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Information @ a Glance

General

  • Venture capital is a type of private equity capital typically provided by professional, outside investors to new, growth businesses. Generally made as cash in exchange for shares in the invested company, venture capital investments are usually high risk, but offer the potential for above-average returns.

  • The main features of venture capital are High Degrees of Risk, Equity Participation, Long Term Investment, Participation in Management, Achieve Social Objectives, Investment is liquid.

  • Generally there are three types of organised or institutional venture capital funds: Venture capital funds set up by angel investors; venture capital subsidaries of corporation; and private venture capital firms/funds. Venture capital subsidaries are established by major corporations, commercial bank holding companies and other financial institutions.

Venture Capital in India

  • Many U.S. and other foreign investors are evaluating alternatives for investments into software development, business process outsourcing, drug discovery and other tech and non-tech companies based in India. In the IT, life sciences and related sectors, many U.S. and India venture capitalists still make early stage investments into a U.S. company which has a subsidiary in India for fulfillment.

  • Some Indian state government funds are actively investing in India. These include SIDBI Venture Capital Limited, Gujarat Venture Fund Limited, RVCF, APIDC, Canbank Venture Capital Fund Limited, IFCI Venture Capital Funds Limited, Rajasthan Asset Management Co. Private Ltd., KITVEN and Kerala Venture Capital Fund Private Limited. Investments from these institutions have the advantage of lower ‘cost’ of capital and hence can be more attractive to entrepreneurs; however, the maximum amount of capital available is typically $500,000.

Market

  • Over 44 US-based VC 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.

  • The spiraling growth in the economy has led to a similar rise in the funding provided by venture capitalists. Apart from a few sectors like non-banking financial services, gold financing and activities not permitted under the industrial policy of the Government of India, investors can invest their funds in most other sectors. And if investors can get used to the heat and dust of India, it continues to be a country that offers great investment opportunities to foreign investors.

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