eo nplecing eis chapser you will be able to: . Understand d : provide @ picture of venture capital investment process. "race the evolution and progress of venture capital. «present the stages + Understand che technical terms associated with the concept. hhe venture capital concept and its features of development of Indian venture capital industry. duction T modern concept of venture capital originated in the US in 1946 and has grown phenomenally over the years. Venture capital was responsible for the success of worldwide giants such as ‘Apple, Ie, Microsoft, Google, Sun Microsystems, Digital and Federal Express.\in the US, the venture capital firms sureured a large number of start-ups and contributed significanely’to the growth of industries like soft sare It is reported that there are approximately 741 veneure capital firms in the US and they manage approximately $257 billion. In India too there are success Rewavable Energy Systems, Mastek, Biocon, Naukri.com, eC. veoture capital industry. Even though there WT instances of participatio companies by the development finance institutions 19 the early 1970s, yet the the mid-1980s. ture capital industry took place in The concept of venture capital has certain characteristics chat distinguish it from the conven- ‘oa forms of financing through loans oF equity participation. Te has @ favourable impact on €MEte- preneurial development in an economy: Today, the venture capital industry has grown to such & level tha it has a sign fica presence in the financial sec00° a apy oui. Ines cHAPEES WE CST the concept of venture capital, venture capital investment process and provide an overview of the Venture capital i A . re capital industry in India. seories of venture capital-assisted firms such ag Praj Industries hich stand testimony to the groweh of che 1a in the equity of several formal start of che ven jon and Characteristics 82 Venture Capital: Defin Yea ture ita meang re is yet another way of financing, st . + ren bk fnance, The projet MAY be innov institutions, being basically risk-averse rarted projects. Venture capital ks and the y,Tradicional come forward ro finance such especially for newly 8 ye but they are Fisk investors, may MO!132 ¢ ee OPES Bir capital company and the beneficiary is the investee conree at poet, Vener cpl Generally, there are different stages of financing eee eee eg begins at the early stages and extends to oe en oe lee a acace gee i any, the ve capital company hol 7 Rig ar pe pote om such investments The exit strategies die fom fg = dl ts. ‘ F . Pry em peeing and exit from the venture capital investments. The process requires the application of standard mj, ation models like the NPV model and First Chicago model, etc. to determine the value of investren ‘Venture capital industry in the US and Europe has a long history and the contribution of vertu capital firms to the development of IT industry and biotechnology firms is a significant one. All technology cycles have been associated with the development of the venture capital industry. Indian venture capital industry started in a modest way by the assistance given by the develo ment finance institutions in the form of seed capital The formation of TDICI was an importa milestone in the growth of the industry. Participation of foreign venture capital funds in the venruz capital industry was also witnessed. SEBI has issued separate regulations for the domestic venrux capital firms and foreign venture capital investors. The flow of funds from the foreign funds ius grown steadily over the years. Key Terms ee Venture capitalist Deal structuring Conditional loan Risk capital Private equity Income notes Mezzanine financing Exit strategy FVCI Start-ups Value addition Venture capital association Deal flow Due diligence \ Explain dhe erm Fo eacibital and distinguish ie with private equity and angel investing a ept o a capital and discuss the salient characteristics of venture capital ure 4, Discuss the different stages of oe ree es 5. Give a brief account of vent ay 6. Critically assess the growth i 7. Explain the role played by § re capital industry in some nd problems of vencure ea BL in venture capical indy of the developed markets. pital financing in India. istry, Further Reading — Chary, T. S. (2005) Venture C, -apital: Concept i Gujarat Vencure Finance Limited: hapten tiation, Macmillan India Led, New Delhi gefl.com