Documente Academic
Documente Profesional
Documente Cultură
1.
Introduction
2.
Significance of Study
3.
Objective of Study
4.
Research Methodology
Literature Review
Conceptual Framework
Operational Definition
5.
6.
Findings
7.
Suggestions
8.
Conclusion
9.
Limitation
10.
Bibliographies
11.
Annexure
ANNEXURE I NAME OF VENTURE CAPITAL FIRMS OUT SIDE
OF INDIA
ANNEXURE II NAME OF VENTURE CAPITAL FIRMS IN INDIA.
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INTRODUCTION
A number of technocrats are seeking to set up shop on their own and capitalize on
opportunities. In the highly dynamic economic climate that surrounds us today, few
traditional business models may survive. Countries across the globe are realizing that it is
not the conglomerates and the gigantic corporations that fuel economic growth any more. The
essence of any economy today is the small and medium enterprises. For example, in the US,
50% of the exports are created by companies with less than 20 employees and only 7% are
created by companies with 500 or more employees. This growing trend can be attributed to
rapid advances in technology in the last decade. Knowledge driven industries like InfoTech,
health-care, entertainment and services have become the cynosure of bourses worldwide. In
these sectors, it is innovation and technical capability that are big business-drivers. This is a
paradigm shift from the earlier physical production and economies of scale model.
However, starting an enterprise is never easy. There are a number of parameters that
contribute to its success or downfall. Experience, integrity, prudence and a clear
understanding of the market are among the sought after qualities of a promoter. However,
there are other factors, which lie beyond the control of the entrepreneur. Prominent among
these is the timely infusion of funds. This is where the venture capitalist comes in, with
money, business sense and a lot more.
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entrepreneur in which the investor can add value to the company because of his knowledge,
experience and contact base.
business merits of the proposed company. Venture capitalists only invest in a small
percentage of the businesses they review and have a long-term perspective. They also
actively work with the company's management, especially with contacts and strategy
formulation.
Venture capitalists mitigate the risk of investing by developing a portfolio of young
companies in a single venture fund. Many times they co-invest with other professional
venture capital firms. In addition, many venture partnerships manage multiple funds
simultaneously. For decades, venture capitalists have nurtured the growth of America's high
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Even individuals may be venture capitalists. In the early days of venture capital
investment, in the 1950s and 1960s, individual investors were the archetypal venture investor.
While this type of individual investment did not totally disappear, the modern venture firm
emerged as the dominant venture investment vehicle. However, in the last few years,
individuals have again become a potent and increasingly larger part of the early stage start-up
venture life cycle. These "angel investors" will mentor a company and provide needed capital
and expertise to help develop companies. Angel investors may either be wealthy people with
management expertise or retired business men and women who seek the opportunity for firsthand business development.
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A BRIEF HISTORY
The concept of venture capital is not new. Venture capitalists often relate the story of
Christopher Columbus. In the fifteenth century, he sought to travel westwards instead of
eastwards from Europe and so planned to reach India. His far-fetched idea did not find favor
with the King of Portugal, who refused to finance him. Finally, Queen Isabella of Spain
decided to fund him and the voyages of Christopher Columbus are now empanelled in
history.
The modern venture capital industry began taking shape in the post World War II
years. It is often said that people decide to become entrepreneurs because they see role
models in other people who have become successful entrepreneurs. Much the same thing can
be said about venture capitalists. The earliest members of the organized venture capital
industry had several role models, including these three:
American Research and Development Corporation, formed in 1946, whose biggest
success was Digital Equipment. The founder of ARD was General Georges Doroit, a Frenchborn military man who is considered "the father of venture capital." In the 1950s, he
taught at the Harvard Business School. His lectures on the importance of risk capital were
considered quirky by the rest of the faculty, who concentrated on conventional corporate
management.
J.H. Whitney & Co also formed in 1946, one of whose early hits was Minute Maid
juice. Jock Whitney is considered one of the industrys founders.
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annualized Return on Investment (ROI). The US$70,000 Digital invested to start the
company in 1959 had a market value of US$37mn. As a result, venture capital became a hot
market, particularly for wealthy individuals and families. However, it was still considered too
risky for institutional investors.
In the 1970s, though, venture capital suffered a double-whammy. First, a red-hot IPO
market brought over 1,000 venture-backed companies to market in 1968, the public markets
went into a seven-year slump. There were a lot of disappointed stock market investors and a
lot of disappointed venture capital investors too. Then in 1974, after Congress legislation
against the abuse of pension fund money, all high-risk investment of these funds was halted.
As a result of poor public market and the pension fund legislation, venture capital fund
raising hit rock bottom in 1975.
Well, things could only get better from there. Beginning in 1978, a series of
legislative and regulatory changes gradually improved the climate for venture investing. First
Congress slashed the capital gains tax rate to 28% from 49.5%. Then the Labor Department
issued a clarification that eliminated the pension funds act as an obstacle to venture investing.
At around the same time, there was a number of high-profile IPOs by venture-backed
companies. These included Federal Express in 1978, and Apple Computer and Genetech Inc
in 1981. This rekindled interest in venture capital on the part of wealthy families and
institutional investors. Indeed, in the 1980s, the venture capital industry began its greatest
period of growth. In 1980, venture firms raised and invested less than US$600 million. That
number soared to nearly US$4bn by 1987. The decade also marked the explosion in the buyout business.
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The late 1980s marked the transition of the primary source of venture capital funds
from wealthy individuals and families to endowment, pension and other institutional funds.
The surge in capital in the 1980s had predictable results. Returns on venture capital
investments plunged. Many investors went into the funds anticipating returns of 30% or
higher. That was probably an unrealistic expectation to begin with. The consensus today is
that private equity investments generally should give the investor an internal rate of return
something to the order of 15% to 25%, depending upon the degree of risk the firm is taking.
However, by 1990, the average long-term return on venture capital funds fell below
8%, leading to yet another downturn in venture funding. Disappointed families and
institutions withdrew from venture investing in droves in the 1989-91 periods. The economic
recovery and the IPO boom of 1991-94 have gone a long way towards reversing the trend in
both private equity investment performance and partnership commitments.
In 1998, the venture capital industry in the United States continued its seventh straight
year of growth. It raised US$25bn in committed capital for investments by venture firms,
who invested over US$16bn into domestic growth companies US firms have traditionally
been the biggest participants in venture deals, but non-US venture investment is growing. In
India, venture funding more than doubled from $420 million in 2002 to almost $1 billion in
2003. For the first half of 2004, venture capital investment rose 32% from 2003.
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INVESTMENT PHILOSOPHY
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While high technology investment makes up most of the venture investing in the U.S.,
and the venture industry gets a lot of attention for its high technology investments, venture
capitalists also invest in companies such as construction, industrial products, business
services, etc. There are several firms that have specialized in retail company investment and
others that have a focus in investing only in "socially responsible" start-up endeavors.
The basic principal underlying venture capital invest in high-risk projects with the
anticipation of high returns. These funds are then invested in several fledging enterprises,
which require funding, but are unable to access it through the conventional sources such as
banks and financial institutions. Typically first generation entrepreneurs start such
enterprises. Such enterprises generally do not have any major collateral to offer as security,
hence banks and financial institutions are averse to funding them. Venture capital funding
may be by way of investment in the equity of the new enterprise or a combination of debt and
equity, though equity is the most preferred route.
Since most of the ventures financed through this route are in new areas (worldwide
venture capital follows "hot industries" like InfoTech, electronics and biotechnology), the
probability of success is very low. All projects financed do not give a high return. Some
projects fail and some give moderate returns. The investment, however, is a long-term risk
capital as such projects normally take 3 to 7 years to generate substantial returns. Venture
capitalists offer "more than money" to the venture and seek to add value to the investee unit
by active participation in its management. They monitor and evaluate the project on a
continuous basis.
The venture capitalist is however not worried about failure of an investee company,
because the deal which succeeds, nets a very high return on his investments high enough to
make up for the losses sustained in unsuccessful projects. The returns generally come in the
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form of selling the stocks when they get listed on the stock exchange or by a timely sale of
his stake in the company to a strategic buyer. The idea is to cash in on an increased
appreciation of the share value of the company at the time of disinvestment in the investee
company. If the venture fails (more often than not), the entire amount gets written off.
Probably, that is one reason why venture capitalists assess several projects and invest only in
a handful after careful scrutiny of the management and marketability of the project.
To conclude, a venture financier is one who funds a start up company, in most cases
promoted by a first generation technocrat promoter with equity. A venture capitalist is not a
lender, but an equity partner. He cannot survive on minimalism. He is driven by
maximization: wealth maximization. Venture capitalists are sources of expertise for the
companies they finance. Exit is preferably through listing on stock exchanges. This method
has been extremely successful in USA, and venture funds have been credited with the success
of technology companies in Silicon Valley. The entire technology industry thrives on it
LENGTH OF INVESTMENT:
Venture capitalists will help companies grow, but they eventually seek to exit the
investment in three to seven years. An early stage investment make take seven to ten years to
mature, while a later stage investment many only take a few years, so the appetite for the
investment life cycle must be congruent with the limited partnerships appetite for liquidity.
The venture investment is neither a short term nor a liquid investment, but an investment that
must be made with careful diligence and expertise.
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4. Second Stage: In the Second Stage of Financing working capital is provided for the
expansion of the company in terms of growing accounts receivable and inventory.
5. Third Stage: Funds provided for major expansion of a company having increasing sales
volume. This stage is met when the firm crosses the break even point.
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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 percent 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 charge royalty ranging
between 2 to 15 percent; 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.
sector, have started introducing innovative financial securities like participating debentures,
introduced by TCFC is an example.
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Many venture capitalists try to mitigate this problem through diversification. They
invest in companies in different industries and different countries so that the systematic risk
of their total portfolio is reduced. Others concentrate their investments in the industry that
they are familiar with. In either case, they work on the assumption that for every ten
investments they make, two will be failures, two will be successful, and six will be
marginally successful. They expect that the two successes will pay for the time given to, and
risk exposure of the other eight. In good times, the funds that do succeed may offer returns of
300 to 1000% to investors.
Venture capital partners (also known as "venture capitalists" or "VCs") may be former
chief executives at firms similar to those which the partnership funds. Investors in venture
capital funds are typically large institutions with large amounts of available capital, such as
state and private pension funds, university endowments, insurance companies and pooled
investment vehicles.
Most venture capital funds have a fixed life of ten yearsthis model was pioneered
by some of the most successful funds in Silicon Valley through the 1980s to invest in
technological trends broadly but only during their period of ascendance, to cut exposure to
management and marketing risks of any individual firm or its product.
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SIGNIFICANCE OF STUDY
Venture capitalists not only support high technology projects they also fianc any
risky idea, they provide funds (a) if one needs additional capital to expand his existing
business or one has a new & promising project to exploit (b) if one cannot obtain a
conventional loan the requirement terms would create a burden during the period the firm is
struggling to grown.
It is the ambition of many talented people in India to set up their own venture if they
could get adequate & reliable support. Financial investment provides loans & equity. But they
do not provide management support, which is often needed by entrepreneurs. But the venture
capital industries provide such support along with capital also. Venture capitalist acts a
partner not a financier.
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Objective No. 1
Instruments
Rs million
Per cent
Equity Shares
6,318.12
63.18
2,154.46
21.54
873.01
8.73
Convertible Instruments
580.02
5.8
Other Instruments
75.85
0.75
Total
10,000.46
100
Interpretation: This diagram shows the venture capital financing in equity share and
secondly they invest in redeemable preference shares to get higher returns.
Contributors of Funds
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Contributors
Rs. mn
Per cent
13,426.47
52.46%
6,252.90
24.43%
2,133.64
8.34%
Other Banks
1,541.00
6.02%
Foreign Investors
570
2.23%
Private Sector
412.53
1.61%
Public Sector
324.44
1.27%
Nationalized Banks
278.67
1.09%
235.5
0.92%
215
0.84%
Other Public
115.52
0.45%
Insurance Companies
85
0.33%
Mutual Funds
4.5
0.02%
Total
25,595.17
100.00%
Interpretation: This table shows the highest contribution of fund FII and secondly AIFI to
develop the Industry.
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Investment Stages
Rs million
Number
Start-up
3,813.00
297
Later stage
3,338.99
154
1,825.77
124
Seed stage
963.2
107
Turnaround financing
59.5
Total
10,000.46
691
Interpretation: This diagram shows the highest finance is received by the venture in
startup stage of any venture.
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Financing By Industry
Industry
Rs million
2,599.32
Computer Software
1,832
Consumer Related
1,412.74
Medical
623.8
500.06
Other electronics
436.54
385.09
Biotechnology
376.46
Energy related
249.56
Computer Hardware
203.36
Miscellaneous
1,380.85
Total
10,000.46
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Financing By States
Investment
Maharashtra
Tamil Nadu
Andhra Pradesh
Gujarat
Karnataka
West Bengal
Haryana
Delhi
Uttar Pradesh
Madhya Pradesh
Kerala
Goa
Rajasthan
Punjab
Orissa
Dadra & Nagar Haveli
Himachal Pradesh
Pondicherry
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Rs million
2,566
1531
1372
1102
1046
312
300
294
283
231
135
105
87
84
35
32
28
22
Bihar
16
Overseas
413
Total
9994
Source IVCA (2005-06)
Interpretation: In this diagram highest finance given by the Maharashtra to the ventures
to promote the state economy growth.
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THE MANAGEMENT
Most businesses are people driven, with success or failure depending on the
performance of the team. It is important to distinguish the entrepreneur from the professional
management team. The value of the idea, the vision, putting the team together, getting the
funding in place is amongst others, some key aspects of the role of the entrepreneur. Venture
capitalists will insist on a professional team coming in, including a CEO to execute the idea.
One-man armies are passe. Integrity and commitment are attributes sought for. The venture
capitalist can provide the strategic vision, but the team executes it. As a famous Silicon
Valley saying goes "Success is execution, strategy is a dream".
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THE IDEA
The idea and its potential for commercialization are critical. Venture funds look for a
scalable model, at a country or a regional level. Otherwise the entire game would be reduced
to a manpower or machine multiplication exercise. For example, it is very easy for Hindustan
Lever to double sales of Liril - a soap without incremental capex, while Gujarat Ambuja
needs to spend at least Rs4bn before it can increase sales by 1mn ton. Distinctive competitive
advantages must exist in the form of scale, technology, brands, distribution, etc which will
make it difficult for competition to enter.
VALUATION
All investment decisions are sensitive to this. An old stock market saying "Every
stock is a buy at a price and vice versa". Most deals fail because of valuation expectation
mismatch. In India, while calculating returns, venture capital funds will take into account
issues like rupee depreciation, political instability, which adds to the risk premia, thus
suppressing valuations. Linked to valuation is the stake, which the fund takes. In India,
entrepreneurs are still uncomfortable with the venture capital "taking control" in a seed stage
project.
EXIT
Without exit, gains cannot be booked. Exit may be in the form of a strategic sale
or/and IPO. Taxation issues come up at the time. Any fund would discuss all exit options
before closing a deal. Sometimes, the fund insists on a buy back clause to ensure an exit.
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PORTFOLIO BALANCING
Most venture funds try and achieve portfolio balancing as they invest in different
stages of the company life cycle. For example, a venture capital has invested in a portfolio of
companies predominantly at seed stage; they will focus on expansion stage projects for future
investments to balance the investment portfolio. This would enable them to have a phased
exit. In summary, venture capital funds go through a certain due diligence to finalize the deal.
This includes evaluation of the management team, strategy, execution and commercialization
plans. This is supplemented by legal and accounting due diligence, typically carried out by an
external agency. In India, the entire process takes about 6 months. Entrepreneurs are advised
to keep that in mind before looking to raise funds. The actual cash inflow might get delayed
because of regulatory issues. It is interesting to note that in USA, at times angels write checks
across the table.
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RESEARCH METHODOLOGY
REDMEN & MORY defines,Research as a systematized effort to gain now
knowledge.
It is a careful investigation for search of new facts in any branch of knowledge. The
purpose of research methodology section is to describe the procedure for conduction the
study. It includes research design, sample size, data collection and procedure of analysis of
research instrument.
Research always starts with a question or a problem. Its purpose is to find answers to
questions through the application of the scientific method. It is a systematic and intensive
study directed towards a more complete knowledge of the subject studied.
RESEARCH DESIGN:
Acc. to Kerlinger, Research design is the plan structure & strategy of investigation
conceived so as to obtain answers to research questions and to control variance.
Acc. to Green and Tull, A research design is the specification of methods and
procedures for acquiring the information needed. It is the overall operational pattern or
framework of the project that stipulates what information is to be collected from which
sources by what procedures.
Its found that research design is purely and simply the framework for a study that guides the
collection and analysis of required data.
Research design is broadly classified into
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LITERATURE REVIEW
ACCORDING TO SUBASH AND NAIR, (MAY 2005)
According to theses persons though the modern concept of venture capital stated
during 1946 and now practiced by almost all economies around the world, there seems to be a
slowdown of venture capital activities after 2000.There may be a long list of reasons for this
situation, where people feel more risky to put their money in new and emerging ventures.
Hardly 5% of the total venture capital investment globally is given to really stage ventures. In
all the years people around the world has seen the potentiality of venture capital in promoting
different economies of the world by improving the standard of living of the people by
expanding business activities, increasing employment and also generating more revenue to
the government
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The issues concerning board of directors' role in venture backed companies are widely
debated topics in academic research. The findings of the study by Fried et. al. (1998)
emphasize that the board of directors are a more involved in the venture-backed firms than
boards where members do not have large ownership at stake. The study provides an empirical
evidence of variation in the boards' involvement and shows its relevance in performance
management of funded units.
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1.
Deal origination
2.
Screening
3.
4.
Deal structuring
5.
Post-investment activity
6.
Exit
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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
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developed countries like USA, is certain intermediaries who match VCFs and the potential
entrepreneurs.
SCREENING:
VCFs, before going for an in-depth analysis, carry out initial screening of all projects
on the basis 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.
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 India 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.
Deal Structuring: Structuring refers to putting together the financial aspects of the
deal and negotiating with the entrepreneurs to accept a venture capitals proposal and finally
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closing the deal. To do a good job in structuring, one needs to be knowledgeable in areas of
accounting, cash flow, finance, legal and taxation. Also the structure should take into
consideration the various commercial issues (ie what the entrepreneur wants and what the
venture capital would require protecting the investment). Documentation refers to the legal
aspects of the paperwork in putting the deal together. The instruments to be used in
structuring deals are many and varied. The objective in selecting the instrument would be to
maximize (or optimize) venture capitals returns/protection and yet satisfies the
entrepreneurs requirements. The instruments could be as follows:
Instrument
Issues
Loan
Clean vs secured
Interest bearing vs non interest bearing
convertible vs one with features (warrants)
1st Charge, 2nd Charge,
loan vs loan stock
Maturity
Preference shares
Warrants
Common shares
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In India, straight equity and convertibles are popular and commonly used. Nowadays,
warrants are issued as a tool to bring down pricing.
A variation that was first used by PACT and TDICI was "royalty on sales". Under
this, the company was given a conditional loan. If the project was successful, the company
had to pay a % age of sales as royalty and if it failed then the amount was written off. In
structuring a deal, it is important to listen to what the entrepreneur wants, but the venture
capital comes up with his own solution. Even for the proposed investment amount, the
venture capital decides whether or not the amount requested, is appropriate and consistent
with the risk level of the investment. The risks should be analyzed, taking into consideration
the stage at which the company is in and other factors relating to the project. (eg exit
problems, etc).
Objective No.2
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SCALABILITY
The Indian software segment has recorded an impressive growth over the last few
years and earns large revenues from its export earnings, yet our share in the global market is
less than 1 per cent. Within the software industry, the value chain ranges from body shopping
at the bottom to strategic consulting at the top. Higher value addition and profitability as well
as significant market presence take place at the higher end of the value chain. If the industry
has to grow further and survive the flux it would only be through innovation. For any venture
idea to succeed there should be a product that has a growing market with a scalable business
model. The IT industry (which is most suited for venture funding because of its "ideas"
nature) in India till recently had a service centric business model. Products developed for
Indian markets lack scale.
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MINDSETS
Venture capital as an activity was virtually non-existent in India. Most venture capital
companies want to provide capital on a secured debt basis, to established businesses with
profitable operating histories. Most of the venture capital units were offshoots of financial
institutions and banks and the lending mindset continued. True venture capital is capital that
is used to help launch products and ideas of tomorrow. Abroad, this problem is solved by the
presence of `angel investors. They are typically wealthy individuals who not only provide
venture finance but also help entrepreneurs to shape their business and make their venture
successful.
EXIT
The exit routes available to the venture capitalists were restricted to the IPO route.
Before deregulation, pricing was dependent on the erstwhile CCI regulations. In general, all
issues were under priced. Even now SEBI guidelines make it difficult for pricing issues for an
easy exit. Given the failure of the OTCEI and the revised guidelines, small companies could
not hope for a BSE/ NSE listing. Given the dull market for mergers and acquisitions,
VALUATION
The recent phenomenon is valuation mismatches. Thanks to the software boom, most
promoters have sky high valuation expectations. Given this, it is difficult for deals to reach
financial closure as promoters do not agree to a valuation. This coupled with the fancy for
software stocks in the bourses means that most companies are preponing their IPOs.
Consequently, the number and quality of deals available to the venture funds gets reduced
Some other major problems facing by venture capitalist in India are:
a.
b.
Requirement
of
an
above
average
rate
of
return
on
investment.
d.
e.
The category of potential customers and hence the packaging and pricing details of
the product.
f.
g.
h.
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i.
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.
OBJECTIVE NO. 3
b.
c.
Second Largest English speaking, scientific & technical manpower in the world.
d.
Vast pool of existing and ongoing scientific and technical research carried by large
number of research laboratories.
e.
f.
Initiatives of the SEBI to develop a strong and vibrant capital market giving the
adequate liquidity and flexibility for investors for entry and exit.
In a recent survey it has been shown that the VC investments in India's I.T. - Software
and services sector (including dot com companies)- have grown from US $ 150 million in 1998
to over US$ 1200 million in 2008. The credit can be given to setting up of a National Venture
Capital Fund for the Software and I.T. Industry (NFSIT) in association with various financial
institutions of Small Industries and Development Bank of India (SIDBI). The facts reveal that
VC disbursements as on September 30, 2002 made by NFSIT totaled Rs 254.36 mn.
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FINDINGS
During the preparation of my report I have analyzed many things which are following:
A number of people in India feel that financial institution are not only conservatives but
they also have a bias for foreign technology & they do not trust on the abilities of
entrepreneurs.
Some venture fails due to few exit options. Teamsignorant of international standards. The
team usually a two or three man team. It does not possess the required depth In top
management. The team is often found to have technical skills but does not possess the
overall organization building skills team is often short sited.
Venture capitalists in India consider the entrepreneurs integrity &urge to grow as the
most critical aspect or venture evaluation.
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LIMITATIONS OF STUDY
1.
The biggest limitation was time because the time was not sufficient as there was lot of
information to be got & to have it interpretation
2.
The data required was secondary & that was not easily available.
3.
4.
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SUGGESTIONS
1.
The investment should be in turnaround stage. Since there are many sick industries in
India and the number is growing each year, the venture capitalists that have
specialized knowledge in management can help sick industries. It would also be
highly profitable if the venture capitalist replace management either good ones in the
sick industries.
2.
It is recommended that the venture capitalists should retain their basic feature that is
tasking high risk. The present situation may compel venture capitalists to opt for less
risky opportunities but is against the spirit of venture capitalism. The established fact
is big gains are possible in high risk projects.
3.
There should be a greater role for the venture capitalists in the promotion of
entrepreneurship. The Venture capitalists should promote entrepreneur forums, clubs
and institutions of learning to enhance the quality of entrepreneurship.
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CONCLUSION
Venture capital can play a more innovation and development role in a developing
country like India. It could help the rehabilitation of sick unit through people with ideas and
turnaround management skill. A large number of small enterprises in India because sick unit
even before the commencement of production of production. Venture capitalist could also be
in line with the developments taking place in their parent companies.
Yet another area where can play a significant role in developing countries is the
service sector including tourism, publishing, healthcare etc. they could also provide financial
assistance to people coming out of the universities, technical institutes etc. who wish to start
their own venture with or without high-tech content, but involving high risk. This would
encourage the entrepreneurial spirit. It is not only initial funding which is need from the
venture capitalists, but the should also simultaneously provide management and marketing
expertise-a real critical aspect of venture capitalists, but they also simultaneously provide
management and marketing expertise-a real critical aspect of venture capital in developing
countries. Which can improve their effectiveness by setting up venture capital cell in R&D
and other scientific generation, providing syndicated or consortium financing and acing as
business incubators.
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BIBLIOGRAPHY
1. JOURNALS
2. BOOKS
www.indiainfoline.com
www.vcapital.com
www.investopedia.com
www.vcinstitute.com
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ANNEXURE I
Venture capital firms
Examples of venture capital firms include:
Accede Partners
Austin Ventures
Atlas Venture
Battery Ventures
Benchmark Capital
Fidelity Ventures
Health Cap
Hummer Wimbled
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Sequoia Capital
Trelys
ANNEXURE II
Some important Venture Capital Funds in India
1.
2.
Canbank Venture Capital Fund Limited, IInd Floor, Kareem Towers, Bangalore.
3.
Gujarat Venture Capital Fund 1997, Ashram Road, Ahmedabad 380 009
4.
5.
Gujarat Venture Capital Fund 1995 Ashram Road Ahmedabad 380 009
6.
7.
8.
9.
10.
11.
12.
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600 017