duo&e/ s%aJ %e/iu%
ca, co%,anies.
Pre %one* )aua&ions o(
Vas& ,o&en&ia e0is&s in &urn aroun/.
MBO. MBI.
C'ange in go)ern%en& ,oicies (i&'
res,ec& &o ;
". $&ruc&uring
#. Ta0a&ion
T'rea&s -ro% (i&'in E0,osi)e
e0,ansion an/ o)er E0u+erance o-
in)es&ors
3ree/ -ro )er* 'ig' re&urns.
ISSUED FACED BY VENTURE CAPITAL IN INDIA

T'e In/ian )en&ure ca,i&a in/us&r*. a& &'e ,resen&. is a& crossroa/s. 1oo(ing are &'e
%a2or issues -ace/ +* &'is in/us&r*.
". Li+itatio% o% !tr"ct"ri%' of )e%t"re Ca.ita F"%&! 6)CF!7- VC1s in
In/ia are s&ruc&ure/ in &'e -or% o- a co%,an* or &rus& -un/ an/ are reDuire/ &o
-oo( a &'ree4&ier %ec'anis%4in)es&ors. &rus&ee co%,an* an/ AMC. A ,ro,er
&a04e--icien& )e'ice in &'e -or% o- :9i%i&e/ 9ia+ii&* Par&ners'i, Ac&5. ('ic'
is ,o,uar in U$A. is no& %a/e a,,ica+e -or s&ruc&uring o- VC1s in In/ia. In
&'is -or% o- s&ruc&uring. in)es&ors5 ia+ii&* &o(ar/s &'e -un/ is i%i&e/ &o &'e
e0&en& o- 'is con&ri+u&ion in &'e -un/ an/ aso -or%ai&ies in s&ruc&uring o-
-un/ are si%,er.
#. Pro$e+ i% rai!i%' of f"%&!- In U$A ,ri%ar* sources o- -un/s are insurance
co%,anies. ,ensions -un/s. cor,ora&e +o/ies e&cK ('ie in In/ian /o%es&ic
-inancia ins&i&u&ions. %u&ia&era agencies an/ s&a&e go)ern%en& un/er&akings
are &'e %ain sources o- -un/s -or VC1s. Ao(ing Pension -un/s. Insurance
co%,anies &o in)es& in &'e VC1s (ou/ enarge &'e ,ossi+ii&* o- se&&ing u, o-
/o%es&ic VC1s. 1ur&'er. i- Mu&ua 1un/s are ao(e/ &o in)es& u,&o > ,ercen&
o- &'eir cor,us in VC1s +* $EBI. i& %a* ea/ &o increase/ a)aia+ii&* o- -un/
-or VC1s.
<. Lac0 of I%ve%tive to I%ve!tor!- Presen&*. 'ig' ne& (or&' in/i)i/uas an/
cor,ora&e are no& ,ro)i/e/ (i&' an* in)es&%en&s in VC1s. T'e ,ro+e% o-
raising -un/s -ro% &'ese sources -ur&'er ge&s aggra)a&e/ (i&' &'e /i--eren&ia
&a0 &rea&%en& a,,ica+e &o VC1s an/ %u&ua -un/s. B'ie &'e inco%e o- &'e
Mu&ua -un/s is &o&a* &a0 e0e%,&e/ un/er $ec&ion "A(#<D) o- &'e Inco%e
Ta0 Ac& inco%e o- /o%es&ic VC1s. ('ic' ,ro)i/e assis&ance &o s%a. an/
%e/iu% en&er,rise is no& &o&a* e0e%,&e/ -ro% &a0. In a+sence o- an*
in)en&i)e. i& is e0&re%e* /i--icu& -or /o%es&ic VC1s &o raise %one* -ro% &'is
in)es&or grou, &'a& 'as a goo/ ,o&en&ia.
=. A$!e%ce of <a%'e i%ve!tor!=- In $iicon Vae*. ('ic' is a nur&uring groun/
-or )en&ure -un/s -inance/ IT co%,aniesK ini&iaJ see/ s&age -inancing is
,ro)i/e/ +* &'e ange in)es&ors &i &'e co%,an* +eco%es eigi+e -or )en&ure
-un/ing . T'ere a-&er Ven&ure Ca,i&ais& &'roug' -inancia su,,or& an/ )aue4

a//e/ in,u&s ena+es &'e co%,an* &o ac'ie)e +e&&er gro(&' ra&e an/ -acii&a&e
i&s is&ng on s&ock e0c'anges. Pri)a&e eDui&* in)es&ors &*,ica* in)es& a&
e0,ansionJ a&er s&ages o- gro(&' o- &'e co%,an* (i&' arge in)es&%en&s. In
con&ras& &o &'is ,'eno%enon. In/ian in/us&r* is %arke/ +* an a+sence o- ange
in)es&ors.
>. Li+itatio%! of i%ve!t+e%t i%!tr"+e%t!- As ,er &'e sec&ion "A(#<1A) o- &'e
Inco%e Ta0 Ac&. inco%e -ro% in)es&%en&s on* in eDui&* ins&ru%en&s o-
)en&ure ca,i&a un/er&akings is eigi+e -or &a0 e0e%,&ionK ('ereas $EBI
regua&ions ao( in)es&%en&s in &'e -or% o- eDui&* s'ares or eDui&* rea&e/
securi&ies issue/ +* co%,an* ('ose s'ares are no& is&e/ on s&ock e0c'ange.
As VC1s nor%a* s&ruc&ure &'e in)es&%en&s in )en&ure ca,i&a un/er&akings
+* (a* o- eDui&* an/ con)er&i+e ins&ru%en&s suc' as O,&iona*J 1u*
Con)er&i+e De+en&ures. Re/ee%a+e Pre-erence s'ares e&c.. &'e* nee/ &a0
+reaks on &'e inco%e -ro% eDui&* inke/ ins&ru%en&s.
8. Do+e!tic )CF! vi!9G9vi! Off!#ore F"%&!- T'e /o%es&ic VC1s o,era&ions in
&'e coun&r* are go)erne/ +* &'e regua&ions as ,rescri+e/ +* $EBI an/
in)es&%en& res&ric&ions as ,ace/ +* CBDT -or a)aiing o- &'e &a0 +ene-i&s.
T'e* ,a* %a0i%u% %argina &a0 <> ,ercen& in res,ec& o- non4e0e%,& inco%e
suc' as in&eres& &'roug' De+en&ures e&c.. ('ie o--4 s'ore -un/s ('ic' are
s&ruc&ure/ in &a0 'a)ens suc' as Mauri&ius are a+e &o o)erco%e &'e in)es&%en&
res&ric&ion o- $EBI an/ aso ge& e0e%,&ion -ro% Inco%e Ta0 un/er Ta0
A)oi/ance Trea&ies. T'is /enies a e)e ,a*ing -ie/ -or &'e /o%es&ic in)es&ors
-or carr*ing ou& &'e si%iar ac&i)i&* in &'e coun&r*.
?. Li+itatio% o% i%&"!tr, !e'+e%t!- In s'ar, con&ras& &o o&'er coun&ries ('ere
&eeco%. ser)ices an/ so-&(are +ag &'e arges& s'are o- )en&ure ca,i&a
in)es&%en&s. in In/ia o&'er con)en&iona sec&ors /o%ina&e )en&ure -inance.
O,ening u, o- res&ric&ions. in recen& &i%e. on in)es&ing in &'e ser)ices sec&ors
suc' as &eeco%%unica&ion an/ rea&e/ ser)ices. ,ro2ec& consu&anc*. /esign
an/ &es&ing ser)ices. &ouris% e&c. (ou/ increase &'e /o%ain an/ gro(&'
,ossi+ii&ies o- )en&ure ca,i&a.
@. A%o+a, $et(ee% SE1I re'"atio%! a%& C1DT r"e!- CBDT &a0 rues
recogni6e in)es&%en& in -inancia* (eak co%,anies on* in case o- unis&e/
co%,anies as )en&ure in)es&%en& ('ereas $EBI regua&ions recogni6e

in)es&%en& in -inancia* (eak co%,anies. ('ic' o--ers an a&&rac&i)e
o,,or&uni&* &o VC1s. T'e sa%e %a* +e ao(e/ +* CBDT -or a)aiing o- &a0
e0e%,&ion on ca,i&a gains a& a a&er s&age. Aso $EBI regua&ions /o no&
res&ric& si6e o- an in)es&%en& in a co%,an*. Ho(e)er. as ,er Inco%e &a0 rues.
%a0i%u% in)es&%en& in a co%,an* is res&ric&e/ &o ess &'an #A ,er cen& o- &'e
raise/ cor,us o- VC1 an/ ,ai/ u, s'are ca,i&a in case o- Ven&ure Ca,i&a
Co%,an*. 1ur&'er. in)es&%en& in co%,an* is aso res&ric&e/ u,&o =A ,er cen& o-
eDui&* o- In)es&ee Co%,an*. VC1s %a* ,ace &'e in)es&%en& res&ric&ion -or
VC1s +* (a* o- %a0i%u% eDui&* s&ake in &'e co%,an*. ('ic' cou/ +e u,&o
=7 ,er cen& o- eDui&* o- &'e In)es&ee Co%,an*.
7. Li+itatio%! o% E:it Mec#a%i!+- T'e VC1s . ('ic' 'a)e in)es&e/ in )arious
)en&ures. 'a)e no& +een a+e &o e0i& -ro% &'eir in)es&%en&s /ue &o i%i&e/ e0i&
rou&es an/ aso /ue &o unsa&is-ac&or* ,er-or%ance o- OTCEI . T'e &'res'o/
i%i& ,ace/ +* )arious s&ock e0c'anges ac&s as /e&erren& -or is&ing o-
co%,anies (i&' s%aer eDui&* +ase. $EBI can consi/er o(ering o- &'res'o/
i%i& -or ,u+icJis&ing -or co%,anies +acke/ +* VC1s. Bu*4+ack o- eDui&*
s'ares +* &'e co%,an* 'as +een ,er%i&&e/ -or unis&e/ co%,anies. ('ic'
(ou/ ,ro)i/e e0i& rou&e &o in)es&%en& o- )en&ure ca,i&ais&s.
"A. Le'a Fra+e(or0- 9ack o- reDuisi&e ega -ra%e(ork resu&ing in a/eDua&e
,ena&ies in case o- su,,ression o- -ac&s +* &'e ,ro%o&ers4resu&s in o( re&urns
e)en -ro% ,er-or%ing co%,anies. T'is 'as +earing on eDui&* in)es&%en&s
,ar&icuar* in unis&e/ co%,anies.
FUTURE OF VENTURE CAPITAL IN INDIA
Ra,i/* c'anging econo%ic en)iron%en& acceera&e/ +* &'e 'ig' &ec'noog*
e0,osion. e%erging nee/s o- ne( genera&ion o- en&re,reneurs in &'e ,rocess an/
ina/eDuac* o- &'e e0is&ing )en&ure ca,i&a -un/sJsc'e%es are in/ica&i)e o- &'e
&re%en/ous sco,e -or )en&ure ca,i&a in In/ia an/ ,oin&ers &o &'e nee/ -or &'e crea&ion

o- a soun/ an/ +roa/4+ase/ )en&ure ca,i&a %o)e%en& In/ia.
T'ere are %an* en&re,reneurs in In/ia (i&' a goo/ ,ro2ec& i/ea +u& no ,re)ious
en&re,reneuria &rack recor/ &o e)erage &'eir -ir%s. 'an/e cus&o%ers an/ +ankers.
Ven&ure ca,i&a can o,en a ne( (in/o( -or suc' en&re,reneurs an/ 'e, &'e% &o
aunc' &'eir ,ro2ec&s success-u*.
Bi&' ra,i/ in&erna&iona %arc' o- &ec'noog*. /e%an/ -or ne(er &ec'noog* an/
,ro/uc&s in In/ia 'as gone u, &re%en/ous*. &'e ,ace o- /e)eo,%en& o- ne( an/
in/igenous &ec'noog* in &'e coun&r* 'as +een sack in )ie( o- &'e -ac& &'a& se)era
,rocess /e)eo,e/ in a+ora&ories are no& co%%erciai6e/ +ecause o- un(iingness o-
,eo,e &o &ake en&re,reneuria risks. i.e. risk &'eir -un/s as aso un/ergo &'e or/ea o-
%arke&ing &'e ,ro/uc&s an/ ,rocess. In suc' a si&ua&ion. )en&ure -inancing assu%es
%ore signi-icance. I& can ac& no& on* ac& as a -inancia ca&a*s& +u& aso ,ro)i/e s&rong
i%,e&us -or en&re,reneurs &o /e)eo, ,ro/uc&s in)o)ing ne(er &ec'noogies an/
co%%erciai6e &'e%. T'is (i gi)e a -ii, &o &'e /e)eo,%en& o- ne( &ec'noog* an/
(ou/ go a ong (a* in +roa/ening &'e in/us&ria +ase. crea&ion o- 2o+s. ,ro)i/e a
&'rus& &o e0,or&s an/ 'e, in &'e o)era enric'%en& o- &'e econo%*.
In a//i&ion. )en&ure ca,i&a (i +e nee/e/ urgen&* &o so)e &'e serious ,ro+e%s o-
sickness ('ic' 'as ,ague/ %an* In/ian In/us&ries. T'ere are arge nu%+er o- sick
co%,anies ('ic' o--er o,,or&uni&ies -or &urn4aroun/. ei&'er &'roug' a c'ange in &'e
,ro/uc& ine or use o- e0is&ing -acii&ies in a /i--eren& (a* or in an* o&'er %anner.
B'a& is nee/e/ is &'e su,,* o- eDui&* &o ,ersons ('o 'a)e -er&ie i/eas. necessar*
e0,er&ise an/ co%,e&ence an/ ('o can +ring a+ou& i%,ro)e%en&s in so%e uni&s.
Ano&'er &*,e o- si&ua&ion co%%on* -oun/ in our coun&r* is ('ere &'e oca grou, an/
a %u&i4na&iona co%,an* %a* +e rea/* &o en&er in&o a 2oin& )en&ure +u& &'e -or%er
/oes no& 'a)e su--icien& -un/s &o ,u& u, i&s s'are o- &'e eDui&* an/ &'e a&&er is
res&ric&e/ &o a cer&ain ,ercen&age. 1or &'e ,ersona reasons or +ecause o- co%,e&i&ion.
&'e oca grou, %a* no& +e keen &o in)i&e an* one in i&s in/us&r* or an* %a2or ,ri)a&e
in)es&or &o con&ri+u&e eDui&* an/ %a* ,re-er a )en&ure ca,i&a co%,an*. as a ess
in&i%a&e* in)o)e/ an/ &e%,orar* s'are'o/er. Ven&ure ca,i&ais&s can aso en/ &'eir
e0,er&ise an/ s&an/ing &o &'e en&re,reneurs.

A arge nu%+er o- s%aer uni&s ser)ing as anciaries &o %a2or in/us&ria grou,s nee/
ca,i&a. e0,er&ise an/ con&ac&s o- )en&ure ca,i&ais& -or u,gra/a&ion o- &'eir &ec'noog*
in &une (i&' &'e /e%an/s -ro% &'e %a2or in/us&ria uni&s. I& is genera* -oun/ &'a&
s%a su,,iers are -ace/ (i&' a c'oice o- going ou& o- +usiness. osing &'eir %a2or
cien&. +eing acDuire/ +* &'e cien& or o+&aining a& an e0or+i&an& ra&e -ro% a source
ou&si/e &'e in/us&r*. Ven&ure ca,i&ais& can 'e, &'ese uni&s an/ sa)e &'e% -ro% &'e
crisis.
In ser)ice sec&or. ('ic' 'as I%%ense gro(&' ,ros,ec&s in In/ia. )en&ure ca,i&ais&s
can ,a* signi-ican& roe in &a,,ing i&s ,o&en&iai&* &o &'e -u. 1or ins&ance. )en&ure
ca,i&ais&s can ,ro)i/e ca,i&a an/ e0,er&ise &o organi6a&ions seing an&iDue.
re%o/ee/ 2e(eer*. +ui/ers o- resor& 'o&es. +a+* an/ 'ea&' care %arke&. re&ire%en&
'o%es an/ s%a 'ouses.
In )ie( o- &'e a+o)e. i& (i +e /esira+e &o es&a+is' a se,ara&e na&iona )en&ure
ca,i&a -un/ &o( ('ic' &'e -inancia ins&i&u&ions an/ +anks can con&ri+u&e. In sco,e
an/ con&en& suc' a na&iona )en&ure ca,i&a -un/ s'ou/ co)erC
(i) a &'e as,ec&s o- )en&ure ca,i&a -inancing in a &'e &'ree s&ages o- conce,&ua.
/e)eo,%en&a an e0,oi&a&ion ,'ases in &'e ,rocess o- co%%erciai6a&ion o- &'e
&ec'noogica inno)a&ion an/
(ii) as %a* o- &'e risk s&ages4/e)eo,%en&. %anu-ac&uring. %arke&ing. %anage%en&
an/ gro(&' as ,ossi+e un/er In/ian Con/i&ions. T'e -un/ s'ou/ o--er a
co%,re'ensi)e ,ackage o- &ec'nica. co%%ercia. %anageria an/ -inancia assis&ance
an/ ser)ices &o +ui/ing en&re,reneurs an/ +e a ,osi&ion &o o--er inno)a&i)e sou&ions
&o &'e )arie/ ,ro+e%s -ace/ +* &'e% in +usiness ,ro%o&ion. &rans-er an/ inno)a&ion.
To &'is en/. &'e ,ro,ose/ na&iona )en&ure ca,i&a -un/ s'ou/ 'a)e a& i&s co%%an/
%u&i4/isci,inar* &ec'nica e0,er&ise. T'e %a2or &'rus& o- &'is -un/ s'ou/ +e on &'e
,ro%o&ion o- )ia+e ne( +usiness in In/ia &o &ake a/)an&age o- &'e on co%ing 'ig'
&ec'noog* re)ou&ion an/ se&&ing u, o- 'ig' gro(&' in/us&ries so as &o &ake &'e In/ian
econo%* &o co%%an/ing 'eig'&s.

QUESTIONAIRE

". B'a& are &'e cri&eria5s use/ +* &'e 3an/'i & associa&esS
3an/'i & associa&es ooks a& a )en&ure5s co%%ercia ,o&en&ia.
/e)eo,%en& i%,ac&. socia +ene-i&s. en)iron%en&a i%,ac&. an/ i&s
i%,ression o- &'e en&re,reneur(s) ,ro%o&ing &'e co%,an*
#. Ho( is &'e -inancing /oneS
Aavishkaar's primary financing instrument is common equity. Where appropriate,
it will consider limited debt financing, in ventures where equity investment is or
has been made.
Our co%,an*:s -inancing ins&ru%en& is /one &'roug' con)er&i+e
,re-erence s'ares. i& aso consi/er eDui&* s'ares.
<. B'a& are &'e ac&i)i&ies /one -ro% &'e &i%e o- in)es&%en& &o &'e
&i%e o- saeS
Aavishkaars will work in partnership with your management in a hands-on
and active manner to ensure that the business achieves its goals. his will
occur formally through Aavishkaar's role on the !oard as well as informally
through introductions to investors and strategic partnerships, technology
advice, public relations, strategic planning, and follow-on financing, among
others

T'e ac&i)i&ies con/uc&e/ +* our co%,an* -ro% &'e &i%e o-
in)es&%en& are &o ook a-&er &'e %anage%en& o- &'e co%,an* an/
a/)ise &'e% regar/ing an* /ea or o&'er a--airs o- &'e co%,an*.
=. B'ic' is &'e +es& o,&ion -or E0i&S
IPO Cou/ +e &'e +es& O,&ion -or e0i& as +o&' +u*4+ack an/
IPO 'a)e a eng&'* ,roce/ure +u& IPO is %ore ,re-era+e.
>. Accor/ing &o *ou. ('a& (ou/ +e &'e -u&ure o- )en&ure ca,i&a in
In/iaS
T'e -u&ure o- )en&ure ca,i&a in In/ia (ou/ +e )er* +rig'&.
T'ere are e0,ec&a&ions o- 'ig' gro(&' o- )en&ure ca,i&a in our
coun&r*.

1irs& sc'e/ue4-ro% SURVEY REPORT
1)Are *ou a(are a+ou& )en&ure ca,i&aS
2)B'ic' co%,an* o- )en&ure ca,i&a (ou/ *ou ,re-erS

3)Ha)e *ou e)er in)es&e/ in an* )en&ure ca,i&a co%,an*S
4)Accor/ing &o *ou. )en&ure ca,i&a is ,ro-i&a+e or no&S

5)Do *ou &'ink &'e ,roce/ure o- )en&ure ca,i&a isS
6)Do *ou &'ink a-&er &'e es&a+is'%en& o- )en&ure ca,i&a in In/ia.
&'ere is gro(&' in en&re,reneurs'i,S

ANNEXURE
1ro% A
$ecuri&ies an/ e0c'ange +oar/ o- In/ia
(Ven&ure ca,i&a -un/s) regua&ion ."778
(see regua&ion)
A,,ica&ion -or gran& o- cer&i-ica&e o- regis&ra&ion as )en&ure ca,i&a -un/
$ecuri&ies an/ e0c'ange +oar/ o- In/ia
Mi&&a cour&. (B) (ing .-irs& -oor !ari%an ,oin&. Mu%+ai=AAA#"
In/ia
Ins&ruc&ionC
T'is -or% is %ean& -or use +* &'e co%,an* or &rus& ('ereina-&er re-erre/ &o as &'e
a,,ican& ) -or a,,ica&ion -or gran& o- cer&i-ica&e o- Regis&ra&ion as )en&ure ca,i&a
-un/.
T'e a,,ica&ion s'ou/ co%,e&e 'is -or% an/ su+%i& i& aong (i&' a su,,or&ing
/ocu%en&s &o +oar/ a& i&s 'ea/ o--ice a& Mu%+ai.
T'is a,,ica&ion s'a +e consi/ere/ +* +oar/ ,ro)i/e/ i& is co%,e&e in a res,ec&.
A ans(er %us& +e egi+e.
In-or%a&ion ('ic' nee/s &o +e su,,ie/ in %ore /e&ai %a* gi)e on se,ara&e s'ee&s
('ic' s'ou/ +e a&&rac&e/ &o &'e a,,ica&ion -or%.
T'e a,,ica&ion %us& +e signe/ an/ a signa&ures %us& +e origina.

T'e a,,ica&ion %us& +e acco%,anie/ +* an a,,ica&ion -ee as s,eci-ie/ &'e secon/
$c'e/ue &o &'ese regua&ion.
". !a%e. a//ress o- &'e regis&ere/ o--ice. a//ress -or corres,on/ing &ee,'one
nu%+er(s). &ee0 nu%+er(s). -a0 nu%+er(s). o- a,,ica&ion an/ &'e na%e o- &'e con&ac&
,erson.
#. Pease in/ica&e &o ('ic' o- &'e -oo(ing ca&egories 'e a,,ica&ion +eongs.
T A co%,an* es&a+is'e/ un/er &'e co%,anies ac&. "7>8 (" o- "7>8)
T A &rus& se& u, un/er &'e In/ian &rus& ac&. "@@# (# o- "@@#)
<. Da&e an/ ,ace o- incor,ora&ion or es&a+is'%en& an/ /a&e o- co%%ence%en& i-
+usiness (encose/ cer&i-ica&e o- incor,ora&ion. %e%oran/u% an/ ar&ices o- associa&e
or &rus& /ee/ in &er%s o- ('ic' incor,ora&e/ or es&a+is'e/).
=. a. De&ai o- %e%+er o- &'e +oar/ o- &rus&ee or /irec&ors o- &'e &rus&ee co%,an*. as
&'e case %a* +e. in case &'e a,,ica&ion 'as +een se& u, as a &rus&
+. De&ais o- %e%+er o- +ar/ o- /irec&ors o- )en&ure ca,i&a -un/ I case &'e a,,ica&ion
'as +een sen& u, as acco%,an*.
>. Pease s&a&e ('e&'er &'e a,,ican&. 'is ,ar&ner. /irec&or or ,rinci,a o--icer is
in)o)e/ in an* i&iga&ion connec&e/ (i&' &'e securi&ies %arke& ('ic' 'as an a/)erse
+earing on +usiness o- a,,ican&K or 'as a& an* &i%e 'as +een con)ic&e/ -or an* %ora
&ur,i&u/e or a& an* &i%e 'as +een -oun/ gui&* o- an* econo%ic o--ence. In case &'e
a,,ica&ion is &rus&. &'e a+o)e in-or%a&ion s'ou/ +e ,ro)i/e/ -or &'e %e%+er o- &'e
+oar/ o- &rus&ee or o- &'e a+o)e %en&ione/ ,erson connec&e/ (i&' &'e Trus&ee
co%,an* .i- *es. &'e /e&ais &'ereo-.
8. Pease aso s&a&e ('e&'er &'ere 'as +een an* ins&ance o- )ioa&ion or non4a/'erence
&o &'e securi&ies a(s. co/e o- e&'icsJcon/uc&. co/e o- +usiness rues. -or ('ic' &'e
a,,ican&. or i&s ,aren& or 'o/ing co%,an* or a--iia&e %a* 'a)e +een su+2ec& &o
econo%ic. or cri%ina. ia+ii&*. or sus,en/e/
?. De&ais o- asse& %anage%en& co%,an*. i- an*. (encose co,* o- agree%en& (i&' &'e
asse& %anage%en& co%,an*).
@. Decara&ion s&a&e%en&(&o +e gi)en as +eo().
Be 'ere+* agree an/ /ecare &'a& &'e in-or%a&ion su,,ie/ in &'e a,,ica&ion.

incu/ing &'e a&&ac'%en& s'ee&s. is co%,e&e an/ &rue.
A!D (e -ur&'er agree &'a&. (e s'a no&i-* &'e $ecuri&ies an/ E0c'ange Boar/ o-
In/ia i%%e/ia&e* an* c'ange in &'e in-or%a&ion ,ro)i/e/ in &'e a,,ica&ion.
Be -ur&'er agree &'a&. (e s'a no&i-* &'e securi&ies an/ E0c'ange +oar/ o- In/ia Ac&.
"77#. an/ &'e securi&ies an/ E0c'ange +oar/ o- In/ia ()en&ure ca,i&a -un/)
Regua&ion. "778. an/ 3o)ern%en& o- In/ia gui/einesJ ins&ruc&ion as %a* +e
announce/ +* &'e securi&ies an/ E0c'ange +oar/ o- In/ia -ro% &i%e &o &i%e.
Be -ur&'er agree &'a& as a con/i&ion o- regis&ra&ion. (e s'a a+i/e +* suc' o,era&iona
ins&ruc&ionsJ /irec&i)es as %a* +e issue/ +* &'e securi&ies an/ E0c'ange +oar/ o-
In/ia -ro% &i%e &o &i%e.
1or an/ on +e'a- o-UUUUUUUUUUU (!a%e o- &'e a,,ican&)
Au&'ori6e/ signa&or* UUUUUUUUUU...(!a%e) ($igna&ure)
PaceC

"778
Cer&i-ica&e o- regis&ra&ion as )en&ure ca,i&a -un/
I. In e0ercise o- &'e ,o(ers con-erre/ +* su+4sec&ion (") o- sec&ion "# o- &'e securi&ies
An/ e0c'ange Boar/ o- In/ia Ac&. "77#. ("> o- "77# ) rea/ (i&' &'e regua&ion %a/e
T'ere un/er. &'e +oar/ 'ere+* gran&s a cer&i-ica&e o- regis&ra&ion &o
4444444444444444444444444
444444444444444444444444444444444444444444444444as a )en&ure ca,i&a -un/ su+2ec& &o &'e
con/i&ions s,eci-ie/ in &'e Ac& an/ in &'e regua&ions %a/e &'ere un/er.
II. T'e Regis&ra&ion !u%+er o- &'e )en&ure ca,i&a -un/ is I!JVCJ J
Da&eC
PaceC MUMBAI
B* or/er
$/J4
1or an/ on +e'a- o-
$ecuri&ies an/ E0c'ange Boar/

CONCLUSION
It is essential that Venture Capital Funding agencies play a major
role in providing capital to industrial enterprises especially the
SMEs if the Indian economy has to grow rapidly. There is a strong
case for Venture Capital Funding for SMEs !udging from the success
in the IT" #iotechnology" $etail and %harma sectors the VCF
agencies can e&plore possi'ilities of funding SMEs in manufacturing
and other sectors also
T'e go)ern%en& 'as +roug'& in sui&a+e regua&ions &'roug' &'e RBI. $EBI an/ o&'er
ins&i&u&ions &o -acii&a&e Ven&ure Ca,i&a 1un/ing. VC1 agencies s'ou/ aggressi)e*
,ro%o&e -un/ing an/ nur&ure ,ro%ising $ME5s
T'e P$B5s an/ 1I5s in In/ia ('o (ere reuc&an& &o -ora* in&o )en&ure ca,i&a -un/ing
'a)e no( reaise/ i&s ,o&en&ia an/ are (iing &o ,ar&ner In/ian VC1 agencies +*
,ro)i/ing -un/s.
VCF agencies should not only engage in funding 'ut also provide
managerial guidance and support to SME s to compete in the
present glo'al environment and ena'le them to achieve turnovers
and pro(ts" which will ultimately result in the enterprise going pu'lic
in the shortest period
Venture Capital supported enterprises can convert into )uality initial
pu'lic o*erings +I%,s-" resulting in capital from pension funds and
investors .owing into VC funds It will also provide protection to
investors" especially small investors Further it will result in
su'stantial and sustaina'le employment generation 'y creating
related ancillary units and support services

1ina*. researc' a+ora&ories un/er C$IR. /e-ense a+ora&ories. uni)ersi&ies an/
&ec'nica ins&i&u&es are carr*ing ou& a o& o- scien&i-ic an/ &ec'nica researc'. A
sui&a+e )en&ure ca,i&a en)iron%en& can 'e, in i/en&i-*ing an/ con)er&ing so%e o-
&'is researc' in&o co%%ercia ,ro/uc&ion in &'e $%a an/ Me/iu% $cae sec&ors.
T'us. i& is a,,aren& &'a& )en&ure ca,i&a -un/ing s'ou/ +e encourage/ &o -acii&a&e
/e)eo,%en& in s%a an/ %e/iu% en&er,rise ('ic' in &urn ea/s &o o)era gro(&' in
&'e In/ian econo%*.
BIBLIOGRAPHY
Refere%ce 1oo0! / Ma'a4i%e!
Venture apital, The Indian E!perience by I " T Tandey
Issues #acing Indian Venture apital Industry +* H Ra2urkar
Business Bor/
In/ia To/a*
Ne(!.a.er!
T'e Ti%es o- In/ia
Econo%ics Ti%es
In/ian E0,ress
1inancia E0,ress
We$!ite!
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