“A STUDY ON VENTURE CAPITAL ”

A Project Report Submitted to

University of Mumbai for partial completion of the degree of
Bachelor in Accounting and Finance
Under The Faculty of Commerce

By
MR. VIREN KRUSHNA HANDE

Under the Guidance of

PROF.
SOHRAB SHAIKH

COLLEGE NAME AND ADDRESS

SIDDHARTH COLLEGE OF ARTS, COMMERCE

AND SCIENCE (BUDDHA BHAVAN), FORT

MARCH, 2022
 DECLARATION

I undersigned MR. VIREN KRUSHNA HANDE hereby, declared that

the work embodied in this project work titled – “ A STUDY ON
VENTURE CAPITAL ” forms my own contribution to the research work
carried out under the guidance of PROF. SOHARAB SHAIKH is the
result of my own research work and has not been previously submitted to
any other university for any other degree / diploma to this or any other
university.

Whenever reference has been made to previous works of others, it has

been clearly indicated as such and included in the bibliography.

I, here by further declare that all information to this document has been
obtained and presented in accordance with rules and ethical conduct.

__________________
MR. VIREN KRUSHNA HANDE

__________________
Certified by:
PROF. SOHRAB SHAIKH
 ACKNOWLEDGEMENT

To list who all have helped me is difficult because they are so numerous and depth is
so enormous.

I would like to acknowledge the following as being idealistic channels and fresh
dimensions in the completion of this project.

I take this opportunity to thank the University of Mumbai for giving me chance to
do this project.

I would like to thank my Principal, DR. ASHOK SUNATKARI for providing the
necessary facilities required for completion of this project.

I take this opportunity to thank our Coordinator DR.SURAJ PURANDARE, for his
moral support and guidance.

I would also like to express my sincere gratitude towards my project guide Prof.
SHORAB SHAIKH whose guidance and care made the project successful.

I would like to thank my College library, for having provided various reference books
and magazines related to my project.

Lastly, I would like to thank each and every person who directly or indirectly helped
me in the completion of the project especially my parents and peers who supported
me throughout my project
 SIDDHARTH COLLEGE OF ARTS, SCIENCE & COMMERCE
Buddha Bhavan, Purshotam Thakurdas Marg Fort, Mumbai-400001

CERTIFICATE

This is to certify that Ms. / Mr. VIREN KRUSHNA HANDE has worked and duly completed

her / his Project work for the degree of bachelor of management studied under the faculty of

commerce in the subject of finance and her/ his project is entitled, “A STUDY ON

VENTURE CAPITAL” under my supervision.

I further certify that the entire work has been done by learner under my guidance and that no

part of it has been submitted previously for any Degree or Diploma of any University.

It is her/ his own work and facts reported by her / his personal findings and investigations.

GUIDE TEACHER EXTERNAL TEACHER

CO-ORDINATOR PRINCIPAL SIGN

 INDEX
SR. PAGE
NO. CONTENTS NO.

1. INTRODUCTION
A) OBEJECTIVE OF THE STUDY 2
B) STATEMENT OF PROBLEMS 3
C) LIMITATION OF PROJECT 4
D) SCOPE OF THE PROJECT 4
E) RESEARCH DESIGN AND INSTRUMENTS 4
2. CONCEPTUAL FRAMEWORK
A) CONCEPT OF VENTURE CAPITAL 7
B) FEATURES OF VENTURE CAPITAL 8
C) VENTURE CAPITAL SPECTRUM/STAGES 10
D) VENTURE CAPITAL INVESTMENT PROCESS 20
E) METHODS OF VENTURE FINANCING 25
F) DIFFERENCE BETWEEN VENTURE CAPITAL AND 26
OTHER FUNDS (PRIVATE EQUITY)
G) VENTURE CAPITAL & ALTERNATIVE FINANCING 28
COMPARISON
H) PLAYERS VENTURE CAPITAL INDUSTRY 33
3. VENTURE CAPITAL IN INDIA
A) EVOLUTION OF VENTURE CAPITAL INDUSTRY IN 38
INDIA
B) OBJECTIVE AND VISION FOR VENTURE CAPITAL 40
IN INDIA
C) GROWTH OF VENTURE CAPITAL IN INDIA 41
D) PROBLEMS OF VENTURE CAPITAL FINANCING 43
IN INDIA
E) OPPORTUNITIES AND THREATS 44
3. RECOMMENDATIONS 50
4. CONCLUSION 53
5. BIBLIOGRAPHY & WEBLIOGRAPHY 54
 EXECUTIVE SUMMARY

Venture capital is a growing business of recent origin in the area of industrial financing in
India. The various financial institution set-ups in India to promote industries have done
commendable work. However, these institutions do not come up to benefit risky ventures
when they are undertaken by new or relatively unknown entrepreneurs. They contend to give
debt finance, mostly in the form of term loans to the promoters and their functioning has been
more akin to that of commercial banks.

Starting and growing a business always require capital. There are a number of alternative
methods to fund growth. These include the owner or proprietor’s own capital, arranging debt
finance, or seeking an equity partner, as is the case with private equity and venture capital.

Venture capital is a means of equity financing for rapidly-growing private companies. Finance
may be required for the start-up, development/expansion or purchase of a company. Venture
Capital firms invest funds on a professional basis, often focusing on a limited sector of
specialization (eg. IT, Infrastructure, Health/Life Sciences, Clean Technology, etc.).

Indian Venture capital and Private Equity Association(IVCA) is a member based national
organization that represents venture capital and private equity firms, promotes the industry
within India and throughout the world and encourages investment in high growth companies.

IVCA member comprise venture capital firms, institutional investors, banks, incubators,
angel groups, corporate advisors, accountants, lawyers, government bodies, academic
institutions and other service providers to the venture capital and private equity industry.

Members represent most of the active venture capital providers and private equity firms in
India. These firms provide capital for seed ventures, early stage companies, later stage
expansion, and growth finance for management buyouts/buy-ins of established companies .

Venture capitalists have been catalytic in bringing forth technological innovation in USA. A
similar act can also be performed in India. As venture capital has good scope in India for three
reasons:
First: The abundance of talent is available in the country. The low cost high quality Indian
workforce that has helped the computer users worldwide in Y2K project is demonstrated
asset.

Second: A good number of successful Indian entrepreneurs in Silicon Valley should have a
demonstration effect for venture capitalists to invest in Indian talent at home.

Third: The opening up of Indian economy and its integration with the world economy is
providing a wide variety of niche market for Indian entrepreneurs to grow and prove
themselves.
INTRODUCTION

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1.1 OBJECTIVES OF THE STUDY

 Understand the concept of venture capital:-

Venture Capital funding is different
from traditional sources of financing. Venture capitalists finance innovation and ideas which
have potential for high growth but with inherent uncertainties. This makes it a high-risk, high
return investment.

 Study venture capital industry in India:-

Scientific, technology and knowledge based
ideas properly supported by venture capital can be propelled into a powerful engine of economic
growth and wealth creation in a sustainable manner. In various developed and developing
economies venture capital has played a significant developmental role.

 Study venture capital industry in global scenario:-

Venture capital has played a very
important role in U.K., Australia and Hong Kong also in development of technology growth
of exports and employment.

 Study the evaluation& needofventurecapital industry in India:-

India is still at the
level of ‘knowledge’. Given the limited infrastructure, low foreign investment and other
transitional problems, it certainly needs policy support to move to the next stage. This is
very crucial for sustainable growth and for maintaining India’s competitive edge

 Understand the legal framework formulated by SEBI to encourage venture

capital activity in Indian economy :-
Promoting sound public policy on issues related to
tax, regulation and securities through representation to the Securities and Exchange Board of India
(SEBI), Ministry of Finance (MoF), Reserve Bank of India (RBI) and other Government
departments

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 Find out opportunities that encourage & threats those hinder venture capital
industry in India.

 To know the impact of political & economical factors on venture capital

investment

1.2 STATEMENT OF PROBLEMS

Venture capital is in its nascent stages in India. The emerging scenario of global competitiveness
has put an immense pressure on the industrial sector to improve the quality level with
minimization of cost of products by making use of latest technological skills. The financing firms
expect a sound, experienced, mature and capable management team of the company being
financed. Since the innovative project involves a higher risk, there is an expectation of higher
returns from the project. The payback period is also generally high (5 - 7 years).

The various problems/ queries can be outlined as follows:

 Problems regarding the infrastructure details of production like plant location,

accessibility, relationship with the suppliers and creditors, transportation facilities, labour
availability etc.

 The limited infrastructure, low foreign investment and other transitional problems,
because of above three reasons availability of fund is very low in market.

 Uncertainty regarding the success of the product in the market.

 As there is requirement of an experienced management team, Due to unavailability

of experienced and skilled people it is difficult to analyse the future growth of the product
in the market.

 Government has taken all the Initiatives in formulating policies to encourage

investors and entrepreneurs. A government policy has many rules and regulation that
can create problems in allocating the fund to the Organizations.

3
  Initiatives of the SEBI to develop a strong and vibrant capital market giving the
adequate liquidity and flexibility for investors for entry and exit. Due to many rules and
regulations from SEBI organization face lots of difficulties at the time of entering in the
market.

 Problem regarding requirement of an above average rate of return on investment,

also longer payback period. The returns on investment are high but the probability of fund
return is depending on the product success in future.

1.3 LIMITATION OF PROJECT

A study of this type cannot be without limitations. It has been observed those venture capitals are
very secretive about their investments. This attitude is a major hindrance for data collection.
However venture capital funds/companies that are members of Indian venture capital association
are to be included in the study.

1.4 SCOPE OF THE PROJECT

The scope of the research includes all types of venture capital firms set up as a company & funds
irrespective of the fact that they are registered with SEBI of India or not part of this study

1.5 RESEARCH DESIGN AND INSTRUMENTS

In India neither venture capital theory has been developed nor are there many comprehensive
books on the subject. Even the number of research papers available is very limited. The
research design used is descriptive in nature. (The attempt has been made to collect maximum
facts and figures available on the availability of venture capital in India, nature of assistance
granted, future projected demand for this financing, analysis of the problems faced by the
entrepreneurs in getting venture capital, analysis of the venture capitalists and social and
environmental impact on the existing framework.)

4
The research is based on secondary data collected from the published material. The data was also
collected from the publications and press releases of venture capital associations in India.

Scanning the business papers filled the gaps in information. The Economic times, Financial
Express and Business Standards were scanned for any article or news item related to venture
capital. Sufficient amount of data about the venture capital has been derived from this project.

5
CONCEPTUAL
FRAMEWORK

6
2.1 CONCEPT OF VENTURE CAPITAL

The term venture capital comprises of two words that is, “Venture” and “capital”. “Venture” is a
course of processing the outcome of which is uncertain but to which is attended the risk or danger
of “Loss”. “Capital” means recourses to start an enterprise. To connote the risk and adventure of
such a fund, the generic name Venture Capital was coined.

Venture capital is considered as financing of high and new technology based enterprises. It is said
that Venture capital involves investment in new or relatively untried technology, initiated by
relatively new and professionally or technically qualified entrepreneurs with inadequate funds.
The conventional financiers, unlike Venture capitals mainly finance proven technologies and
established markets. However, high technology need not be prerequisite for venture capital.

Venture capital has also been described as ‘unsecured risk financing’. The relatively high risk of
venture capital is compensated by the possibility of high return usually through substantial capital
gains in term. Venture capital in broader sense is not solely an injection of funds into a new
firm, it is also an input of skills needed to set up the firm, design its marketing strategy, organize
and manage it. Thus it is a long term association with successive stages of company’s development
under highly risky investment condition with distinctive type of financing appropriate to each stage
of development. Investors join the entrepreneurs as co-partners and support the project with
finance and business skill to exploit the market opportunities.

Venture capital is not a passive finance. It may be at any stage of business/ production cycle, that
is start-up, expansion or to improve a product or process, which are associated with both risk
and reward. The Venture capital gains through appreciation in the value of such investment
when the new technology succeeds. Thus the primary return sought by the investor is
essentially capital gain rather than steady interest income or dividend yield.

7
The most flexible Definition of Venture Capital is:-

“The support by investors of entrepreneurial talent with finance and business skills to
exploit market opportunities and thus obtain capital gains.”

Venture capital commonly describes not only the provision of start up finance or ‘seed corn’
capital but also development capital for later stages of business. A long term commitment of
funds is involved in the form of equity investments, with the aim of eventual capital gains rather
than income and active involvement in the management of customer’s business.

2.2 FEATURES OF VENTURE CAPITAL

 High Risk

 High Tech

 Equity Participation & Capital Gains

 Participation In Management

 Length Of Investment

 Illiquid Investment

 High Risk:-
By definition the Venture capital financing is highly risky and chances of failure
are high as it provides long term start up capital to high risk- high reward ventures.
Ventures capital assumes four type of risks, these are:

o Management risk -Inability of management teams to work together.

o Market risk -Product may fail in the market.
o Product risk -Product may not be commercially viable.
o Operation risk -Operation may not be cost effective resulting in increased
cost decreased gross margin.

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 High Tech :-
As opportunities in the low technology area tend to be few of lower order, and
hi- tech projects generally offer higher returns than projects in more traditional area, venture
capital investments are made in high tech. areas using new technologies or producing
innovative goods by using new technology. Not just high technology, any high risk
ventures where the entrepreneur has conviction but little capital gets venture finance. Venture
capital is available for expansion of existing business or diversification to a high risk area. Thus
technology financing had never been the primary objective but incidental to venture capital.

 Equity Participation & Capital Gains :-

Investments are generally in equity and quasi
equity participation through direct purchase of share, options, convertible debentures where the
debt holder has the option to convert the loan instruments into stock of the borrower or a debt
with warrants to equity investment. The funds in the form of equity help to raise term loans that
are cheaper source of funds. In the early stage of business, because dividends can be delayed,
equity investment implies that investors bear the risk of venture and would earn a return
commensurate with success in the form of capital gains.

 Participation In management :-
Venture capital provides value addition by managerial
support, monitoring and follow up assistance. It monitors physical and financial progress
as well as market development initiative. It helps by identifying key resource person. They want
one seat on the company’s board of directors and involvement, for better or worse, in the major
decision affecting the direction of company. This is a unique philosophy of “hand on
management” where Venture capitalist acts as complementary to the entrepreneurs. Based upon
the experience other companies, a venture capitalist advice the promoters on project
planning, monitoring, financial management, including working capital and public issue.
Venture capital investor cannot interfere in day today management of the enterprise but keeps a
close contact with the promoters or entrepreneurs to protect his investment.

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 Length of Investment :-
Venture capitalist help companies grow, but they eventually seek
to exit the investment in three to seven years. An early stage investment may take seven to ten
years to mature, while most of the later stage investment takes only a few years. The process of
having significant returns takes several years and calls on the capacity and talent of venture
capitalist and entrepreneurs to reach fruition.

 Illiquid Investment :-
Venture capital investments are illiquid, that is not subject to
repayment on demand or following a repayment schedule. Investors seek return ultimately by
means of capital gain when the investment is sold at market place. The investment is
realized only on enlistment of security or it is lost if enterprise is liquidated for unsuccessful
working. It may take several years before the first investment starts too locked for seven to ten
years. Venture capitalist understands this illiquidity and factors this in his investment decision.

2.3 THE VENTURE CAPITAL SPECTRUM / STAGES

The growth of an enterprise follows a life cycle as shown in the diagram below. The requirements
of funds vary with the life cycle stage of the enterprise. Even before a business plan is prepared
the entrepreneur invests his time and resources in surveying the market, finding and
understanding the target customers and their needs. At the seed stage the entrepreneur continue
to fund the venture with his own fund or family funds. At this stage the fund are needed to solicit
the consultant’s services in formulation of business plans, meeting potential customers and
technology partners. Next the funds would be required for development of the product/process
and producing prototypes, hiring key people and building up the managerial team. This is
followed by funds for assembling the manufacturing and marketing facilities in that order.
Finally the funds are needed to expand the business and attaint the critical mass for profit
generation. Venture capitalists cater to the needs of the entrepreneurs at different stages of their
enterprises. Depending upon the stage they finance, venture capitalists are called angel investors,
venture capitalist or private equity supplier/investor.

Venture capital was started as early stage financing of relatively small but rapidly growing
companies. However various reasons forced venture capitalists to be more and more involved in
expansion financing to support the development of existing portfolio companies. With increasing

10
demand of capital from newer business, venture capitalists began to operate across a broader
spectrum of investment interest. This diversity of opportunities enabled venture capitalists to
balance their activities in term of time involvement, risk acceptance and reward potential,
while providing ongoing assistance to developing business.

Venture Capital Spectrum/Stage

Different Venture capital firms have different attributes and aptitudes for different types
of Venture capital investments. Hence there are different stages of entry for different venture
capitalists and they can identify and differentiate between types of venture capital investments,
each appropriate for the given stage of the investee company, these are:-

1. Early stage Finance

o Seed capital

o Start up Capital

o Early/First Stage Capital

o Later/Third Stage capital

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 2. Later Stage Finance

o Expansion/Development Stage Capital

o Replacement Finance

o Management Buy Out and Buy Ins

o Turnarounds

o Mezzanine/Bridge Finance

Not all business firms pass through each of these stages in sequential manner. For instance seed
capital is normally not required by service based ventures. It applies largely to manufacturing
or research based activities. Similarly second round finance does not always follow early stage
finance. If the business grows successfully it is likely to develop sufficient cash to fund its own
growth, so does not require venture capital for growth.

The table below shows risk perception and time orientation for different stages of venture capital
financing

Financing Stage Period (funds Risk Activity to be financed

locked in years) perception

Early stage finance 7-10 Extreme For supporting a concept

or idea or R & D for

product development
Start up 5-9 Very high Initializing operations or

developing prototypes
First stage 3-7 High Start commercial

production and marketing

Second stage 3-5 Sufficiently Expand market & growing

high working capital need

12
Later stage finance 1-3 Medium Market expansion,
acquisition & product
development for profit
making company

Buy out-in 1-3 Medium Acquisition financing

Turnaround 1-3 Medium to high Turning around a sick

company

Mezzanine 1-3 Low Facilitating public issue

Venture Capital- Financing Stages

 Seed Capital
It is an idea or concept as opposed to a business. European venture capital association
defines seed capital as “The financing of the initial product development or capital provided to
an entrepreneur to prove the feasibility of a project and to qualify for start up capital.”

The characteristics of the seed capital may be enumerated as follows:

o Absence of ready product market

o Absence of complete management team
o Product/process still in R & D stage
o Initial period/licensing stage of technology transfer

Broadly speaking seed capital investment may take 7 to 10 year to achieve realization.
It is the earliest and therefore riskiest stage of Venture capital investment. The new technology
and innovations being attempted have equal chance of success and failure. Such projects,
particularly hi-tech, projects sink a lot of cash and need a strong financial support for
their adaptation, commencement and eventual success. However, while the earliest stage of
financing is fraught with risk, it also provides greater potential for realizing significant gains in
long term. Typically seed enterprises lack asset base or track record to obtain finance from
conventional sources and are largely dependent upon entrepreneur’s personal resources. Seed
capital is provided after being satisfied that the entrepreneur has used up his own resources and
carried out his idea to a stage of acceptance and has initiated research. The asset underlying the
seed capital is often technology or an idea as opposed to human assets (a good management
taem0 so often sought by venture capitalists.

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 Volume of Investment Activity

It has been observed that Venture capitalist seldom make seed capital investment and these are
relatively small by comparison to other forms of Venture finance. The absence of interest in
providing a significant amount of seed capital can be attributed to the following three factors:-

a) Seed capital projects by their very nature require a relatively small amount of capital. The
success or failure of an individual seed capital investment will have little impact on the
performance of all but the smallest venture capital investments. This is because the small
investments are seen to be cost inefficient in terms of time required to analyse structure
manage them.

b) The time horizon to realization for most seed capital investment is typically 7-10
years which is longer than all but most long-term oriented investors will desire.

c) The risk of product and technology obsolescence increases as the time to realization I
extended. These types of obsolescence are particularly likely to occur with high technology
investments particularly in the fields related to Information Technology.

 Start Up Capital

It is stage second in the venture capital cycle and is distinguishable from seed capital
investments. An entrepreneur often needs finance when the business is just starting. The start
up stage involves starting a new business. Here in the entrepreneur has moved closer towards
establishment of a going concern. Here in the business concept has been fully investigated and
the business risk now becomes that of turning the concept into product.

Start up capital is defined as; “Capital needed to finance the product development,
initial marketing and establishment of product facility.”

The characteristics of start-up capital are:-

a) Establishment of company or business :- the company is either being organized

or is established recently. New business activity could be based on experts, experience or
a spin-off from R & D.

b) Establishment of most but not all the members of the team :- the skills and fitness
to the job and situation of the entrepreneur’s team is an important factor for start up
finance.

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 c) Development of business plan or idea: the business plan should be fully developed yet
the acceptability of the product by the market is uncertain. The company has not yet
started trading.

In the start up preposition Venture capitalists’ investment criteria shifts from idea to people
involved in the venture and the market opportunity. Before committing any finance at this stage,
venture capitalist however, assesses the managerial ability and the capacity of the entrepreneur,
besides the skills, suitability and competence of the managerial team are also evaluated. If
required they supply managerial skill and supervision for implementation. The time horizon
for start up capital will be typically 6 or 8 years. Failure rate for start up is 2 out of 3. Start up
needs funds by way of both first round investment and subsequent follow-up investments. The
risk tends to be lower relative to seed capital situation. The risk is controlled by initially investing
a smaller amount of capital in start-ups. The decision on additional financing is based upon the
successful performance of the company. However, the term to realization of a start up
investment remains longer than the term of finance normally provided by the majority of
financial institutions. Longer time scale for using exit route demands continued watch on start
up projects.

Volume of Investment Activity

Despite potential for secular returns most venture firms avoid investing in start- ups. One reason
for the paucity of start up financing may be high discount rate that venture capitalist applies
to venture proposals at this level of risk and maturity. They often prefer to spread their risk by
sharing the financing. Thus syndicates of investor’s often participate in start up finance.

 Early Stage Finance

It is also called first stage capital is provided to entrepreneur who has a proven product, to start
commercial production and marketing, not covering market expansion, de-risking and
acquisition costs.

At this stage the company passed into early success stage of its life cycle. A proven management
team is put into this stage, a product is established and an identifiable market is being targeted.

British Venture capital Association has vividly defined early stage finance as: “Finance provided
to companies that have completed the product development stage and require further funds to
initiate commercial manufacturing and sales but may not be generating profits.”
15
 The characteristics of early stage finance may be:-

o Little or no sales revenue.

o Cash flow and profit still negative.

o A small but enthusiastic management team which consists of people with technical and
specialist background and with little experience in the management of growing business.

o Short term prospective for dramatic growth in revenue and profits.

The early stage finance usually takes 4 to 6 years time horizon to realization. Early stage
finance is the earliest in which two of the fundamentals of business are in place i.e. fully
assembled management team and a marketable product. A company needs this round of finance
because of any of the following reasons:-

o Project overruns on product development.

o Initial loss after start up phase.

The firm needs additional equity funds, which are not available from other sources thus
prompting venture capitalist that, have financed the start up stage to provide further financing.
The management risk is shifted from factors internal to the firm (lack of management, lack of
product etc.) to factor external to the firm (competitive pressures, in sufficient will of financial
institutions to provide adequate capital, risk of product obsolescence etc.)

At this stage, capital needs, both fixed and working capital needs are greatest. Further, since
firms do not have foundation of a trading record, finance will be difficult to obtain and so venture
capital particularly equity investment without associated debt burden is key to survival of the
business.

The following risks are normally associated to firms at this stage :-

a) The early stage firms may have drawn the attention of and incurred the challenge of
a larger competition.
b) There is a risk of product obsolescence. This is more so when the firm is involved in
high-tech business like computer, information technology etc.

 Second stage Finance

It is the capital provided for marketing and meeting the growing working capital needs of an
enterprise that has commenced the production but does not have positive cash flows sufficient to

16
take care of its growing needs. Second stage finance, the second trench of Early Stage Finance is
also referred to as follow on finance and can be defined as the provision of capital to the firm
which has previously been in receipt of external capital but whose financial needs have
subsequently exploded. This may be second or even third injection of capital.

The characteristics of a second stage finance are:

 A developed product on the market

 A full management team in place
 Sales revenue being generated from one or more products
 There are losses in the firm or at best there may be a breakeven but the surplus
generated is insufficient to meet the firm’s needs.

Second round financing typically comes in after start up and early stage funding and so have
shorter time to maturity, generally ranging from 3 to 7 years. This stage of financing has both
positive and negative reasons.

Negative reasons include :-

 Cost overruns in market development

 Failure of new product to live up to sales forecast.
 Need to re-position products through a new marketing campaign
 Need to re-define the product in the market place once the product deficiency
is revealed.

Positive reasons include :-

 Sales appear to be exceeding forecasts and the enterprise needs to acquire assets to gear
up for production volumes greater than forecasts.
 High growth enterprises expand faster than their working capital permit, thus needing
additional finance. Aim is to provide working capital for initial expansion of an
enterprise to meet needs of increasing stocks and receivables.

It is additional injection of funds and is an acceptable part of venture capital. Often provision
for such additional finance can be included in the original financing packages as an option, subject
to certain management performance targets.

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 Later Stage Finance

It is called third stage capital is provided to an enterprise that has established commercial
production and basic marketing set-up, typically for market expansion, acquisition product
development etc. it is provided for market expansion of the enterprise.

The enterprises eligible for this round of finance have following characteristics:

o Established business, having already passed the risky early stage.

o Expanding high yield, capital growth and good profitability.
o Reputed market position and an established formal organization structure.

“Funds are utilized for further plant expansion, marketing, working capital or development of
improved products.” Third stage financing is a mix of equity with debt or subordinate debt.
As it is half way between equity and debt in US it is called “mezzanine” finance. It is also called
last round of finance in run up to the trade sale or public offer.

Venture capitalists prefer later stage investment vis a Vis early stage investments, as the rate of
failure in later stage financing is low. It is because firms at this stage have a past
performance data, track record of management, established procedures of financial control.
The time horizon for realization is shorter, ranging from 3 to 5 years. This helps the venture
capitalists to balance their own portfolio of investment as it provides a running yield to
venture capitalists. Further the loan component in third stage finance provides tax advantage and
superior return to the investors.

There are four sub divisions of later stage finance:

 Expansion/Development Finance
 Replacement Finance
 Buyout Financing
 Turnaround Finance

Expansion/ Development finance

An enterprise established in a given market increases its profit exponentially by achieving the
economies of scale. This expansion can be achieved either through an organic growth, that is by
expanding production capacity and setting up proper distribution system or by way of
acquisitions. Anyhow, expansion needs finance and venture capitalists support both organic
growth as well as acquisitions for expansion.
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 At this stage the real market feedback is used to analyse competition. It may be found that the
entrepreneur needs to develop his managerial team for handling growth and managing a larger
business.

Realization horizon for expansion/development investment is one to three years. It is favoured

by venture capitalist as it offers higher rewards in shorter period with lower risk. Funds are
needed for new or larger factories and warehouses, production capacities, developing improved
or new products, developing new markets or entering exports by enterprise with established
business that has already achieved break even and has started making profits.

Replacement Finance

It means substituting one shareholder for another, rather than raising new capital resulting in the
change of ownership pattern. Venture capitalist purchase share from the entrepreneurs and their
associates enabling them to reduce their shareholding in unlisted companies. They also buy
dividend coupon. Later, on sale of the company or its listing on stock exchange, these are re-
converted to ordinary shares. Thus Venture capitalist makes a capital gain in a period of 1 to 5
years.

Buy-out / Buy-in Financing

It is a resent development and a new form of investment by venture capitalist. The funds provided
to the current operating management to acquire or purchase a significant share holding in the business
they manage are called management buyout.

Management Buy-in refers to the funds provided to enable a manager or a group of managers from
outside the company to buy into it.

It is the most popular form of venture capital amongst stage financing. It is less risky as venture
capitalist in invests in solid, ongoing and more mature business. The funds are provided for
acquiring and revitalizing an existing product line or division of a major business. MBO
(Management buyout) has low risk as enterprise to be bought have existed for some time besides
having positive cash flow to provide regular returns to the venture capitalist, who structure their
investment by judicious combination of debt and equity. Of late there has been a gradual shift
away from start-up and early finance towards MBO opportunities. This shift is because of lower
risk than start up investments.

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Turnaround Finance

It is rare form later stage finance which most of the venture capitalist avoid because of higher
degree of risk. When an established enterprise becomes sick, it needs finance as well as
management assistance for a major restructuring to revitalize growth of profits. Unquoted
company at an early stage of development often has higher debt than equity; its cash flows are
slowing down due to lack of managerial skill and inability to exploit the market potential. The
sick companies at the later stages of development do not normally have high debt burden but
lack competent staff at various levels. Such enterprises are compelled to relinquish control to
new management. The venture capitalist has to carry out the recovery process using hands on
management in 2 to 5 years. The risk profile and anticipated rewards are akin to early stage
investment.

Bridge Finance

It is the pre-public offering or pre-merger/acquisition finance to a company. It is the last round

of financing before the planned exit. Venture capitalist help in building a stable and experienced
management team that will help the company in its initial public offer. Most of the time bridge
finance helps improves the valuation of the company. Bridge finance often has a realization
period of 6 months to one year and hence the risk involved is low. The bridge finance is paid
back from the proceeds of the public issue.

2.4 VENTURE CAPITAL INVESTMENT PROCESS

Venture capital investment process is different from normal project financing. In order to
understand the investment process a review of the available literature on venture capital finance
is carried out. Tyebjee and Bruno in 1984 gave model of venture capital investment activity with
some variations is commonly used presently. As per this model this activity is a five step process
as follows:
1. Deal Organization

2. Screening

3. Evaluation or due Diligence

4. Deal Structuring

5. Post Investment Activity and Exit

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1. Deal Origination :-
In generating a deal flow, the VC investor creates a pipeline
of deals or investment opportunities that he would consider for investing in. deal may
originate in various ways. Referral system, active search system, and intermediaries.
Referral system is an important source of deals. Deals may be referred to VCFs by their
parent organizations, trade partners, industry associations, friends etc. Another deal flow
is active search through networks, trade fairs, conferences, seminars, foreign visits etc.
intermediaries is used by venture capitalists in developed countries like USA, is certain
intermediaries who match VCFs and the potential entrepreneurs.

2. Screening :-
VCFs, before going for an in-depth analysis, carry out initial screening of
all projects on the basic of some broad criteria. For example, the screening process may
limit projects to areas in which the venture capitalist is familiar in terms of technology, or
product, or market scope. The size of investment, geographical location and stage of
financing could also be used as the broad screening criteria.

3. Due Diligence :-
Due diligence is the industry jargon for all the activities that are
associated with evaluating an investment proposal. The Venture capitalists evaluate the
quality of entrepreneur before appraising the characteristics of the product, market or
technology. Most venture capitalists ask for a business plan to make an assessment
of the possible risk and return on the venture. Business plan contains detailed information
about the proposed venture. The evaluation of ventures by VCFs in Indian includes;
Preliminary evaluation: the applicant required to provide a brief profile of the proposed
venture to establish prima facie eligibility.

Detailed evaluation: once the preliminary evaluation is over, the proposal is evaluated
in greater detail. VCFs in India expect the entrepreneur to have: - integrity, long-term
vision, urge to grow, managerial skills, commercial orientation.

VCFs in India also make the risk analysis of the proposed projects which includes:
product risk, market risk, technological risk and entrepreneurial risk. The final decision
is taken in terms of the expected risk-return trade-off as shown in figure.

21
 4. Deal Structuring :-
In this process, the venture capitalist and the venture company
negotiate the terms of the deals, that are the amount form and price of the investment. This
process is termed as deal structuring. The agreement also include the venture capitalists
right to control the venture company and to change its management if needed, buyback
arrangement specify the entrepreneurs equity share and the objectives share and the
objectives to be achieved.

5. Post Investment Activities :-

Once the deal has been structured and agreement
finalized, the venture capitalist generally assumes the role of a partner and collaborator. He
also gets involved in shaping of the direction of the venture. The degree of the venture
capitalists involvement depends on his policy. It may not, however be desirable for
a venture capitalist to get involved in the day-to-day operation of the venture. If a financial
or managerial crisis occurs, the venture capitalist may intervene, and even install a new
management team.

6. Exit :-
Venture capitalists generally want to cash-out their gains in five to ten years after
the initial investment. They play a positive role in directing the company towards particular
exit routes. A venture may exist in one of the following ways:

There are four ways for a venture capitalist to exit its investment:

o Initial Public Offer (IPO)

o Acquisition by another company
o Re-purchase of venture capitalists share by the investee company
o Purchase of venture capitalists share by a third party

Promoters Buy-back

The most popular disinvestment route in India is promoters buy-back. This route is suited to
Indian conditions because it keeps the ownership and control of the promoter intact. The
obvious limitation, however, is that in a majority of cases the market value of the shares
of the venture firm would have appreciated so much after some years that the promoter
would to be in a financial position to buy them back.

22
 In India, the promoters are invariably given the first option to buy back equity of their
enterprise. For example, RCTO participates in the assisted firm’s equity with suitable
agreement for the promoter to repurchase it. Similarly, Confina- VCF offers an opportunity
to the promoters to buy back the shares of the assisted firm within an agreed period at a
predetermined price. If the promoter fails to buy back the shares within the stipulated period,
Confine-VCF would have the discretion to divest them in any manner it deemed appropriate.
SBI capital Markets ensures through examining the personal assets of the promoters and their
associates, which buy back, would be a feasible option. GV would make disinvestment, in
consultation with the promoter, usually after the project has settled down, to a profitable level
and the entrepreneur is in a position to avail of finance under conventional schemes of
assistance from banks or other financial institutions.

Initial Public Offers (IPOs)

The benefits of disinvestments via the public issue route are improved marketability and
liquidity, better prospects for capital gains and widely known status of the venture as well as
market control through public share participation. This option has certain limitations in the
Indian context. The promotion of the public issue would be difficult and expensive since the
first generation entrepreneurs are not known in the capital markets. Further, difficulties will
be caused if the entrepreneurs business is perceived to be an unattractive investment
proposition by investors. Also, the emphasis by the Indian investors on short- term profits
and dividends may tend to make the market price unattractive. Yet another difficulty in India
until recently was that the Controller of Capital Issues (CCI) guidelines for determining the
premium on shares took into account the book value and the cumulative average EPS till
the date of the new issue. This formula failed to give due weight age to the expected stream
of earning of the venture firm. Thus, the formula would underestimate the premium. The
government has now abolished the Capital Issues Control Act, 1947 and consequently, the
office of the controller of Capital Issues. The existing companies are now free to fix
the premium on their shares. The initial public issue for disinvestments of VCFs holding
can involve high transaction costs because of the inefficiency of the secondary market in a
country like India. Also, this option has become far less feasible for small ventures on
account of the higher listing requirement of the stock exchanges. In February 1989, the
Government of India raised the minimum capital for listing on the stock exchanges
from Rs 10 million to Rs 30 million and the minimum public offer from Rs 6 million to
Rs 18 million.

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Sale on the OTC Market

An active secondary capital market provides the necessary impetus to the success of the
venture capital. VCFs should be able to sell their holdings, and investors should be able to
trade shares conveniently and freely. In the USA, there exist well-developed OTC markets
where dealers trade in share on telephone/terminal and not on an exchange floor. This
mechanism enables new, small companies which are not otherwise eligible to be listed on
the stock exchange, to enlist on the OTC markets and provides liquidity to investors. The
National Association of Securities dealers Automated Quotation System (NASDAQ) in the
USA daily quotes over 8000 stock prices of companies backed by venture capital.

The OTC Exchange in India was established in June 1992. The Government of India had
approved the creation for the Exchange under the Securities Contracts (Regulations) Act in
1989. It has been promoted jointly by UTI, ICICI, SBI Capital Markets, Can Bank Financial
Services, GIC, LIC and IDBI. Since this list of market-makers (who will decide daily prices
and appoint dealers for trading) includes most of the public sector venture financiers, it should
pick up fast, and it should be possible for investors to trade in the securities of new
small and medium size enterprise.

The other disinvestment mechanisms such as the management buy outs or sale to other venture
funds are not considered to be appropriate by VCFs in India.

The growth of an enterprise follows a life cycle as shown in the diagram below. The
requirements of funds vary with the life cycle stage of the enterprise. Even before a business
plan is prepared the entrepreneur invests his time and resources in surveying the market,
finding and understanding the target customers and their needs. At the seed stage the
entrepreneur continue to fund the venture with his own fund or family funds. At this stage the
funds are needed to solicit the consultant’s services in formulation of business plans,
meeting potential customers and technology partners. Next the funds would be required for
development of the product/process and producing prototypes, hiring key people and building
up the managerial team. This is followed by funds for assembling the manufacturing and
marketing facilities in that order. Finally the funds are needed to expand the business and
attaint the critical mass for profit generation. Venture capitalists cater to the needs of the
entrepreneurs at different stages of their enterprises. Depending upon the stage they finance,
venture capitalists are called angel investors, Venture capitalist or private equity
supplier/investor.

24
2.5 METHODS OF VENTURE FINANCING

Venture Capital is typically available in three forms in India, they are:

 Equity :-
All VCFs in India provide equity but generally their contribution does not
exceed 49% of the total equity capital. Thus, the effective control and majority
ownership of the firm remains with the entrepreneur. They buy shares of an enterprise
with an intention to ultimately sell them off to make capital gains.

 Conditional Loan :-
It is repayable in the form of a royalty after the venture is able
to generate sales. No interest is paid on such loans. In India, VCFs change royalty ranging
between 2% to 15%; actual rate depends on other factors of the venture such as gestation
period, cost flow patterns, riskiness and other factors of the enterprise.

 Income Note :-
It is a hybrid security which combines the features of both
conventional loan and conditional loan. The entrepreneur has to pay both interest and
royalty on sales, but at substantially low rates.

 Participating Debenture :-
Such security carries charges in 3 phases. In the start up
phase, before the venture attains operations to a minimum level, no interest is charged,
after this, low rate of interest is charged, up to a particular level of operation. Once the
venture is commercial, a high rate of interest is required to be paid.

 Quasi Equity :-
Quasi equity instruments are converted into equity at a later date.
Convertible instruments are normally converted into equity at the book value or at
certain multiple of EPS, i.e. at a premium to par value at a later date. The premium
automatically rewards the promoter for their initiative and hand work. Since it is
performance related, it motivates the promoter to work harder so as to minimize dilution
of their control on the company. The different quasi equity instruments are follows:

o Cumulative convertible preference shares.

o Partially convertible debentures.
o Fully convertible debentures.

25
  Other Financing methods :-
A few venture capitalists, particularly in the private
sector, have started introducing innovative financial securities like participating
debentures, introduced by TCFC is an example.

2.6 DIFFERENCE BETWEEN VENTURE CAPITAL AND OTHER

FUNDS (PRIVATE EQUITY)

 Venture Capital Vs Development Funds

Venture capital differs from development funds as latter means putting up of industries
without much consideration of use of new technology or new entrepreneurial venture but
having a focus on underdeveloped areas (locations). In majority cases it is in the form
of loan capital and proportion of equity is very thin. Development finance is security
oriented and liquidity prone. The criteria for investment are proven track record of
company and its promoters, and sufficient cash generation to provide for returns
(principal and interest). The development bank safeguards its interest through collateral.

They have no say in working of the enterprise except safeguarding their interest by
having a nominee director. They do not play any active role in the enterprise except
ensuring flow of information and proper management information system, regular board
meetings, adherence to statutory requirements for effective management information
system, regular board meetings, adherence to statutory requirements for effective
management control where as Venture capitalist remain interested if the overall
management of the project account of high risk involved I the project till its completion,
entering into production and making available proper exit route for liquidation of the
investment. As against this fixed payments in the form of instalment of principal and
interest are to be made to development.

 Venture Capital Vs Seed Capital & Risk Capital

It is difficult to make a distinction between venture capital, seed capital, and risk capital
as the latter two form part of broader meaning of Venture capital. Difference between
them arises on account of application of funds and terms and conditions applicable. The
seed capital and risk funds in India are being provided basically to arrange promoter’s

26
 contribution to the project. The objective is to provide finance and encourage
professionals to become promoters of industrial projects. The seed capital is
provided to conventional projects on the consideration of low risk and security and
use conventional techniques for appraisal. Seed capital is normally in the form low
interest deferred loan as against equity investment by Venture capital. Unlike
Venture capital, Seed capital providers neither provide any value addition nor participate
in the management of the project. Unlike Venture capital Seed capital provider is satisfied
with low-normal returns and lacks any flexibility in its approach.

Risk capital is also provided to established companies for adapting for new technologies.
Herein the approach is not business oriented but developmental. As a result on one hand
the success rate of units assisted by seed capital/risk.

Seed Capital Scheme Venture Capital Scheme

Basic Income or aid Commercial viability
Beneficiaries Very small entrepreneurs Medium and large
entrepreneurs are also
covered
Size of assistance Rs. 15 lac(Max) Up to 40 percent of
promoters’
equity
Appraisal process Normal Skilled and Specialized

Estimates returns 20 percent 30 percent plus

Flexibility Nil Highly flexible

Value addition Nil Multiple ways

Exit option Sell back to promoters Several, including public

offer
Funding sources Owner funds Outside contribution
allowed
Syndication Not done Possible

Tax concession Nil Exempted

Success rate Not good Very satisfactory

Difference between Seed Capital Scheme and Venture Capital Scheme

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  Venture Capital Vs Bought Out Deals

The important difference between the venture capital and bought out deals is that bought
outs are not based upon high risk- high reward principal. Further unlike venture capital
they do not provide equity finance at different stages of the enterprise. However both
have a common expectation of capital gains yet their objectives and intents are totally
different.

2.7 VENTURE CAPITAL & ALTERNATIVE FINANCING

COMPARISON

Venture capital & alternative financing comparison

If we are struggling to find success in our quest for venture capital, maybe we are looking
in the wrong place. Venture capital is not for everybody. For starters, venture capitalists
tend to be very picky about where they invest. They are looking for something to dump
a lot of money into 9usually no less than $1 million) that will pour even more money right
back at them in a short amount of time (typically 3-7 years). We may be planning for a steady
growth rate as opposed to the booming, overnight success that venture capitalists tend
to gravitate toward. We may not be able to turn around as large of a profit as they are

28
 looking for in quick enough time. We may not need the amount of money that they offer or
our business may simply not be big enough.

Simply put, venture capital is not the right fit for our business and there are plenty
of other options available when it comes to finding capital.

 Substitute in Early stage

1. Angels :-
Most venture capital funds will not consider investing in anything
under $1 million to $2 million. Angels, however, are wealthy individuals who will
provide capital for a start-up business. These investors have usually earned their money
as entrepreneurs and business managers and can serve as a prime resource for
advice on top of capital. On the other hand, due to typically limited resources, angels
usually have a shorter investment horizon than venture capitalists and tend to have less
tolerance for losses.

2. Private Placement :-
An investment bank or agent may be able to raise equity for
our company by placing our unregistered securities with accredited investors.
However, you should be aware that the fees and expenses associated with this practice
are generally higher than those that come with venture and angel investors. We will
likely receive little or no business counsel from private investors who also tend to have
little tolerance for losses and under-performance.

3. Initial Public Offering :-

If we are somehow able to gain access to public equity
markets than an initial public offering (IPO) can be an effective way to raise capital.
Keep in mind that, while the public market’s high valuations, abundant capital and
liquidity characteristics make it attractive, the transaction costs are high and there are
ongoing legal expenses associated with public disclosure requirements.

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 Large Stage Financing

1. Bootstrap Financing :-
This method is intended to develop a foundation for your
business from scratch. Financial management is essential to make this work. With
bootstrap financing you’re building a business from nothing, which means there is little
to no margin for error in the finance department. Keep a rigid account of all transactions
and don’t stray from your budget.

A few different methods of bootstrapping include:

Factoring, this generates cash flow through the sale of your accounts receivable to a
“factor” at discounted price for cash.

Trade Credit is an option if you are able to find a vendor or supplier that will allow
you to order goods on net 30, 60 or 90 day terms. If you can sell the goods before the
bill comes due then you have generated cash flow without spending any money.
Customers can pay you up front our services.

Leasing, your equipment instead of purchasing it outright.

2. Fund from Operations :-

Look for ways to tweak your business in order to reduce
the cash flowing out and increase the cash flowing in. Funding found in business
operations come free of finance charges, can reduce future financing charges and can
increase the value of your business. Month-by-month operating and cash projections
will show how well we have planned, how you can optimize the elements of your
business that generate cash and allow you to plan for new investments and
contingencies.

3. Licensing :-
Sell licenses to technology that is non-essential to our company or grant
limited licensing to essential technology that can be shared. Throughout licensing we
can generate revenue from up-front fees, access fees, royalties or milestone
payments.

30
4. Vendor Financing :-
Similar to the trade credit related to bootstrap financing,
vendors can play a big role in financing your new business. Establish vendor
relationships through our trade association and strike deals to offer their product and
pay for it at a date in the near future. Selling the product in time is up to us. In hopes of
keeping you as a customer, vendors may also be willing to work out an arrangement
if we need to finance equipment or supplies. Just make sure to look for stability when
you research a vendor’s credentials and reputation before you sign any kind of
agreement. And keep in mind that many major suppliers (GE Small Business Solutions,
IBM Global Financing) own financial companies that can help you.

5. Self Funding :-
Search between the couch cushions and in old jacket pockets for
whatever extra money you might have lying around and invest it into your business.
Obviously loose change will not be enough for extra business funding, but take a
look at your savings, investment portfolio, retirement funds and employee buyout
options from your previous employer. You won’t have to deal with any creditors or
interest and the return on your investment could be much higher.

However, make sure that you consider the risks involved with using your own resources.
How competitive is the market that you are about to enter into? How long will it take to
pay you back? Will you be able to pay yourself back? Can you afford to lose everything
that you are investing if your business were to fail? It’s important that your projected
returns are more than enough to cover the risk that you will be taking.

6. SBIR and STTR Programs :-

Coordinated by the SBA, SBIR (Small Business
Innovation Research) and STTR (Small business Technology Transfer) programs offer
competitive federal funding awards to stimulate technological innovation and provide
opportunities for small businesses. You can learn more about these programs at
SBIRworld.com.

7. State Funding :-
If you’re not having any luck finding funding from the federal
government take a look at what your state has to offer. There is a list of links to state
development agencies that offer an array of grants and financial assistance for
small businesses on About.com.

31
8. Community Banks :-
These smaller banks may have fewer products than their
financial institution counterparts but they offer a great opportunity to build banking
relationships and are generally more flexible with payment plans and interest rates.

9. Microloans :-
These types of loans can range from hundreds of dollars to low six-
figure amounts. Although some lenders regard microloans to be a waste of time because
the amount is so low, these can be a real boon for a start-up business or one that just
needs to add some extra cash flow.

10. Finance Debt :-

It may be more expensive in the long run than purchasing, but
financing your equipment, facilities and receivables can free up cash in the short term
or reduce the amount of money that you need to raise.

11. Friends :-
Ask your friends if they have any extra money that they would like to
invest. Assure them that you will pay them back with interest or offer those stock
options or a share of the profits in return.

12. Family :-
Maybe you have a rich uncle or a wealthy cousin that would be willing
to lend you some money get your business running or send it to the next level. Again,
make it worth their while by offering interest, stocks or a share of the profits.

13. Form a Strategic Alliance :-

Aligning your business with a corporation can
produce funding from upfront or access fees to your service, milestone payments and
royalties. In addition, corporate partners may be able to provide research funding, loans
and equity investments.

14. Sell Some Assets :-

Find an interested party to buy some of your assets (computers,
equipment, real estate, etc…) and then lease them back to you. This provides an instant
source of cash and you will still be able to use whatever assets you need.

32
 15. Business Lines of Credit :-
If your business has positive cash flow and has proven
that it will cover its debts then you may be eligible for a business line of credit. This
type of financing is a common service offered by most business banks and serves as
business capital, up to an agreed upon amount, that you can access at any time.

16. Personal Credit Cards :-

Using personal credit cards to finance a business can be
risky but, if you take the right approach, they can also give your business a lift. You
should only consider using this type of financing for acquiring assets and working
capital. Never consider this to be a long-term option. Once your company breaks even
or moves into the black, ditch the credit cards and move toward traditional bank
financing or lease agreements.

17. Business Credit Cards :-

Business credit cards carry similar risks as personal
credit cards but tend to be a safer alternative. While the activity on this card goes toward
your credit report, a business credit card can help you to build business credit, keep your
business expenses separate from your personal expenses and can make tax season easier
to manage.

2.8 PLAYERS IN VENTURE CAPITAL INDUSTRY

There are following group of players:

 Angels and angel clubs

 Venture capital funds
o Small
o Medium
o Large
 Corporate Venture funds
 Financial service venture groups

33
 Angels and angel clubs

Angels are wealthy individuals who invest directly into companies. They can form
angel clubs to coordinate and bundle their activities. Beside the money, angels often provide
their personal knowledge, experience and contacts to support their investees. With
average deals sizes from USD100, 000 to USD 500,000 they finance companies in their
early stages. Examples for angel clubs are –Media Club, Dinner Club, and Angel’s forum.

 Small and Upstart Capital Funds

These are smaller Venture Capital Companies that mostly provide seed and start-up
capital. The so called “Boutique firms” are often specialized in certain industries or market
segments. Their capitalization is about USD 20 to USD 50 million (is this deals size or total
money under management or money under management per fund?). As for small and
medium Venture capital funds strong competition will clear the market place. There will be
mergers and acquisitions leading to a concentration of capital. Funds specialized in different
business areas will form strategic partnerships. Only the more successful funds will be able
to attract new money. Examples are:

o Artemis Comaford
o Abbell Venture Fund
o Acacia Venture Partners

 Medium Venture Funds

The medium venture funds finance all stages after seed and operate in all business
segments. They provide money for deals up to USD 250 million. Single funds have up to
USD 5 billion under management. An example is Accel Partners

 Large Venture Funds

As the medium funds, large funds operate in all business sectors and provide all types of
capital for companies after seed stage. They often operate internationally and finance deals
up to USD 500 million the large funds will try to improve their position by mergers and
acquisitions with other funds to improve size, reputation and their financial muscle. In
addition they will to diversify. Possible areas to enter are other financial services by means
of M&As with financial services corporations and the consulting business. For the latter one
34
 the funds have a rich resource of expertise and contacts in house. In a declining market for
their core activity and with lots of tumbling companies out there is no reason why Venture
Capital funds should offer advice and consulting only to their investees.
Examples are:

o AIG American International Group

o Cap Vest man
o 3i

 Corporate Venture Funds

These Venture Capital funds are set up and owned by technology companies. Their aim is
to widen the parent company’s technology base in an win-win- situation for both, the
investor and the investee. In general, corporate funds invest in growing or maturing
companies, often when the investee wishes to make additional investments in technology or
product development. The average deals size is between USD 2 million and USD 5 million.
The large funds will try to improve their position by mergers and acquisitions with other
funds to improve size, reputation and their financial muscle. In addition, they will to
diversify. Possible areas to enter are other financial services by means of M&As with
financial services corporations and the consulting business. For the latter one the funds have
a rich resource of expertise and contents in house. In a declining market for their core activity
and with lots of tumbling companies out there is no reason why Venture Capital funds
should offer advice and consulting only to their investees. Examples are:
o Oracle

o Adobe

o Dell
o Kyocera

As an example, Adobe systems launched a $40m venture fund in 1994 to invest in

companies strategic to its core business, such as Cascade Systems Inc and lantana research
Corporation-has been successfully boosting demand for its core products, so that Adobe
recently launched a second $40m fund.

35
Financial Funds:

A solution for financial funds could be a shift to a higher saucerization of Venture Capital
activities. That means that the parent companies shift the risk to their customers by creating
new products such as stakes in a Venture Capital fund. However, the success of such
products will depend on the overall climate and expectations in the economy. As long as
the sown turn continues without any sign of recovery customers might prefer less risky
alternatives.

36
VENTURE
CAPITAL IN
INDIA

37
3.1 EVOLUTION OF VENTURE CAPITAL INDUSTRY IN INDIA

The first major analysis on risk capital for India was reported in 1983. It indicated that
new companies often confront serious barriers to entry into capital market for raising equity
finance which undermines their future prospects of expansion and diversification. It also
indicated that on the whole there is a need to review the equity cult among the masses by
ensuring competitive return on equity investment. This brought out the institutional
inadequacies with respect to the evolution of venture capital.

In India, the Industrial Finance Corporation of India (IFCO) initiated the idea of Venture
Capital when it established the Risk Capital Foundation in 1975 to provide seed capital
to small and risky projects. However the concept of venture capital financing got statutory
recognition for the first time in the fiscal budget for the year 1986-87.

The venture Capital companies operating at present can be divided into four groups:

o Promoted by All-India Development Financial Institutions

o Promoted by State Level Financial Institutions
o Promoted by Commercial Banks
o Private Venture Capitalists.

1. Promoted by all India Development Financial Institutions

The IDBI started a Venture Capital in 1976 as per the long term fiscal policy of government
of India, with an initial of Rs. 10 Cr. which raised by imposing a chess of 5% on all
payment made for the import of technology know-how projects requiring funds from
Rs.5 Lacks to Rs.2.5Cr. Were considered for financing. Promoter’s contribution ranged
from this fund was available at a concessional interest rate of 9% (during gestation period)
which could be increased at later stages.

The ICICI provided the required impetus to Venture Capital activities in India, 1986 it
started providing venture Capital finance in 1998 it promoted, along with the Unit trust of
India (UTI) Technology Development and information Company of India (TDICI) as first
venture Capital company registered under the companies act, 1956. The TDICI may
provide financial assistance to venture capital undertaking which are set up by technocrat
entrepreneurs, or technology information and guidance services.

38
 The risk capital foundation established by the industrial finance corporation of India (IFCI)
in 1975, was converted in 1988 into the Risk Capital and Technology Finance
Company (RCTC) as a subsidiary company of the IFCI the rate provides assistance in
the form of conventional loans, interest free conditional loans on profit and risk
sharing basis or equity participation in extends financial support to high technology
projects for technological up gradations. The RCTC has been renamed as IFCI Venture
Capital Funds Ltd. (IVCF).

2. Promoted by State Level Financial Institutions

In India, the State Level Financial Institutions in some states such as Madhya Pradesh,
Gujarat, Uttar parades, etc., have done an excellent job and have provided venture
capital to a small scale enterprise. Several successful entrepreneurs have been the
beneficiaries of the liberal funding environment. In 1990, the Gujarat Industrial
Investment Corporation, promoted the Gujarat Venture Financial Ltd (GVFL) along with
other promoters such as the IDBI, the World Bank, etc., the GVFL provides financial
assistance to business in the form of equity, conditional loans or income notes for
technologies development and innovative products. It also provides finance assistance to
entrepreneurs.

The government of Andhra Pradesh has also promoted the Andhra Pradesh Industrial
Development Corporation (APIDC) venture capital ltd. to provide venture capital
financing in Andhra Pradesh.

3. Promoted by Commercial Banks

Canbank Venture Capital Fund, State bank Venture Capital Fund and Grind lays bank
Venture Capital Fund have been set up the respective commercial banks to undertake
venture capital activities.

The State bank Venture Capital funds provides financial assistance for bought out deal as
well as new companies in the form of equity which it disinvests after the commercialization
of the project.

Canbank Venture Capital Funds provides financial assistance for proven but yet to be
commercially exploited technologies. It provides assistance both in the form of equity and
conditional loans.

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 4. Private venture Capital Funds

Several private sector venture capital funds have been established in India such as the 20 th
Century Venture Capital Company, Indus venture capital Funds, Infrastructure Leasing
and financial Services Ltd.
Some of the companies that have received funding through this route include:
o Mastek, one of the oldest software house in India
o Ruskan software, Pune based software consultancy
o SQL Star, Hyderabad based training and software development
consultancy
o Satyam Infoway, the first private ISP in India
o Hinditrom, makers of embedded software
o Selectia, provider of interaction software selector
o Yantra, ITL Infosy’s US subsidiary, solution for supply chain management
o Rediff on the Net, India website featuring electronic shopping, news, chat etc.

3.2 OBJECTIVE AND VISION FOR VENTURE CAPITAL IN

INDIA

Venture capitalists finance innovation and ideas which have potential for high growth but with
inherent uncertainties. This makes it a high-risk, high return investment. Apart from finance,
venture capitalists provide networking, management and marketing support as well. In the
broadest sense, therefore, venture capital connotes financial as well as human capital. In the
global venture capital industry, investors and investee firms work together closely in an
enabling environment that allows entrepreneurs to focus on value creating ideas and
allows venture capitalists to drive the industry through ownership of the levers of control, in
return for the provision of capital, skills, information and complementary resources. This very
blend of risk financing and hand holding of entrepreneurs by venture capitalists creates an
environment particularly suitable for knowledge and technology based enterprises.

Scientific, technology and knowledge based ideas properly supported by venture capital can be
propelled into a powerful engine of economic growth and wealth creation in a sustainable
manner. In various developed and developing economies venture capital has played a
significant developmental role. India, along with Israel, Taiwan and the United States, is
recognized for its globally competitive high technology and human capital. India has the second
largest English speaking scientific and technical manpower in the world.
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 The Indian software sector crossed the Rs 100 billion mark turnover during 1998. The sector
grew 58% on a year to year basis and exports accounted for Rs 65.3 billion while the domestic
market accounted for Rs 35.1 billion. Exports grew by 67% in rupee terms and 55% in US
dollar terms. The strength of software professionals grew by 14% in 1997 and has crossed
1, 60000. The global software sector is expected to grow at 12% to 15% per annum for the
next 5 to 7 years.

Recently, there has also been greater visibility of Indian companies in the US.

Given such vast potential not only in IT and software but also in the field of service industries,
biotechnology, telecommunications, media and entertainment, medical and health services and
other technology based manufacturing and product development, venture capital industry can
play a catalytic role to put India on the world map as a success story.

3.3 GROWTH OF VENTURE CAPITAL IN INDIA

Growth of Venture Capital in India

The venture capital is growing 43% CAGR. However, in spite of the venture capital scenario
improving, several specific Venture Capital funds are setting up shop in India, with the year
2007 having been a landmark year for venture capital in India. The no of deals are increasing
year by year. The no of deal in 2003 only 56 and now in 2007 it touch the 387 deals. The
introduction stage of venture capital industry in India is completed in 2003 after that growing
stage of India venture capital industry is started.

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There are 160 venture capital firms/funds in India. In 2006 it is only but in 2007 the number
of venture capital firms are 146. The reason is good position of capital market. But in
2008 no of venture capital firms increase by only 14 the reason is crash down of capital market
by 51%. The no of venture capital funds are increasing year by year.

2000 2001 2002 2003 2004 2005 2006 2007 2008

81 77 78 81 86 89 105 146 160

Venture capital growth and industrial clustering have a strong positive correlation.
Foreign direct investment, starting of R&D centres, availability of venture capital and growth
of interneural firms are getting concentrated into five clusters. The cost of monitoring and the
cost of skill acquisition are lower in clusters, especially for innovation. Entry costs are also
lower in clusters. Creating entrepreneurship and stimulating innovation in clusters have to
become a major concern of public policy makers. This is essential because only when the
cultural context is conductive for risk management venture capital will take-of. Clusters support
innovation and facilitates risk bearing. Venture capital prefer clusters because the information
costs are lower. Policies for promoting dispersion of industries are becoming redundant after
the economic liberalization.
The venture capital firm invest their money in most developing sectors like health care, IT-
ITes, Telecom, Bio-technology, Media & Entertainment, shipping & logistic etc.

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 Total sector wise venture capital investment

Now venture capital is nascent stage in India. Now due to growth of sector, the venture capital
industry is also growing. The top most players in the industries are ICICI venture capital
fund, IT&FS venture capital fund, Canbank.

3.4 PROBLEMS OF VENTURE CAPITAL FINANCING IN INDIA :

VCF is in its nascent stages in India. The emerging scenario of global competitiveness has put
an immense pressure on the industrial sector to improve the quality level with minimization
of cost of products by making use of latest technological skills. The implication is to obtain
adequate financing along with the necessary hi-tech equipment’s to produce an innovative
product which can succeed and grow in the present market condition. Unfortunately, our
country lacks on both fronts. The necessary capital can be obtained from the venture capital
firms who expect an above average rate of return on the investment. The financing firms
expect a sound, experienced, mature and capable management team of the company being
financed. Since the innovative project involves a higher risk, there is an expectation of
higher returns from the project. The payback period is also generally high (5 - 7 years).
The various problems/ queries can be outlined as follows:

o Requirement of an experienced management team.

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 o Requirement of an above average rate of return on investment.

o Longer payback period.

o Uncertainty regarding the success of the product in the market.
o Questions regarding the infrastructure details of production like plant location,
accessibility, relationship with the suppliers and creditors, transportation facilities,
labour availability etc.
o The category of potential customers and hence the packaging and pricing details of
the product.
o The size of the market.
o Major competitors and their market share.
o Skills and Training required and the cost of training.
o Financial considerations like return on capital employed (ROCE), cost of the project,
the Internal Rate of Return (IRR) of the project, total amount of funds required, ratio
of owners investment (personnel funds of the entrepreneur), borrowed capital,
mortgage loans etc. in the capital employed.

OPPORTUNITIES AND THREATS

 OPPORTUNITIES:
Initiatives taken by the Government in formulating policies to encourage investors
and entrepreneurs
The emerging scenario of global competitiveness has put an immense pressure on the
industrial sector to improve the quality level with minimization of cost of products by
making use of latest technological skills. The implication is to obtain adequate financing
along with the necessary hi-tech equipment’s to produce an innovative product which can
succeed and grow in the present market condition. Unfortunately, our country lacks on
both fronts. The necessary capital can be obtained from the venture capital firms
who expect an above average rate of return on the investment. Government of India
understands this.

Also, The Government of India in an attempt to bring the nation at par and above the
developed nations has been promoting venture capital financing to new, innovative
concepts & ideas, liberalizing taxation norms providing tax incentives to venture firms,
giving an opportunity for the creation of local pools of capital and holding training
sessions for the emerging VC investors.

44
In the year 2000, the finance ministry announced the liberalization of tax treatment
for venture capital funds to promote them & to increase job creation. This is expected to
give a strong boost to the non resident Indians located in the Silicon Valley and elsewhere
to invest some of their capital, knowledge and enterprise in these ventures.

o SME GROWTH

VC, to be able to contribute to developing entrepreneurship in India, needs to concentrate

its investment in small and medium enterprises. A “Package for Promotion of Micro
and Small Enterprises” was announced in February 2007.

This includes measures addressing concerns of credit, fiscal support, cluster- based
development, infrastructure, technology, and marketing. Capacity building of MSME
Associations and support to women entrepreneurs are the other important features of this
package. SMEs have been allowed to manage their direct/indirect exposure to foreign
exchange risk by booking/cancelling/rollover of forward contracts without prior
permission of RBI.

To boost the micro and small enterprise sector, the bank has decided to refinance an
amount of 7000 crore to the Small Industries Development Bank of India, which will be
available up to March 31, 2010. The Central Bank said that it is also working on a
similar refinance facility for the National Housing Bank (NHB) of an amount of Rs
4, 000 crore.

45
The Indian economy is growing at 8-9% so the there is a development of all sector
like manufacturing, services sector. So there is a great opportunities for Venture Capital
firms. Because mostly invest their money in this sectors.

India amongst leading entrepreneurial Hotbeds globally

City competencies emerging

o Bangalore

 All IP-led companies; IT and IT-enabled services

o Delhi (NCR)

 Software services, IT enabled services, Telecom

o Mumbai

 Software services, IT enabled services, Media, Computer Graphics,

Animation, Banking

o Other emerging Centres

 Chennai, Hyderabad, and Pune

Emerging sectors for investments

As the venture industry continues to accelerate, a number of trends that cross geographies
can be seen. The industry is becoming even more globalized .As a result, innovation in
clean tech, IT, and healthcare, pharmaceutical are having a global impact. This changing
landscape is driving new approaches in how large corporations are interacting with the
venture community.

Clean technology
Global climate changes, high oil prices, accelerated growth in emerging markets, energy
security concerns and the finite nature of resources are some of the key drivers of the
growing global demand for clean technologies in energy and water. In addition ,the
increased willingness of consumers and governments to pay for and use green
technologies ,combined with the positive exit environment of the last years ,has provided
venture capitalists with the confidence to invest in emerging companies around the globe.

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According to the research from Dow Jones Venture One and Ernst &Young .US $1.28
billion was invested in 140financing rounds in 2006 in China , Europe Israel and
United States that compares to US $ 664.1 million invested in 103 financing rounds in
2005,showing the capital investment in the field has nearly doubled over the past year. It
is expected that investment in clean technologies will continue to increase not only in
developed markets but also in the developing markets, mainly in India and China.

Biotechnology

Over last few years ,the story of the US biotech industry has been one of the remarkable
success .There are signs that this success story is now repeated in other parts of world
,with maturing pipelines, record breaking financing totals, strong deal activity and
impressive financial results. Industry is grew 31% for second year in raw in 2007.

Pharmaceutical
The industry's growth rate is likely to touch 19 per cent from the current 13 per cent,
according to a projection released by the Confederation of Indian Industries (CII), on
September 1, 2008.

According to a McKinsey study, the Indian pharmaceutical industry is projected to grow

to US$ 25 billion by 2010 whereas the domestic market is likely to more than triple to
US$ 20 billion by 2015 from the current US$ 6 billion to become one of the leading
pharmaceutical markets in the next decade.

The Indian pharmaceutical industry has shown robust growth in terms of infrastructure
development, technology base creation and a wide range of products with a
determination to flourish in the rapidly changing environment, thereby establishing its
global presence. The Indian pharmaceutical industry has increased its competitive
intensity owing to pricing pressures and striving consistently to innovate. ICICI Venture-
controlled Ranbaxy Fine Chemicals (RFCL) has acquired the US-based specialty
chemicals major Mallinckrodt Baker in a deal estimated at US$ 340 million.

So there is great opportunity for venture capital industry to invest their money in this
sector. Nowadays, India will become a global pharmacy hub exporting by exporting
domestically produced generic products.

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 IT/IT-ES Industry

The Department of Information Technology is setting up Nano Electronic Centres

at the Indian Institute of Technology, Mumbai and the Indian Institute of Science,
Bangalore. With an outlay of about Rs. 100 crore to carry out R&D activities in nano-
electronics devices and materials.

In 2006-07, the performance of the Information Technology Enabled Services– Business

Process Outsourcing (ITES-BPO) industry was marked by double-digit revenue growth,
steady expansion into newer service lines and increased geographic penetration and an
unprecedented rise in investments by multinational corporations (MNCs).

The Special Incentive Package Scheme (SIPS) to encourage investments for setting up
semiconductor fabrication and other micro- and nano-technology manufacturing
industries was announced in March2007. The incentives admissible would be 20
per cent of the capital expenditure during the first 10 years for units located in
Special Economic Zones (SEZs) and 25 per cent for units located outside SEZs.

Electronic Industry

There is a high growth of software and solutions related to the consumer Internet,
software as a service (SAAS), open source, software-cum-services and
telecommunications (both wireless and wire-line) products and related services. There is
a great opportunity for venture capital industry to invest in this electronic production
industry.

 Threats:
Venture Capital Market in India Getting Overheated

The Venture Capital market in India seems to be getting as hot as the country’s famous
summers. However, this potential over-exuberance may lead to some stormy days ahead,
based on sobering research compiled by global research and analytics services firm,
Evalueserve. Evalueserve research shows an interesting phenomenon is beginning to
emerge:

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Over 44 US-based Venture capital firms are now seeking to invest heavily in start-
ups and early-stage companies in India. These firms have raised, or are in the process
of raising, an average of US $100 million each. Indeed, if these 40- plus firms are

successful in raising money, they would garner approximately $4.4 billion to be invested
during the next 4 to 5 years. Taking Indian Purchasing Power Parity (PPP) into
consideration, this would be equivalent to $22 billion worth of investment in the US.
Since about $1.75 billion (or approximately 40% of $4.4 billion) has been already raised,
even if only $2.2 billion is raised by December 2006, Evalueserve cautions that there will
be a glut of Venture Capital money for early stage investments in India. This will be
especially true if the VCs continue to invest only in currently favourite sectors such
as IT, BPO, software and hardware products, telecom, and consumer Internet. Given
that a typical start-up in India would require $9 million during the first three years (i.e.,
$3 million per year) and even assuming that the start-up survives for three years, investing
$2.2 billion during 2007-2010 would imply investing in 150 to 180 start-ups every
year during this period, which simply does not seem practical if the VCs continue to
focus only on their current favourite sectors.

Unproductive workforce:
A global survey by McKinsey & Company revealed that Indian business leaders are
much more optimistic about the future than their international peers. So Indian
employees are tardy in their job so it will effect reversely on the economic condition of
the country. Because they are unproductive to the economy of the country.

Exit route barriers:

Due to crash down of market by 51% from January to November 2008. It creates a
problem for venture capital firms. Because nobody is trying to come up with IPO and
IPO is the exits route door Venture Capital.

Taxes on emerging sector:

As per Union Budget 2007 and its broad guidelines, Government proposed to limit
pass-through status to venture capital funds (VCFs) making investment in nine areas.
These nine areas are biotechnology, information technology, nanotechnology, seed
research and development, R&D for pharmacy sectors, dairy industry, poultry industry
and production of bio-fuels. Pass-through status means that the incomes earned by funds
are taxable now.
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 RECOMMENDATIONS:
Multiplicity of regulations – need for harmonization and
nodal Regulator:
Presently there are three set of Regulations dealing with venture capital activity i.e. SEBI (Venture
Capital Regulations) 1996, Guidelines for Overseas Venture Capital Investments issued by
Department of Economic Affairs in the MOF in the year 1995 and CBDT Guidelines for Venture
Capital Companies in 1995 which was modified in 1999. The need is to consolidate and substitute
all these with one single regulation of SEBI to provide for uniformity, hassle free single window
clearance. There is already a pattern available in this regard; the mutual funds have only one set
of regulations and once a mutual fund is registered with SEBI, the tax exemption by CBDT and
inflow of funds from abroad is available automatically. Similarly, in the case of FIIs, tax benefits
and foreign inflows/outflows are automatically available once these entities are registered
with SEBI. Therefore, SEBI should be the nodal regulator for VCFs to provide uniform, hassle
free, single window regulatory framework. On the pattern of FIIs, Foreign Venture Capital
Investors (FVCIs) also need to be registered with SEBI.

Tax passes through for Venture Capital Funds:

VCFs are a dedicated pool of capital and therefore operate in fiscal neutrality and are treated as
pass through vehicles. In any case, the investors of VCFs are subjected to tax. Similarly, the
investee companies pay taxes on their earnings. There is a well established successful precedent
in the case of Mutual Funds which once registered with SEBI are automatically entitled to tax
exemption at pool level. It is an established principle that taxation should be only at one level and
therefore taxation at the level of VCFs as well as investors amount to double taxation. Since like
mutual funds VCF is also a pool of capital of investors, it needs to be treated as a tax pass through.
Once registered with SEBI, it should be entitled to automatic tax pass through at the pool level
while maintaining taxation at the investor level without any other requirement under Income Tax
Act.

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Mobilization of Global and Domestic resources:

o Foreign Venture Capital Investors (FVCIs):

Presently, FIIs registered with SEBI can freely invest and disinvest without taking
FIPB/RBI approvals. This has brought positive investments of more than US $10 billion.
At present, foreign venture capital investors can make direct investment in venture capital
undertakings or through a domestic venture capital fund by taking FIPB / RBI approvals.
This investment being long term and in the nature of risk finance for start-up enterprises,
needs to be encouraged. Therefore, at least on par with FIIs, FVCIs should be registered
with SEBI and having once registered, they should have the same facility of hassle free
investments and disinvestments without any requirement for approval from FIPB /
RBI. This is in line with the present policy of automatic approvals followed by the
Government. Further, generally foreign investors invest through the Mauritius-route and
do not pay tax in India under a tax treaty. FVCIs therefore should be provided tax
exemption. This provision will put all FVCIs, whether investing through the Mauritius
route or not, on the same footing. This will help the development of a vibrant India-based
venture capital industry with the advantage of best international practices, thus enabling a
jump-starting of the process of innovation. The hassle free entry of such FVCIs on the
pattern of FIIs is even more necessary because of the following factors:

 Venture capital is a high risk area. In out of 10 projects, 8 either fail or yield
negligible returns. It is therefore in the interest of the country that FVCIs bear such
a risk.
 For venture capital activity, high capitalization of venture capital companies
is essential to withstand the losses in 80% of the projects. In India, we do not have
such strong companies.
 The FVCIs are also more experienced in providing the needed managerial expertise
and other supports.

o Augmenting the Domestic Pool of Resources:

The present pool of funds available for venture capital is very limited and is predominantly
contributed by foreign funds to the extent of 80 percent. The pool of domestic venture
capital needs to be augmented by increasing the list of sophisticated institutional investors
permitted to invest in venture capital funds. This should include banks, mutual funds and
insurance companies’ up to prudential limits. Later, as expertise grows and the venture
51
capital industry matures, other institutional investors, such as pension funds, should also
be permitted. The venture capital funding is high-risk investment and should be restricted
to sophisticated investors. However, investing in venture capital funds can be a valuable
return-enhancing tool for such investors while the increase in risk at the portfolio level
would be minimal. Internationally, over 50% of venture capital comes from pension
funds, banks, mutual funds, insurance funds and charitable institutions.

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 CONCLUSION
The study provides that the maturity if the still nascent Indian Venture Capital market is
imminent.

Venture Capitalists in Indian have notice of newer avenues and regions to expand. VCs
have moved beyond IT service but are cautious in exploring the right business model, for
finding opportunities that generate better returns for their investors.

In terms of impediments to expansion, few concerning factors to VCs include; unfavourable

political and regulatory environment compared to other countries, difficulty in achieving
successful exists and administrative delays in documentation and approval.

In spite of few non attracting factors, Indian opportunities are no doubt promising which is
evident by the large number of new entrants in past years as well in coming days. Nonetheless
the market is challenging for successful investment.

Therefore Venture capitalists responses are upbeat about the attractiveness of the India as a
place to do the business.

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BIBLIOGRAPHY

 BOOKS:

 Taneja Satish, “Venture Capital in India”.

 Chary T Satyanarayana, “Venture Capital – Concepts & Applications ”

 MAGAZINE:

 Sharma Kapil, an Analysis of Venture Capital Industry in India.

 REPORT:

 Trends of Venture Capital in India, survey Report by Deloitte, 2009.

 Global Trends of Venture Capital, survey report by Deloitte, 2009.
 Economic survey 2008-09,

 WEBSITE:

 www.ivca.org
 www.indiavca.org.
 www.vcindia.com
 www.ventureintelligence.in
 www.nvca.org
 www.economictimes.indiatimes.com
 www.100ventures.com
 www.google.com
 www.deloitte.com

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