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    VENTURE CAPITAL

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    1. INTRODUCTION

    The Venture capital is the life blood of new industry in the financial market today. Venture

    capital is the money provided by professionals who invest alongside management in young,

    rapidly growing companies that have the potential to develop into significant economic

    contributors. Venture capital is an important source of equity for start-up companies. Venture

    capital can be visualized as your ideas and our money concept of developing business. The

    venture capital industry in India has really taken off in. Venture capitalists not only provide

    monetary resources but also help the entrepreneur with guidance in formalizing his ideas into a

    viable business venture. In order to promote innovation, enterprise and conversion of scientific

    technology and knowledge based ideas into commercial production, it is very important to

    promote venture capital activity in India. Indias success story in the area of informationtechnology has shown that there is a tremendous potential for growth of knowledge based

    industries. The recent economic slowdown of IT Sector is provided a chance to Venture

    capitalist to consider investment opportunities in other sectors such as Manufacturing and

    Service Industry which will be necessary to have overall economic development and to reduce

    the economic dependency on a single sector. The current paper will concentrate on the different

    opportunities in Non-IT Sector as well the investment opportunities available for Venture

    capitalist which ensures better perspective for Indian economy.

    The Venture capital sector is the most vibrant industry in the financial market today. Venture

    capitalists are professional investors who specialize in funding and building young, innovative

    enterprises. Venture capitalists are long-term investors who take a hands-on approach with all of

    their investments and actively work with entrepreneurial management teams in order to build

    great companies which will have the potential to develop into significant economic contributors.

    Venture capital is an important source of equity for start-up companies. Venture capital can be

    visualized as your ideas and our money concept of developing business.

    Venture capitalists are people who pool financial resources from high net worth individuals,

    corporate, pension funds, insurance companies, etc. to invest in high risk - high return ventures

    that are unable to source funds from regular channels like banks and capital markets. The venture

    capital industry in India has really taken off in. Venture capitalists not only provide monetary

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    resources but also help the entrepreneur with guidance in formalizing his ideas into a viable

    business venture.

    Five critical success factors have been identified for the growth of VC in India, namely:

    The regulatory, tax and legal environment should play an enabling role as internationally

    venture funds have evolved in an atmosphere of structural flexibility, fiscal neutrality and

    operational adaptability.

    Resource raising, investment, management and exit should be as simple and flexible as needed

    and driven by global trends.

    Venture capital should become an institutionalized industry that protects investors and invitee

    firms, operating in an environment suitable for raising the large amounts of risk capital needed

    and for spurring innovation through start-up firms in a wide range of high growth areas.

    Venture capital should become an institutionalized industry that protects investors and invitee

    firms, operating in an environment suitable for raising the large amounts of risk capital needed

    and for spurring innovation through start-up firms in a wide range of high growth areas.

    In view of increasing global integration and mobility of capital it is important that Indian

    venture capital funds as well as venture finance enterprises are able to have global exposure

    and investment opportunities

    Infrastructure in the form of incubators and R&D need to be promoted using government

    support and private management as has successfully been done by countries such as the US,

    Israel and Taiwan. This is necessary for faster conversion of R&D and technological

    innovation into commercial products.

    With technology and knowledge based ideas set to drive the global economy in the coming

    millennium, and given the inherent strength by way of its human capital, technical skills, cost

    competitive workforce, research and entrepreneurship, India can unleash a revolution of wealth

    creation and rapid economic growth in a sustainable manner. However, for this to happen, there

    is a need for risk finance and venture capital environment which can leverage innovation,

    promote technology and harness knowledge based ideas.

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    2 PHYSICAL EVIDENCES

    Venture Capital Fund Performance: In this paper, the investment performance of alarge database of venture funds is considered over a 28 year period. The results suggest

    that a portfolio of venture capital partnerships can provide an average return that is

    superior to the public equity market, although the individual fund returns are highly

    positively skewed. Absent these outliers, the level of fund performance is more inline

    with public equity market returns. This paper also establishes a link between public

    equity market conditions and venture capital returns. Finally, some preliminary evidence

    is provided of venture fund performance during and immediately following the dot.com

    bubble.

    A Survey of Venture Capital Research: This survey reviews the growing body ofacademic work on venture capital. It lays out the major data sources used. It examines the

    work on venture capital investments in companies, looking at issues of selection,

    contracting, post-investment services and exits. The survey considers recent work on

    organizational structures of venture capital firms, and the relationship between general

    and limited partners. It discusses the work on the returns to venture capital investments. It

    also examines public policies, and the role of venture capital in the economy at large.

    Venture-Capital Financing and the Growth of Startup Firms:Venture capital firmshave unique capabilities in terms of dealing with high uncertainty, high degrees of

    information asymmetry, and providing access to a strategic network. This study examines

    the association between the presence of venture capital and the growth of startups. It

    explores whether venture capital leads to growth or, alternatively growth signals the need

    for venture capital. It also investigates the impact if any of venture capital financing

    events and the growth of these firms. Finally, it documents the relationship between

    growth in startup financial valuation and changes in the number of employees over

    successive rounds of financing.

    New Venture Valuation by Venture Capitalists: An Integrative Approach: How tovaluate accurately a new venture is a critical and underresearched question in entrepreneurial financing.

    Leveraging established theories in strategic management, this research study develops an integrative

    theoretical framework to examine whether venture capitalists valuation of a new venture can be explained

    by variables identified in the strategy literature as important to predicting firmlevel economic

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    performance. A systematic linkage between welldeveloped theories in strategy and venture capital

    valuation practice are corroborated empirically. This research study proposes a complementary method to

    extant valuation methods to valuate a new venture.

    3..VENTURE CAPITAL AT A TAKE-OFF STAGE IN INDIA:-

    The venture capital industry in India is still at a nascent stage. With a view to promote

    innovation, enterprise and conversion of scientific technology and knowledge based ideas into

    commercial production, it is very important to promote venture capital activity in India. In dias

    recent success story in the area of information technology has shown that there is a tremendous

    potential for growth of knowledge based industries. This potential is not only confined to

    information technology but is equally relevant in several areas such as bio-technology,pharmaceuticals and drugs, agriculture, food processing, telecommunications, services, etc.

    Given the inherent strength by way of its skilled and cost competitive manpower, technology,

    research and entrepreneurship, with proper environment and policy support, India can achieve

    rapid economic growth and competitive global strength in a sustainable manner.

    A flourishing venture capital industry in India will fill the gap between the capital requirements

    of Manufacture and Service based startup enterprises and funding available from traditional

    institutional lenders such as banks. The gap exists because such startups are necessarily based onintangible assets such as human capital and on a technology-enabled mission, often with the

    hope of changing the world. Very often, they use technology developed in university and

    government research laboratories

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