Venture Capital Financing and Its Impact On Various Business

Affiliated to
University of Mumbai
Revised Syllabus for

Programme:
B.Com
(Accounting and Finance)
Semester VI
Under Choice Based Credit System
Academic Year 2021-2022
PROJECT
ON
(VENTURE CAPITAL FINANCING AND ITS IMPACT ON VARIOUS
BUSINESSES )
1
PROJECT REPORT
ON
VENTURE CAPITAL FINANCING AND ITS IMPACT ON VARIOUS

BUSINESSES
SUBMITTED BY
SHRUTI VIJAY SHAH
D- 19
TYBCom (BAF)
(SEMESTER VI)
UNDER THE GUIDANCE OF

Nishant Modi
ACADEMIC YEAR
2021 - 2022
2
DECLARATION
1, Shruti Shah the student of T.Y.BCom (BAF) Semester VI (2021 -

2022) hereby declare that I have completed the Project on
______________.
I also declare that this report which is the partial fulfilment of the
requirement for the degree of T.Y.BCom (BAF) of KES SHROFF
COLLEGE OF ARTS AND COMMERCE, is the result of my own
efforts with the help of experts.

3
CERTIFICATE

This is to certify that Mr. /Ms._________________________
of Third Year B.Com (BAF) Semester VI (2021 - 2022) has
successfully completed the Project / Internship on
_________________ as per the guidelines of KES’ Shroff
College of Arts and Commerce, Kandivali(W), Mumbai-
400067.

Coordinator Guide Principal
Dr. Vaibhav R. Ashar Nishant Modi Dr. L. Bhushan
ACKNOWLEDGEMENT
4
To list who all have helped me is difficult because they are so
numerous and the depth is so enormous.
I would like to acknowledge the following as being idealistic channels
and fresh dimensions in the completion of this internship.
I take this opportunity to thank the KES SHROFF COLLEGE OF
ARTS AND COMMERCE (AUTONOMOUS) for giving me chance
to present this report.
I am thankful to KES SHROFF COLLEGE OF ARTS AND
COMMERCE (AUTONOMOUS) and <Name of a person, if any>
for providing me opportunity to work on the project with their company
and gaining work experience.
I would like to thank my Principal, Dr. Lily Bhushan for providing
the support required for the internship.
I take this opportunity to thank our Guide Nishant Modi for his moral
support and guidance.
Lastly, I would like to thank each and every person who directly or
indirectly helped me specially my parents and peers who supported
me throughout my project.
5
Index
Sr.
No. Topic Page No.
1.
Introduction 3– 30
2.
Research Methodology 31 – 42
3.
Literature Review 43 – 52
4.
Data Analysis , Interpretation and Presentation 53 – 78
5.
Conclusions and Suggestions 79 – 86
6.
Bibliography 87-88
Annexure 89-93
6
Chapter-1
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 center of attraction worldwide. In these sectors, it is innovation and technical
capability that are big business-drivers. This is a pattern 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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What is Venture Capital ?
The venture capital investment helps for the growth of innovative entrepreneurships in
India. Venture capital has developed as a result of the need to provide non-conventional,
risky finance to new ventures based on innovative entrepreneurship. Venture capital is an
investment in the form of equity, quasi-equity and sometimes debt - straight or conditional,
made in new or untried concepts, promoted by a technically or professionally qualified
entrepreneur. Venture capital means risk capital. It refers to capital investment, both equity
and debt, which carries substantial risk and uncertainties. The risk envisaged may be very
high may be so high as to result in total loss or very less so as to result in high gains
The concept of Venture Capital
Venture capital means many things to many people. It is in fact nearly impossible to come
across one single definition of the concept.
Jane Koloski Morris, editor of the well known industry publication, Venture Economics,
defines venture capital as 'providing seed, start-up and first stage financing' and also
'funding the expansion of companies that have already demonstrated their business potential
but do not yet have access to the public securities market or to credit oriented institutional
funding sources.
The European Venture Capital Association describes it as risk finance for entrepreneurial
growth oriented companies. It is investment for the medium or long term return seeking to
maximize medium or long term for both parties. It is a partnership with the entrepreneur in
which the investor can add value to the company because of his knowledge, experience and
contact base.
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Meaning of venture capital
Venture capital is 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.
Professionally managed venture capital firms generally are private partnerships or closely-
held corporations funded by private and public pension funds, endowment funds,
foundations, corporations, wealthy individuals, foreign investors, and the venture capitalists
themselves.
Venture capitalists generally:
 Finance new and rapidly growing companies
 Purchase equity securities
 Assist in the development of new products or services
 Add value to the company through active participation
 Take higher risks with the expectation of higher rewards
 Have a long-term orientation
When considering an investment, venture capitalists carefully screen the technical and
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.
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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
technology and entrepreneurial communities resulting in significant job creation, economic
growth and international competitiveness. Companies such as Digital Equipment
Corporation, Apple, Federal Express, Compaq, Sun Microsystems, Intel, Microsoft and
Genentech are famous examples of companies that received venture capital early in their
development.
Private Equity Investing
Venture capital investing has grown from a small investment pool in the 1960s and early
1970s to a mainstream asset class that is a viable and significant part of the institutional and
corporate investment portfolio. Recently, some investors have been referring to venture
investing and buyout investing as "private equity investing." This term can be confusing
because some in the investment industry use the term "private equity" to refer only to
buyout fund investing. In any case, an institutional investor will allocate 2% to 3% of their
institutional portfolio for investment in alternative assets such as private equity or venture
capital as part of their overall asset allocation. Currently, over 50% of investments in
venture capital/private equity comes from institutional public and private pension funds,
with the balance coming from endowments, foundations, insurance companies, banks,
individuals and other entities who seek to diversify their portfolio with this investment
class.
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What is a Venture Capitalist?
The typical person-on-the-street depiction of a venture capitalist is that of a wealthy

financier who wants to fund start-up companies. The perception is that a person who
develops a brand new change-the-world invention needs capital; thus, if they can’t get
capital from a bank or from their own pockets, they enlist the help of a venture capitalist.
In truth, venture capital and private equity firms are pools of capital, typically organized as
a limited partnership that invests in companies that represent the opportunity for a high rate
of return within five to seven years. The venture capitalist may look at several hundred
investment opportunities before investing in only a few selected companies with favorable
investment opportunities. Far from being simply passive financiers, venture capitalists
foster growth in companies through their involvement in the management, strategic
marketing and planning of their investee companies. They are entrepreneurs first and
financiers second.
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 first-hand business development.
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Factor to be considered by venture capitalist in selection of
investment proposal
There are basically four key elements in financing of ventures which are studied in depth by
the venture capitalists.
These are-
1. Management:
The strength, expertise & unity of the key people on the board bring significant
credibility to the company. The members are to be mature, experienced possessing
working knowledge of business and capable of taking potentially high risks.
2. Potential for Capital Gain:

An above average rate of return of about 30 - 40% is required by venture capitalists. The
rate of return also depends upon the stage of the business cycle where funds are being
deployed. Earlier the stage, higher is the risk and hence the return.
3. Realistic Financial Requirement and Projections:

The venture capitalist requires a realistic view about the present health of the organization
as well as future projections regarding scope, nature and performance of the company in
terms of scale of operations, operating profit and further costs related to product
development through Research & Development.
4. Owner's Financial Stake:

The financial resources owned & committed by the entrepreneur/ owner in the business
including the funds invested by family, friends and relatives play a very important role in
increasing the viability of the business. It is an important avenue where the venture
capitalist keeps an open eye.
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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 French-born
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 industry’s founders.
The Rockefeller Family, and in particular, L S Rockefeller, one of whose earliest

investments was in Eastern Airlines, which is now defunct but was one of the earliest
commercial airlines.
The Second World War produced an abundance of technological innovation, primarily with
military applications. They include, for example, some of the earliest work on micro
circuitry. Indeed, J.H. Whitney’s investment in Minute Maid was intended to
13
commercialize an orange juice concentrate that had been developed to provide nourishment
for troops in the field.
In the mid-1950s, the U.S. federal government wanted to speed the development of
advanced technologies. In 1957, the Federal Reserve System conducted a study that
concluded that a shortage of entrepreneurial financing was a chief obstacle to the
development of what it called "entrepreneurial businesses." As a response this a number of
Small Business Investment Companies (SBIC) were established to "leverage" their private
capital by borrowing from the federal government at below-market interest rates. Soon
commercial banks were allowed to form SBICs and within four years, nearly 600 SBICs
were in operation.
At the same time a number of venture capital firms were forming private partnerships
outside the SBIC format. These partnerships added to the venture capitalist’s toolkit, by
offering a degree of flexibility that SBICs lack. Within a decade, private venture capital
partnerships passed SBICs in total capital under management.
The 1960s saw a tremendous bull IPO market that allowed venture capital firms to
demonstrate their ability to create companies and produce huge investment returns. For
example, when Digital Equipment went public in 1968 it provided ARD with 101%
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.
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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 Genentech
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
buy-out business.
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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Venture Capital in INDIA
Venture capital was introduced in India in mid eighties by All India Financial Institutions
with the inauguration of Risk Capital Foundation (RCF) sponsored by IFCI with a view to
encourage the technologists and the professional to promote new industries. Consequently
the government of India promoted the venture capital during 1986-87 by creating a venture
capital fund in the context of structural development and growth of small-scale business
enterprises. Since then several venture capital firms/funds (VCFs) are incorporated by
Financial Institutions (FIs), Public Sector Banks (PSBs), and Private Banks and Private
Financial companies.
The Indian Venture Capital Industry (IVCI) is just about a decade old industry as
compared to that in Europe and US. In this short span it has nurtured close to one thousand
ventures, mostly in ENTERPRISE segment and has supported building
technocrat/professionals all through. The VC industry, through its investment in high
growth companies as well as companies adopting newer technologies backed by first
generation entrepreneurs, has made a substantial contribution to economy. In India,
however, the potential of venture capital investments is yet to be fully realized. There are
around thirty venture capital funds, which have garnered over Rs. 5000 Crores. The venture
capital investments in India at Rs. 1000.05 crore as in 1997, representing 0.1 percent of
GDP, as compared to 5.5 per cent in countries such as Hong Kong.
Venture capital industry in India is moving in a faster phaseand inherits lots of potential for
growth. Venture capital industry is translucent that is there is no clear visibility about the
functioning, pattern and trends in the venture capital investments. This study is an attempt to
provide insights about the venture capital investments trends across various sectors over the
period of last ten years. The rational for the concentration of venture capital investments in few
sectors and driving forces for the tremendous growth is assessed. Thereby, emphasis the growth
of venture capital industry and encourage potential entrepreneurs to avail the benefits of venture
capital investments.
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Investment Philosophy
Venture capitalists can be generalists, investing in various industry sectors, or various

geographic locations, or various stages of a company’s life. Alternatively, they may be
specialists in one or two industry sectors, or may seek to invest in only a localized
geographic area.
Not all venture capitalists invest in "start-ups." While venture firms will invest in
companies that are in their initial start-up modes, venture capitalists will also invest in
companies at various stages of the business life cycle. A venture capitalist may invest
before there is a real product or company organized (so called "seed investing"), or may
provide capital to start up a company in its first or second stages of development known as
"early stage investing." Also, the venture capitalist may provide needed financing to help a
company grow beyond a critical mass to become more successful ("expansion stage
financing").
The venture capitalist may invest in a company throughout the company’s life cycle and
therefore some funds focus on later stage investing by providing financing to help the
company grow to a critical mass to attract public financing through a stock offering.
Alternatively, the venture capitalist may help the company attract a merger or acquisition
with another company by providing liquidity and exit for the company’s founders.
At the other end of the spectrum, some venture funds specialize in the acquisition,
turnaround or recapitalization of public and private companies that represent favorable
investment opportunities.
There are venture funds that will be broadly diversified and will invest in companies in
various industry sectors as diverse as semiconductors, software, retailing and restaurants
and others that may be specialists in only one technology.
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
17
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 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
18
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.
Stages of Venture Capital Funding
The Venture Capital funding varies across the different stages of growth of a firm. The
various stages are:
1. Pre seed Stage:
Here, a relatively small amount of capital is provided to an entrepreneur to conceive and

market a potential idea having good future prospects. The funded work also involves
product development to some extent.
2. Seed Stage:
Financing is provided to complete product development and commence initial marketing

formalities.
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3. Early Stage / First Stage:
Finance is provided to companies to initiate commercial manufacturing and sales.
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.
6. Bridge / Mezzanine Financing or Later Stage Financing Bridge / Mezzanine

Financing or Later Stage Financing:
is financing a company just before its IPO (Initial Public Offer). Often, bridge finance
is structured so that it can be repaid, from the proceeds of a public offering.
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ADVANTAGES OF VENTURE CAPITAL
Venture capital has made significant contribution to technological innovations and

promotion of entrepreneurism. Many of the companies like Apple, Lotus, Intel, Micro etc.
have emerged from small business set up by people with ideas but no financial resources
and supported by venture capital. There are abundant benefits to economy, investors and
entrepreneurs provided by venture capital.
Economy Oriented-
 Helps in industrialization of the country
 Helps in the technological development of the country
 Generates employment
 Helps in developing entrepreneurial skills
Investor oriented-
 Benefit to the investor is that they are invited to invest only after company
starts earning profit, so the risk is less and healthy growth of capital market is entrusted.
 Profit to venture capital companies.
 Helps them to employ their idle funds into productive avenues.
Entrepreneur oriented:
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 Finance –
The venture capitalist injects long-term equity finance, which provides a solid capital base
for future growth. The venture capitalist may also be capable of providing additional rounds
of funding should it be required to finance growth.
 Business Partner
- The venture capitalist is a business partner, sharing the risks and rewards. Venture
capitalists are rewarded by business success and the capital gain.
 Mentoring –
The venture capitalist is able to provide strategic, operational and financial advice to the
company based on past experience with other companies in similar situations.
Alliances - The venture capitalist also has a network of contacts in many areas that can add
value to the company, such as in recruiting key personnel, providing contacts in
international markets, introductions to strategic partners and, if needed, co-investments with
other venture capital firms when additional rounds of financing are required.
 Facilitation of Exit –
The venture capitalist is experienced in the process of preparing a company for an initial
public offering (IPO) and facilitating in trade sales.
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ADVANTAGES
ENTREPRENEUR ECONOMY INVESTOR

ORIENTED
Benefits of VC over other Funding Methods
Venture capital has a number of advantages over other forms of finance:
• It injects long term equity finance which provides a solid capital base
for future growth.
• The venture capitalist is a business partner, sharing both the risks and
rewards. Venture capitalists are rewarded by business success and the
capital gain.
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• The venture capitalist is able to provide practical advice and
assistance to the company based on past experience with other
companies which were in similar situations.
• The venture capitalist also has a network of contacts in many areas

that can add value to the company, such as in recruiting key
personnel, providing contacts in international markets, introductions
to strategic partners, and if needed co-investments with other venture
capital firms when additional rounds of financing are required.
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ROLES WITHIN A VENTURE CAPITAL FIRM
1. Venture capital general partners: (Also known in this case as "venture capitalists" or
"VCs") are the executives in the firm. In other words the investment professionals. Typical
career backgrounds vary, but VCs come from either an operational or a finance
background.
VCs with an operational background tend to be former chief executives at firms similar
to those which the partnership finances and other senior executives in technology
companies.VCs with finance backgrounds come from investment banks, M&A firms, and
other firms in the corporate investment and finance space.
2. Limited partners: Investors in venture capital funds are known as limited partners. This
constituency comprises both high net worth individuals and institutions with large amounts
of available capital, such as state and private pension funds, insurance companies, and
pooled investment vehicles, called fund of funds or mutual funds.
3. Venture partners and entrepreneur-in-residence (EIR): Other positions at venture capital

firms include venture partners and entrepreneur-in-residence (EIR).Venture partners "bring
in deals" and receive income only on deals they work on (as opposed to general partners
who receive income on all deals).
EIRs are experts in a particular domain and perform due diligence on potential deals. EIRs
are engaged by VC firms temporarily (six to 18 months) and are expected to develop and
pitch startup ideas to their host firm (although neither party is bound to work with each
other). Some EIR's move on to roles such as Chief Technology Officer (CTO) at a portfolio
company.
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4. Associate: The "associate" is the typical apprentice within a venture capital firm. After a
few successful years, an associate may move up to the "senior associate" position. The next
step from senior associate is "principal," typically a partner track position. Alternatively, there
are many pre-MBA associate roles that are used solely for the purpose of deal sourcing, and
the associate is usually expected to move on after two years.
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STRATEGIC ROLES
 Serving Board
 Business Consultant
 Financier
SOCIAL/ SUPPORTIVE
Coach/ Mentor
Conflict resolver
NETWORKING ROLES
Management recruiter
Professional contact
Industrial contact
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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.
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.
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Venture Capital Fund Operation
Venture capitalists are very selective in deciding what to invest in. A common figure is that
they invest only in about one in four hundred ventures presented to them.
They are only interested in ventures with high growth potential. Only ventures with high
growth potential are capable of providing the return that venture capitalists expect, and
structure their businesses to expect. Because many businesses cannot create the growth
required having an exit event within the required timeframe, venture capital is not suitable
for everyone.
Venture capitalists usually expect to be able to assign personnel to key management

positions and also to obtain one or more seats on the company's board of directors. This is
to put people in place, a phrase that has sometimes quite unfortunate implications as it was
used in many accounting scandals to refer to a strategy of placing incompetent or easily
bypassed individuals in positions of due diligence and formal legal responsibility, enabling
others to rob stockholders blind. Only a tiny portion of venture capitalists, however, have
been found liable in the large scale frauds that rocked American (mostly) finance in 2000
and 2001.
Venture capitalists expect to be able to sell their stock, warrants, options, convertibles, or
other forms of equity in three to ten years: this is referred to as harvesting. Venture
capitalists know that not all their investments will pay-off. The failure rate of investments
can be high; anywhere from 20% to 90% of the enterprises funded fail to return the invested
capital.
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
29
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 years—this 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.
In such a fund, the investors have a fixed commitment to the fund that is "called down" by
the VCs over time as the fund makes its investments. In a typical venture capital fund, the
VCs receive an annual "management fee" equal to 2% of the committed capital to the fund
and 20% of the net profits of the fund. Because a fund may run out of capital prior to the
end of its life, larger VCs usually have several overlapping funds at the same time—this lets
the larger firm keep specialists in all stage of the development of firms almost constantly
engaged. Smaller firms tend to thrive or fail with their initial industry contacts—by the time
the fund cashes out, an entirely new generation of technologies and people is ascending,
whom they do not know well, and so it is prudent to re-assess and shift industries or
personnel rather than attempt to simply invest more in the industry or people it already
knows.
30
CHAPTER : 2
RESEARCH METHODOLOGY
Background of the Study

Today due to the economic crisis and the change in job market, Entrepreneurship has
gained interest. A number of young people in India today, plans to setup their own ventures
and capitalize this opportunities. In today's highly dynamic economic climate with
regular technological inventions, few traditional business models may survive but margin
lies more towards more innovative business ideas. Now, along with conglomerates
that fuel economic growth enterprises (Small and Medium enterprises) and other
innovative businesses have gained the momentum towards contribution in it.
Starting and expanding an enterprise has its own risk and is never easy. There are number of
parameters that contribute to its success or downfall. Some of these include:
• Should one choose Venture Capital or any other mode of finance?

• Which sector one should start its venture in?
•What array of businesses are points of attraction among Venture
Capitalists?
• What is possible near future growth in sector of one's choice?
The study helps in providing answers to these questions by analysing status of Venture
Capital in India, Which sectors are on rise, what is the confidence level of Indian and
Foreign investors.
31
Statement Of Problem
The Enterprise (small and medium enterprises), various startups , businesses which are
operating with lives less than 5 years constitutes in excess of 90% of the economy of the
country. The need to provide affordable credit over a reasonable period for this sector
cannot be over emphasized. Enterprises, if properly structured and capitalized have the
potential to grow and spearhead accelerated growth of this economy into a middle income
status.
These businesses have been faced with liquidity and financing challenges leading
to business failures under production Industrial disputes and sometimes closures by
regulatory authorities.
Just as it has been a great concern to all and sundry to promote the welfare
of such businesses , it has also been a great cause of concern to all, the fact that the vital
sub-sector has fallen short of expectation. The situation is more disturbing and
worrying when compared with what other developing and developed countries
have been able to achieve with their businesses.
Their success is determined by their financing needs and the action of investors.
Their financing needs reflect their operational requirements, while the action of
investors depends on their risk perception and the attractiveness of alternative
investment (which affects their willingness to invest). Government borrowing, the
general economic climate, availability of collateral, quality of record keeping,
and business investor relations skills affect the way in which this challenge is managed.
32
Additionally many non-financial constraints inhibit the success of such enterprises.
Businesses owners are reluctant to be transparent or open up involvement of their
businesses to outsiders. They seem to be unaware of or oblivious to the obligations
and responsibilities they have toward capital providers, and the need to acquire or
seek support for technical services like accounting, management, marketing, strategy
development and establishment of business linkages. Management and support
services are perceived to be cost prohibitive and non-value adding.
Unfortunately since there is a dearth of long term investment funds for these enterprises (as
a consequence of the banks and securities markets shying away from the high risk
investments in these sectors, it has became imperative for the Government to set up a
scheme that will provide long term funding for the high risk investment needs of the
ENTERPRISE sector. This has led to the establishment of Venture capital fund under the
Venture Capital Trust Fund Act, 2004 (Act 680), to provide capital to Small and
Medium Enterprises (Enterprises) and to promote Venture Capital industry .
Does these enterprises know of venture capital funds? Has it ever applied for funding from
Venture Capital organisations? What motivated the organisation to go for venture
capital funds? What benefits have choked from sourcing funds from venture capital
managers? This study seeks to provide answers to these questions.
33
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.
34
Research design is broadly classified into
 Exploratory research design
 Descriptive research design
 Casual research design
This research is a Exploratory research. The major purpose of this research is

description of state of affairs as it exists at present.
Flowchart
35
Objectives of Study
As we know Venture Capital Finance is no more in the dormant stage in India. But there is
a dearth of academic research on the topic. In order to fill the gap the study has been
undertaken. The main objectives of study are:
• To know people preferences about mode of finances.
• To know the current scenario of venture capital finance in India.
• To predict the future rate of growth of Venture Capital Finance.
• To know about the awareness of venture capital funding among the entrepreneurs.
• To identify the major problems and obstacles related with venture capital financing in
India.
36
Hypotheses Of The Study
Hypothesis 1 : People are aware about venture capital Financing.
Hypothesis 2 : There is future rate of growth of Venture Capital Finance .
Hypothesis 3 : Applying for Venture Capital funding is an easy process.
Need for the Study
The need of study has following facets:
• The study has been conducted for gaining the practical knowledge
about Venture Capital Finance in India
• There is a limited Academic Literature available regarding Venture

Capital Finance in India.
Scope of Study
This highlights funding from financial institutions, other sources of funding, and the various
businesses owners and managers‟ views on the venture capital as an alternative source of
funding and the impact of venture capital financing on their business operations.
37
Significance of Study
Venture capitalists not only support high technology projects they also fiancé 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.
Limitations Of The Research
1. The first limitation was the natural lack of control in field settings, a limitation
considered before data collection. However, the aim of the study was to gather as detailed
and comprehensive a set of data as possible. Thus, the noted limitation was actually a
strength in this study because the approach met the study's broad data needs, compared with
what could have been gathered from a more closely controlled and defined approach.
38
2. Another limitation of the research was as the concept of venture capital is fairly new in
India; therefore the historical data available was limited.
3. The primary data collection requires personal interviews and sample selected were
reluctant to fill in questionnaire. Some might not be completely willing to reveal real
information. Thus, in selecting the sample it will be difficult to tell who are willing to share
their authentic experiences freely and those who are not.
4. Due to the time consideration and costs of field investigations, the study was conducted
with some start-ups and online data available on different sites only.
5. The study was limited to Mumbai and Pune district . The sample is small and not
representative of various sectors that these enterprises belong. However, its findings can be
used as hypotheses for future studies using large and more representative samples of such
enterprises form various sectors.
39
Sample Design, Size and Selection
A sample of 40 businesses of Mumbai and Pune District was obtained. The selection of
sample was done through convenience sampling technique. 40 respondents were
contacted personally and by email as well.
Sample Design:
Multistage sampling (stratified) was employed to select the samples. Sampling has been
done in two stages and each stage is described in detail. The study area covered 2
districts i.e., Mumbai and Pune.
Stage 1:
The first stage of sampling was of selection of the district for carrying out the study.
Under which 2 districts were selected i.e., Mumbai and Pune.
Stage 2:
The next step in the sampling design was to select the enterprises from the Districts.
Under which 40 enterprises were selected.
Respondents Population:
Total targeted population was 40 , responses received 34, as 6 of them were found
incomplete or facts appeared to be filled up casually with irrelevant information, hence
not considered.
40
Survey Instrument
 Primary Source of Data
Primary data were gathered through the administration of questionnaires to owners,

director(s) and middle management employees of the organisation. The researcher
conducted the survey with aid of questionnaires. The main reason for using
questionnaire lies in the quality of the data obtained. Unambiguity was reduced and a
better rate of return of the interviews was achieved. Structured and unstructured
questionnaires were used to elicit responses from respondents. The structured part will
be used in order to present the respondent with fixed set choices whiles the unstructured
will sought to encourage respondents to share as much information as possible in an
unrestricted manner. Face to Face interviews and personal observations were also used
to solicit information from the organisation.\
 Secondary Source of Data

The secondary data helped the researcher to gain more insight into existing literature on
venture capital financing. The secondary data included financial statements, financial
plans, strategic plans, internet sources, newspapers, journals, financial institution
reports, quarterly bulletin and other relevant collateral materials from venture capital
trust fund.
41
Analysis of Data
Data for the analysis were extracted from the responses of the questionnaire carried out
by the researcher. The analysis for the collected data was done using Microsoft Excel,
Microsoft word and results are presented further.
42
CHAPTER: 3
REVIEW OF LITERATURE
Although there is limited literature available for Venture Capital Finance in Indian context,
there are extensive texts available on Venture capital all over the world. Following are
some insightful work done by different academicians and researchers in the same line.
1. M Panday (1998)
This study investigates the process of developing venture capital in a developing country
— India. The discussion documents the experiences of the largest venture capital firm in
India (TDICI) in initiating and developing the concept of venture capital as well as
learning the venture capital business. The history of modern venture capital in India is of
recent origin; it only goes back to the mid-eighties. In the initial years„ venture capital firms
(VCFs) in India encountered a number of problems in developing their businesses. From
the in-depth case study of TDICI, it is found that the firm went through the initial
constraint of not knowing the venture capital business well and learnt through experience.
It faced problems in raising funds and evaluating prospective ventures. It initially focused
its investment in the high-technology business, but gradually shifted the focus towards
other potentially high-growth, high-profitable businesses, not just high-tech businesses. It is
also noticed that TDICI undertook a number of business development initiatives to
popularise the venture capital business in India. It introduced a simple organisational
structure for facilitating quick decision-making, and developed innovative funding and
financing mechanisms.
43
2. Dossani, R. and Kenney (2002)
The institution of venture capitalism is a difficult one to initiate through policy

intervention, particularly in developing countries with unstable macroeconomic
environments and histories of state involvement in the use of national capital and in the
composition of production. India has all these constraints. The emergence of a thriving
software services industry after 1985 created the raw material that venture capital could
finance, thus achieving a critical precondition for venture capital's growth. It was
followed by efforts to create a venture capital industry. After several setbacks, some
success has been achieved largely due to a slow process of moulding the environment of
rules and permissible institutions. The process was assisted by the role of overseas Indians
in Silicon Valley's success in the 1990s. Yet, in terms of what is needed, most of the work
remains to be done. Inevitably, this will be the result of joint work by policymakers and
practitioners.
3 Asirn Mishra (2004)
This paper analyses the validity of venture evaluation model in India by directly comparing
the relative importance of evaluation criteria on the funding decision with the relative
importance to factors influencing venture's empirical performance. In the light of the
differences in investment opportunities around India, and the nature of industrial
development in South East Asia in general, the author anticipated that the investment
criteria employed by Venture Capital Firms (VCFs) in India would differ. A questionnaire
was administered to venture capitalists (regular members of Indian Venture Capital
Association) to determine the criteria they use to decide on funding new ventures. The
response rate was 100%. A list of forty two criteria was developed on previously developed
lists. The criteria fell into six groups: the entrepreneur's personality, the entrepreneur's
experience, characteristics of the product or service, characteristics of the market, financial
consideration and characteristics of venture management team. Answers were given on a
four point rating scales. The results reveal that criteria adopted by Indian VCs are different
from those adopted by VCs in other countries including US.
44
4. Sayed Ahmed Naqi and Sarnanthala Ilettihewa (2007)
Venture capital in Asia has exhibited remarkable growth over the last two decades.
Researchers and practitioners have, however, expressed doubts as to whether what is being
reported as venture capital in Asia can really be classified as such. Authors of scholarly
studies often avoid this debate and, consequently, fail to caution readers about the
applicability of their research findings. Through an exploration of the history,
development, and composition of venture capital in Asia, this article not only confirms
significant differences between Asian and traditional venture capital, but also finds that
venture capital in Asia differs little from what is commonly called private equity. As such,
a need exists within the venture capital literature to recognize this peculiarity of the Asian
venture capital market. Moreover, venture capitalists considering expansion into Asia
must comprehend the nature of the Asian market in order to avoid disillusionment and
frustrations which may result from inadequate understanding.
5. A. Thillai Rajan (2010)
Venture Capital (VC) has emerged as the dominant source of finance for entrepreneurial
and early stage businesses, and the Indian VC industry in particular has clocked the fastest
growth rate globally. Academic literature reveals that VC funded companies show superior
performance to non VC funded companies. However, given that venture capitalists (VCs)
select and fund only the best companies, how much credit can they take for the performance
of the companies they fund? Do the inherent characteristics of the firm result in superior
performance or do VCs contribute to the performance of the portfolio company after they
have entered the firm? A panel that comprised VCs, an entrepreneur and an academic
debated these and other research questions on the inter-relationships between VC funding
and portfolio firm performance. Most empirical literature indicates that the value addition
effect dominates the selection effect in accounting for the superior performance of VC
funded companies. The panel discussion indicates that the context as well as the experience
45
of the General Partners in the VC firms can influence the way VCs contribute to the
efficiency of their portfolio companies.
Dr. Mamta Jain & Ms Purva Ranu Jain(2017)
crucially analyze venture capital industry across the globe.The presence of well-established
venture capital industry is witnessed in USA and Europe. Venture capital industry has
played a prominent role in growth and expansion of business in these regions.Venture
capital has been an engine for industrial development, especially knowledge based
industries by exploiting untapped potentialities. Major developments in venture capital
industry in India are witnessed in during last five to seven years.
Yuk-Shee Chan (2018) assesses the role of venture capital as a financial intermediary.
According to the developed theory of financial intermediation, venture capitalist acts as
informed agents with imperfect information in a market. Entrepreneurs are the well
informed about the qualitative prospects about the project. Entrepreneurs try to push the
ventures with lesser prospects of survival and profitability. This forms a hindrance for the
venture capital investments as it leads undesirable allocation of funds in low return projects.
Some other sources are as follows :
6. SEBI ( Venture Capital funds) Regulations Source: National venture capital Association
A substantial number of technocrats have worked out strategies to set up shop on their own
and capitalize on opportunities.
Venture capitalist mitigate the risk of investing by developing portfolio of young companies
in single venture fund. Many times they co invest with other professional venture capital
firms .In addition many venture capitalist manage multiple funds simultaneously. For so
many years it is noticed that they nurture the growth of high technology and entrepreneurial
communities resulting in significant job creation , economic growth and international
competitiveness. Companies such as Digital equipment corporation, Apple, Compaq ,Intel
46
are some of the famous example which receive venture capital early in their development.
In India venture capital funds are governed by Securities Exchange board of India (SEBI).
As per theses guide lines venture capital fund means a fund established in the form of a
company or trust, which raises money through loans, donations, and issue of securities or
units as the case may be and makes or proposes to make an investment in accordance with
these regulations.
7. BOOK REVIEW
A book on Venture Capital Funding the Dreams by Nagendra, Ramkrishna, Bharati, 2002.
If we look at entrepreneurs view point one needs to do thorough homework on the profile of
funds before approaching venture capitalist. One must also identify projects in which
venture capitalist has already invested. It is a matter of concern that entrepreneur must
know what are the aspects venture capitalist is looking forward. Going to a venture
capitalist is like taking a final exam. Entrepreneurs should be fully prepared. Entrepreneurs
should looked at the proposition of scaling the business from day one. If entrepreneur need
47
to scale business from day one and require large money they should head for venture fund
but if they need to structure idea into viable financial and marketing plan, than they should
look for an angel to help. Expectations of Venture Capitalist from entrepreneurs- Passion,
commitment, multifunctional team, vision, transparency, well researched business plan,
energy to turn idea into business. All this is true but focus is more on entrepreneur whereas
market product and returns are equally important.
It is also not unusual for venture capital funds to set up an investment screen. The screen is
a set of qualitative (sometimes quantitative criterion) criteria that helps venture capital
funds companies to quickly decide on whether an investment opportunity warrants further
diligence.
Venture capitalist tries to maximize the upside potential of any project. He tries to structure
his investment in such manner that he can get benefits of upside potential and he would like
to exit at the time when he can get maximum returns on his investment in the project.
9. Thomas Hellmann and Manju Puri, September 2002
It's been observed in India that entrepreneurs are sometimes apprehensive in seeking
venture capital funding .It is important to know the role that venture capitalist play. In order
to examine this a research was conducted by Graduate school of business faculty members
Thomas Hellmann and Manju Pari on a relationship between venture capitalist and internal
organization of firms. particularly the building of management team. In the traditional
financial relationship investors are involved on the financial side of the business but not on
the human resource side. It is the general thinking in the Silicon valley that venture capital
makes difference that is more than money.
The researchers quantified for the first time that founders are more likely to be replaced by
an outsider CEO if they obtain venture capital and that venture backed companies make
leadership changes faster than other companies. Even its found that venture capital is
particularly important in for attracting CEO to the companies that has no sign of success.
48
10. ARTICLE REVIEW
Evalueserve, IVCA and Venture Intelligence India
The venture capital market in India seems to be getting hot. Research already is showing an
interesting phenomenon emerging : most of the US based venture capital firms are
investing in start ups and early stage companies in India. Earlier it was difficult for the
finance companies to receive private equity or venture capital funding. The scenario began
to change after 1990s with the growth of IT companies in India. Indian entrepreneurs ,
consultants and experts within this ecosystem and based on the analysis of the data from
IVCA and venture Intelligence India whether this large investment can actually be absorbed
by startup companies and early stage companies.
Trend of venture capitalist 2001-2003 - Venture Capitalist/Private equity becomes risk

averse and activity declines: India came "crashing down" when NASDAQ lost 60% of its
value during the second quarter of 2000 and other public markets (including those in India)
also declined substantially. During 2001-2003. the Venture Capitalists and Private equities
started investing less money and in more mature companies in an effort to minimize the
risks. For example: (a) The average deal size more than doubled from $4.14 million in 2000
to $8.52 million in 2001
(b) The number of early-stage deals fell sharply from 142 in 2000 to 36 in 2001 (c) Late-
stage deals and Private Investments in Public Equity (Private equity’s) declined from 138 in
2000 to 74in 2001 (d) Investments in Internet-related companies fell from $576 million in
2000 to $49 million in 2001. This decline broadly continued until 2003.
2004 onwards - Renewed investor interest and activity: As India's economy started growing
at 7%-8% a year, and some sectors, including the services sector and the high-end
manufacturing sector, have been growing at 12%-14% a year, investors renewed their
interest and started investing again in 2004. The number of deals and the total dollars
invested in India started increasing substantially.
49
11. WEBSITES REVIEW
www.evalueserve.com
www.venturewoods.org
Lack of Venture Capitalists who have cross-border experience: The real worrisome aspect
is that many US-based Venture Capitalists believe they can help the growth of Indian start-
ups, and provide good returns to their own shareholders by;
1. Matching decisions by periodically visiting India: This usually requires conducting

frequent conference calls and either the Venture Capitalists flying to India or the executive
management of the startup flying to the US every two or three months (for a face-to-face
meeting). Since the Indian startups require a lot of handholding in the areas mentioned
above, this approach is unlikely to be very effective.
2. Sending one of the senior partners in the Venture Capitalist firm to India to set up a
subsidiary that can help its portfolio companies:
Although this approach may work, it is likely to fail in instances where the partner has not
lived and managed any organization in India for at least two to three years. This is because
even Indians living in the US are usually not familiar with the typical business practices in
India unless they have had 2-3 years of recent experience on the ground in India.
3. Hiring a junior partner in India: This approach has three major disadvantages: First, the
challenges required by Indian start-ups vary from hiring good talent inside and outside the
country to setting up effective and efficient processes. Second, if the partner is fairly junior
then this person may not have sufficient experience to advise this start-up effectively, and
third, such a junior partner would have a Mow standing' within the Venture Capitalist firm
and hence, both the junior partner and its portfolio companies in India would feel they are
being dictated to by senior partners in the US (who may not understand the environment in
India adequately).
50
12. REPORT REVIEW
Indian Private Equity Report 2008 Private equity and venture capital impacted by global
slowdown
All private equity and venture capital investment witnessed a significant decline. It is
basically due to absence of mega deals. As this was the time when US mortgage crisis had
started taking a heavy toll on Indian and world markets. The star sectors of 2007 ,apart from
real estate were unable to attract huge investments in 2008.However in 2008 except real
estate every other sector faced a drop in investment value. Infrastructure sector received the
second highest number of investments though it was lower than 2007.Telecom sector was
the biggest looser where as media and entertainment received almost same investments in
2007 and 2008. This sector continues to attract Private equity attention, given the strong
underlying growth opportunity.
51
References:
1. The process of developing venture capital in India" Technovation, Volume 18, Issue
4, April 1998
2. "Creating an Environment for Venture Capital in India"- M. World Development,
30 (2) 227-253 (2002)
3. "Indian Venture Capitalists (VCs): Investment Evaluation Criteria" - ICFAI Journal
of Applied Finance, Vol. 10, No. 7, pp. 71 -93, July 2004
4. "Venture capital or private equio.)? The Asian experience"- Business Horizons
Volume 50, Issue 4, July—August 2007
5. A theory of strategic venture investing ,Thomas Hellmann, Journal of Financial
Economics(vol.64,no. 2)May2002 Research Paper: Venture capital and
professionalization of start up firms : Empirical evidence
6. I.M. Panday- venture capital development process in India
7. I.M. Panday- venture capital the Indian experience
8. www.evalueserve.com
9. www.venturewoods.org
52
CHAPTER: 4
Data Analysis, Interpretation and Presentation
Data Analysis and Interpretation:

Data analysis is a critical stage in the research process, as it carries the potential to decrease
or amplify the result expected. Data analysis is also the critical stage for analysing and
presenting the outcomes of the research done. Before proceeding with the proper analysis,
first test reliability of the instruments was used. They are explained in detail in the
preceding paragraph.
1. Gender
Table 1: Classification Of Gender

Gender Respondents Percentage
Male 65 65%
Female 35 35%
Total Sample 100 100
Figure:1
Gender
35%
Male
65% Female
Source – Primary Data
Interpretation –
From the above table and figure it is depicted that majority of the respondents are male i.e.,
65% ( 65 Respondents) followed by female members i.e., 35% ( 35 Respondents)
53
2. Age
Table 2: Classification Of Age

Age Respondents Percentage
Below 25 years 56 56%
25 – 40 years 23 23%
41 – 60 years 21 21%
61 and above 0 0
Total Sample 100 100%
Figure 2
Age
20
15
10
Age
0
Below 25 years25 – 40 41 – 60 61 and above
years years
Interpretation –
From the above table and figure it is depicted that majority of the respondents are
below 25 years . This shows that people start their businesses at an early age. The
concept of business attracts young minds and they are ready to take various types of
risks associated with business.
54
3. Qualification
Table 3:Qualification of Respondents

Qualification Respondents Percentage
HSC 3 3%
Graduate 18 18%
Post Graduate 41 41%
Professional 38 38%
Figure 3
Qualification
3%
18%
HSC
38% Graduate Post Graduate Professional
41%
Interpretation –
From the above table and figure it is depicted that majority of the respondents are
either professionals or post graduated . This shows that most of the people prefer to
start their business after completion of their education.
55
4. Type of business
Table 4: Classification Of Businesses

Type of business Respondents Percentage
Sole proprietorship 59 59%
Partnership 32 32%
Limited Liability company 9 9%
Total sample 100 100
Figure 4
Type of business
9%
Sole proprietorship
Partnership
32%
59%
Limited Liability company
Interpretation –
From the above table and figure it is depicted that majority of respondents i.e., 59%
are doing and owning business single handedly. 32% of the respondents are doing
partnership business and the rest are involved in companies .
56
5. Monthly Income
Table 5: Classification Of Income

Monthly Income Respondents Percentage
up to 25000 9 9%
25000 – 50000 15 15%
50000 –100000 26 26%
100000 – 500000 28 28%
500000 and above 12 12%
Figure 5
Monthly Income
14
12
10
8
6
4
2
0 Monthly Income
up to 25000 25000 – 5000050000 –100000 –500000 and

100000500000above
57
Interpretation –
From the above table and figure it is depicted that majority of the respondents have
a monthly income between 50,000 and 5,00,000 , earned from their business.
58
6. How many employees does the business have?
Table 6: Classification Of no. of Employees

No. of employees Respondents Percentage
Below 15 employees 38 38%
16-30 employees 53 53%
31-50 employees 9 9%
more than 50 employees 0 0
Figure 6
No. of employees
0%
9%
Below 15 employees
38%
16-30 employees
31-50 employees
53% more than 50 employees
Interpretation –
From the above table and figure it is depicted that majority of the respondents have
less than 30 employees in their business , none of the respondents have more than
50 employees . From this it can be concluded that the entrepreneurs believe in
having limited workforce.
59
7. How long has this business been operating ?
Table 7: Classification Of Business years

Business Years Respondents Percentage
less than 2 years 50 50%
2-4 years 29 29%
5 -10 years 15 15%
More than 10 years 6 6%
Figure 7
Business Years
6%
15% less than 2 years 2-4 years
5 -10 years
50% More than 10 years
29%
Interpretation –
From the above table and figure it is depicted that 50% of the respondents are
operating businesses which have lives less than 2 years and another 29% are
operating with lives less than 4 years . This can be said that our study consists of
majority of the businesses which have been operating less than 4 years .
60
8. What is the major source of finance for your business?
Table 8: Classification Of source of finance

Source of Finance Respondents Percentage
Owners (Self-financed) 53 53%
Venture capital 15 15%
Bank loans 23 23%
Government assistance 0 0
Others 9 9%
Figure 8
Source of Finance
0%
9% Owners (Self-financed)
23%
Venture capital Bank loans
53%
Government assistance
15% Others
Interpretation –
From the above data it could be concluded that more than 50% respondents has owners
(self –financed) source as their major source of finance and after that Bank loans are also
considered as major source by 23% of respondents following by venture capital and other
sources of funds with 15% and 9% respectively. However none of the respondents has
61
government assistance as their major source of finance.
62
9. Is it easy to raise capital?
Table 9
Raising Capital is Respondents Percentage
easy?
Yes 0 0
No 100 100%
Figure 9
Raising Capital is easy?
35
30
25
20
15
10
5
0
Yes No
Interpretation –
The interpretation of the above shows that it is not at all easy to raise capital for the
Entrepreneurs for their businesses no matter what type of business it is , this can be strongly
concluded because none of the respondents has chosen yes for the same .
Accordingly it can be concluded raising capital is a difficult task.
63
10. Are you aware of venture capital financing?
Table 10
Awareness about venture Respondents Percentage
capital financing?
Yes 94 94%
No 6 6%
Figure 10
Awareness about venture capital financing?
40
30
20
10
0 Yes No
Interpretation –
The table and chart above showed in general the perceived knowledge or awareness of
venture capital financing . The respondents indicated a higher value (more than 90%) for
being aware about venture capital financing . It means the respondents were very much
aware about VC funding and venture capital has generally attracted the knowledge of the
entrepreneurs.
64
11. If yes, what is the medium through which you
obtained Information regarding Venture Capital
financing?
Table 11
Medium of information Respondents Percentage
about Venture Capital
Newspapers and magazines 41 41%
Radio/television 20 20%
Training workshops and 12 12%
seminars
Friends/Family 15 15%
Other 6 6%
Not Applicable 6 6%
Figure 11
Medium of information about Venture Capital
Newspapers and magazines Radio/television
6% Training workshops and
6% seminars Friends/Family
Other
Not Applicable
15% 41%
12%
20%
Interpretation –
From the above data it can be concluded that majority of the respondents got to
know about venture capital through various newspapers and magazines. Further it can be
said that newspapers and magazines are playing a crucial role in building awareness about
65
VC funding among the entrepreneurs. Radio and television also contributes a significant
part in the same . However training workshops and seminars are still lagging behind.
66
12. Did you ever apply for Venture Capital financing?
Table 12
Ever applied for Venture Respondents Percentage
Capital Financing?
Yes 74 74%
No 26 26%
Figure 12
Ever applied for Venture Capital Financing?
25
20
15
10
5
0
Yes No
Interpretation –
The interpretation of the above shows that almost 75% of the respondents have
applied atleast for once for venture capital financing. If we deeply analyse the above
chart the respondents who have not applied for VC funding also contains the
respondents who are not aware about the same. So the no. of respondents who have
applied for VC funds are from the people who are aware of it , 26/100 respondents,
is a very good statistics for concluding that majority of the respondents have shown
their interest for applying in VC funding .
67
13.If yes in above question, did you receive any
funding/support from the VC firms?
Table 13
Ever received Venture Respondents Percentage
Capital Financing?
Yes 56 56%
No 18 18%
Not Applicable 24 24%
Figure 13
Ever received Venture Capital Financing?
26% Yes No
Not Applicable
56%
18%
Interpretation –
From the above data we can conclude that only 56% of the respondents were able to get VC
financing. Since we know that only 25 respondents have had tried applying for VC funds .
so we can further conclude that 75% of the respondents who applied for VC funds
successfully got the same.
68
14. What array of businesses are points of attraction among
Venture Capitalists?
Table 14
Array Of Businesses Respondents Percentage
Unique idea 35 35%
Perfect team 15 15%
long term sustainability 35 35%
Financial outlook 9 9%
Not applicable 6 6%
Figure 14
Array Of Businesses
12
10
8
6
4
2
0
Interpretation –
From the above data it can be concluded that the entrepreneurs believe that an unique idea
and the long sustainability of the business are equally important factors to attract venture
capitalists . According to them financial outlook of the business is the least attractive array
69
to be considered by the venture capitalists
70
15.According to you , what can be the effects of the venture Capital
funding to your business?
Table 15
Effects of Venture Respondents Percentage
Capital Funding
Increase in sales volume 26 26%
Better monitoring 44 44%
Better governance structure 3 3%
loss of control of the business 6 6%
delays in decision making 15 15%
not applicable 6 6%
Figure 15
Effects of Venture Capital Funding

16
14
12
10
8
6
4
2
0
Increase inBetter salesBetter

volumemonitoring
governance structure
loss of control of the
delays
business
in decision
not applicable
making
Interpretation –
From the above data we can conclude that majority of the respondents think that VC
financing will have positive effect on businesses i.e., better monitoring and increase in sales
71
value. We can further conclude that VC financing is not beneficial in terms of government
structure .
72
16.What is the main challenge you faced when applying for Venture
Capital funds?
Table 16
Main challenges faced Respondents Percentage
Process of applying too lengthy 9 9%
Business data required to make 15 15%
application is incomplete and unreliable
Requirements for application are 0 0
difficult
No sufficient support and guidance 29 29%
during the application process
Not sure how much funding to apply for 21 21%
as this is determined by VC firm
not applicable 26 26%
Figure 16
Main challenges faced

Process of applying too lengthy
9%
Business data required to make application is incomplete

26%
Requirements for application are difficult
15%
No sufficient support and guidance during the application
unreliable
Not sure how much funding to apply for as this is determin
0%
21% 29%
VC firm
not applicable

Interpretation –
From the above data we can conclude that majority of the respondents face challenges
73
during the application process. With this response we can conclude that VC Financing
application process and its requirements are complex or difficult to understand.
74
17.According to you, which sector one should start its
venture in?
Table 17
Sectors Respondents Percentage
Automobile Industry 56 56%
Finance industry 20 20%
Manufacturing 15 15%
Others 9 9%
Figure 17
Sectors
9%
15% Automobile Industry Finance industry Manufacturing
Others
56%
20%
Interpretation –
From the above data it can be concluded that majority of the respondents suggest that one
should venture in automobile industry may be because automobile industry has a great
scope in near future as compared to other industries . 20% and 15% of the respondents
suggest that one should start venture in finance and manufacturing industry respectively.
75
18. Do you recommend Venture Capital Source of Financing for
future startups?
Table 18
Do you recommend VC Respondents Percentage
Source of Financing for
future startups?
Yes 71 71%
No 29 29%
Figure 18
Do you recommend VC Source of Financing for future sta
25
20
15
10
5
0
Yes No
Interpretation –
The interpretation of the above shows that more than 70% of the respondents recommend
VC source of financing for future startups from which can conclude that VC as a source of
finance has growth prospects in the future.
76
19. How much minimum amount of funds one would require
through venture capital financing?
Table 19
Minimum amount Respondents Percentage
of Funds
less than 500000 0 0
500000 – 1000000 0 0
1000000 – 2500000 29 29%
more than 2500000 27 27%
Depends on the type of 44 44%
Business
Figure 19
Minimum amount of Funds
Depends on the type of Business
more than 2500000
1000000 – 2500000
500000 – 1000000
less than 500000
0246810121416
Interpretation –
From the above data it can be concluded that majority of the respondents believe that
amount of funds which one would require through VC financing totally depends upon the
type of business one is operating. However none of the respondents feel that the funds
77
required should be less than 10,00,000.
78
CHAPTER: 5
Conclusions and Suggestions
Findings and Discussions :
In summary the study conducted determined various source of financing available to

Enterprises their perception and Impact of Venture Capital Funding as alternative source of
funding. A number of issues were identified through the survey with the aid of a
questionnaire. Face to face interviews and personal observations were also made on with
Enterprise owner/managers in relation to their sources of finance, preference for financing,
awareness of venture capital funds, requirements needed to source Venture Capital Funds
and intention to source funds from venture capitalists.
The study further chronicles other alternative means financing to Enterprises. For instance,
while some respondents indicated most of their funding was from personal sources, friends
and relatives and retained earnings, others pointed out that occasionally they received
support from financial institutions such as the bank. The respondents however added that
they found it much difficult to obtain financing from these financial institutions due to the
conditions and requirements needed to assess financing.
The study consequently suggests that Enterprises prefers self-financing, because it is less
expensive relative to commercial loans. They remained much skeptical and considered
them as high risk borrowers.
The findings also further assert that the Enterprises which have applied for VC funds face
problem in its application process. Moreover, Enterprises feel that the application process is
too lengthy and time consuming.
79
Though few of Enterprises respondents remained optimistic about venture capital financing
most them were „uncertain‟.Though this level of uncertainty would suggest that it is
unlikely local Enterprises would utilise venture capital above other sources of finance. It
would also seem that in order for Enterprises to be comfortable with using venture capital
they require much more information in a number of areas. Enterprises and their advisors
particularly need information about the level of risk associated with venture capital, that is,
they must be convinced that venture capital involves no more risks than other forms of
finance. Clearly more education is needed before venture capital will be utilised by local
Enterprises.
The entrepreneurs believe that an unique idea and the long sustainability of the business are
equally important factors to attract venture capitalists . According to them financial outlook
of the business is the least attractive array to be considered by the venture capitalists.
Venture capital funding have both positive and negative effects on business but majorly it
has positive effects only. Better monitoring of business operations is one of the major
positive effect . However it does not contribute in shaping the governance structure.
The findings also says that majority of the respondents suggest that one should venture in
automobile industry may be because automobile industry has a great scope in near future as
compared to other industries. ( For the ones who are thinking to start their business in
future)
Most of them recommend venture capital funding as a source of finance for the future
startups . So we can say that venture capital financing has growth prospects. They believe
that there isn’t a specific amount for funding it totally depends upon the nature of your
business.
80
Conclusion :
On the basis of the theoretical analysis and empirical findings Several conclusions could be
extracted .
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
company.
Although findings show that venture capital funding is related to strengthened control,
better monitoring and no contribution in governance structure, Venture Capital remains
crucial factor for spurring innovations, enhancing growth opportunities, especially for the
small and medium-sized enterprises and therefore, creating new jobs. The latter are enough
reasons for every national economy to take care for the venture capital financing as proven
chance for the realization of smart ideas.
Hypothesis Accepted/Rejected
Hypothesis 1: People are aware about venture capital Accepted
Financing.
Hypothesis 2: There is future rate of growth of Venture Capital Accepted
Finance .
Hypothesis 3: Applying for Venture Capital funding is an easy Rejected
process.
81
Suggestions and Recommendations:
In view of the findings, a number of recommendations are made for further action to be
taken in support of Enterprises, startups, other businesses Financing .
Business Enterprises
 Enterprises need to recognize the potential advantages of seeking external equity finance
from corporate sources. Corporate investors can therefore become very important assets for
Enterprises both financially and strategically as they provide tangible and intangible value-
added resources which can play a valuable role in Enterprise growth.
 Businesses with the primary objective of raising external equity finance will typically
require only limited contact with corporate investors and should therefore approach
independent venture capital funds which have raised finance from corporate sources.
 If one of the major objectives of the Enterprise is to benefit from the value-added offered
by corporate investors then contact should be made directly with companies operating in
appropriate industrial sectors with venture capital public funds.
 The most suitable partners may be companies with whom previous business relationships
have been established. Venture capital links offer far greater opportunities ranging from the
gain of hands-on advice and resources from investors to forming further collaborative
relationships with them.
 Enterprises should be trained and assisted to set up basic planning and record keeping
systems, and to write financing proposals.
82
Summary
Though various researches are done but working out the criteria from entrepreneurs and
venture capitalist point of view over and above business plan is required. A proper action
plan is required for entrepreneurs and venture capitalist before screening any project.
Qualitative analysis and quantitative analysis both are equally important for venture capital
funding. In India venture capital funds are governed by SEBl so even the Venture Capitalist
from outside India need to know the entrepreneurs and the growing sectors in India as cross
border difference make lot of impact on the funding. Certain specific parameters to be
required for venture capitalist especially when there exist lot of apprehension.
Venture capital investments in India have been witnessing tremendously growth and paving
way for entrepreneurial venturesto explore the untapped opportunities. Entrepreneurial ventures
backed by venture capital have set new benchmark of success and is encouraging budding
potential entrepreneurs. India has become startup hub and hold third position in global ranking.
India has been witnessing growing number of startups in various sectors. Venture capital relies
on the entrepreneurial development and entrepreneur’s willingness to share their rights over
business. Thereby, it is clear from
the study that the growth in number of venture capital deals and venture capital investments.
The results infer that there is both more demand and supply in the venture capital industry with
growing number of potential entrepreneurs and venture capital investors. Venture capital
investments are made in ventures which possess the high risk and high return. Venture capital
prefers novice ventures. Venture capital investor’s preliminary focus is to earn good returns
with rational choice of investments. Thereby, venture capital investment is a challenge to meet
the standard expectations from the investors. The study confers that IT & ITES sector, BFSI
sector, Healthcare & life sciences sector and manufacturing sector are the major sectors
attracting venture capital investments. IT & ITES sector substantially dominate the other
sectors in attracting venture capital investments. The driving forces of tremendous increase in
the venture capital investments in IT & ITES sector are its extended subsectors like online
83
services, mobile value added services and Enterprise resource software. BFSI sector is driving
the new startups in BHIM, UPI, payment banking, online transactions, peer to peer lending etc.
Therefore increase in the venture capital investments is also witnessed. Health care & Life
sciences sector is an evergreen most essential sector supporting the human sustenance. The
advancement in this sector with new technologies possesses more value. Increasing health
concern among the people across various demographic profiles has been the push factor for the
growth in the sector which is found to have support by the venture capital investments.
Manufacturing sector is the backbone of developing countries which provides
employment to vast population and makes the products available and affordable to people.
Venture capital investments are found to be lesser comparatively due to exogenous factors
which effects profitability time period. Venture capital investments are supportive for the
entrepreneurial growth. However, it is found to be highly concentrated in few sectors.
Governmentshould provide incentives and tax wavering for venture capital investments in the
very essentially sectors like agricultures, Engineering and constructions, travel and transport
which supports the national growth. Government has already many initiatives for
entrepreneurial development. Government has to consider venture capital investments as a part
of entrepreneurial development and create awareness among the young potential entrepreneurs.
Venture capital investments serves as alternative source of financing for entrepreneurs and
availability of financial support is essential for growth and development of the nations.
Government policies to monitor the activities of venture capital investors would support
entrepreneurialsafety.
84
Venture Capital Managers
Venture capital fund managers can do more to encourage venture capital investment.
 Non-financial companies can be a very significant alternative source of funds for
independent venture capital groups specializing in investing in Enterprises at a time when
they are experiencing difficulties in raising funds from financial institutions.
 Venture capital fund managers need to recognize the motivations of the corporate
investor and to tailor their funds accordingly.
 They should try to reduce the complexities of the application process and make the
entrepreneurs understand the process easily so that they are not reluctant towards applying
for the same.
 Venture capitalists should consider allowing investing corporations to influence fund

investment criteria and have closer contact with investee firms, particularly when corporate
objectives are oriented strategically.
 Dedicated funds designed specifically for the requirements of an individual corporation

provide greater opportunities for the company to benefit strategically and obtain windows
on innovation, growth and expansion.
 Venture capitalists have a role to play in stimulating direct venture capital investment via
co-investments with corporations. Linking up with direct corporate investors in this way
can help them to learn and gain experience and also benefit the investee firm.
 Develop Intensive Education and Awareness Programmes to inform the general public
and businesses on the attributes and merits of Venture Capital Financing.
85
Government and Policy makers
Since Private Sector is the engine of growth of the economy as such government and Policy
makers should:
 Provide credit and equity financing to eligible Venture Capital Finance Companies
(VCFCs) which in turn will support Enterprises
 Provide monies to support other activities and programs for the promotion of Venture
Capital Financing
 Serve as both facilitators and educators in encouraging the venture capital process.
 Provide tax incentives to companies prepared to make venture capital investments. Tax
breaks are an important method for initially stimulating interest in an activity that many
corporate executives are possibly not currently considering. Policy makers should consider
offering large companies similar incentives.
 Investigate the feasibility of establishing some form of guaranteed funding potential

scheme operated by consultants, venture capitalists and other experts, which could provide
would-be investors with advice and information concerning potential investees.
 Be a government-funded marriage bureau service to act as a match-maker for investor and

investee companies.
 Organise seminars and reports to business leaders by underline the need for, advantages
of, and guidelines for success in inter-firm strategic partnerships.
 Place particular emphasis on the importance of publicizing successful examples of

alliances and specifically venture capital role models.
86
BIBLIOGRAPHY
1. JOURNALS
•APPLIED FINANCE VENTURE STAGE INVESTMENT

PREFERENCE IN INDIA, VINAY KUMAR, MAY,
2004.
• ICFAI JOURNAL OF APPLIED FINANCE MAY- JUNE

• VIKALPA VOLUME 28, APRIL- JUNE 2003
• ICFAI JOURNAL OF APPLIED FINANCE, JULY- AUG.
2. BOOKS
• I.M. Panday- venture capital development process in India
• I.M. Panday- venture capital the Indian
experience
3.VARIOUS NEWSPAPERS
- Economic Times
- The Financial Express
- Mint
- Business World
87
4. VARIOUS RESEARCH PAPERS
1. The process of developing venture capital in India" Technovation, Volume 18,

Issue 4, April 1998
2. "Creating an Environment for Venture Capital in India"- M. World
Development, 30 (2) 227-253 (2002)
3. “Indian Venture Capitalists (VCs): Investment Evaluation Criteria" - ICFAI

Journal of Applied Finance, Vol. 10, No. 7, pp. 71 -93, July 2004
4. "Venture capital or private equio.)? The Asian experience"- Business
Horizons Volume 50, Issue 4, July—August 2007
5. A theory of strategic venture investing ,Thomas Hellmann, Journal of
Financial Economics(vol.64,no. 2)May2002 Research Paper: Venture capital
and professionalization of start up firms : Empirical evidence
4. INTERNET
 www.indiainfoline.com
 www.vcapital.com
 www.investopedia.com
 www.vcinstitute.com
 www.1000ventures.com
 www.wikipidea.org
 www.investopedia.org
 www.shodhganga.in
 www.researchgate.in
88
ANNEXURE
Questionnaire: Survey on Impact of Venture Capital

Financing on various Businesses
The researcher would like to learn about the impact of Venture Capital Financing towards
financing of various enterprises and attitudes towards venture capital as an alternative
source of fund. Any information provided would be used for the sole purpose of this
academic exercise and would be kept in strict confidence.
The statement does not require any information that could be detrimental to you. Any
information that is given herein is assured to be treated as confidential. Please, deliberately
complete all statement in this questionnaire in order to have precise and accurate research.
Thank you so much for your corporation and participation.
Name:
Organization Name:
1. Gender
[ ] Male
[ ] Female
2. Age
[ ] below 25
[ ] 25 – 40 years
[ ] 41 – 60 years
89
[ ] 61 and above
3. Qualification
[ ] HSC
[ ] Graduate
[ ] Post Graduate
[ ]Professional
4. Type of business
[ ] Sole proprietorship
[ ] Partnership
[ ] Limited liability company
5 Monthly Income
[ ] up to 25000
[ ] 25001 – 50000
[ ] 50001 – 75000
[ ] 75001 – 100000
[ ] 100000 and above
6. How many employees does the business have?

[ ] below15 employees
[ ] 16-30 employees
[ ] 31-50 employees
[ ] more than 50 employees
7. How long has this business been operating ?

[ ] less than 2 years
[ ] 2-4 years
[ ] 5 -10 years
[ ] More than 10 years
90
8. What is the major source of finance for your
business?
[ ] Owners (Self-financed)
[ ] Venture capital
[ ] bank loans
[ ] government assistance
[ ] others
9. Is it easy to raise capital?

[ ] Yes
[ ] No
10. Are you aware of venture capital financing?

[ ] Yes
[ ] No
11. If yes, what is the medium through which you obtained

Information regarding Venture Capital financing?
[ ] Newspapers and magazines
[ ] Radio/television
[ ] Training workshops and seminars
[ ] Friends/Family
[ ] Other
12. Did you ever apply for Venture Capital

financing?
[ ] Yes
[ ] No
91
13. If yes in above question, did you receive any funding/support from the VC firms?
[ ] Yes
[ ] No
[ ] Not Applicable
14. What array of businesses are points of attraction among Venture Capitalists?
[ ] Unique idea
[ ] Perfect team
[ ] long term sustainability
[ ] Financial outlook
[ ] Not Applicable
15. What are the effects of the venture Capital funding to your business?
[ ] Increase in sales volume
[ ] Better monitoring
[ ] Better governance structure
[ ] loss of control of the business
[ ] delays in decision making
[ ] not applicable
16. What is the main challenge you faced when applying for Venture Capital funds?
[ ] Process of applying too lengthy
[ ] Business data required to make application is incomplete and unreliable
[ ] Requirements for application are difficult
[ ] No sufficient support and guidance during the application process
[ ] Not sure how much funding to apply for as this is determined by VC firm
[ ] not applicabl
92
17. According to you ,Which sector one should start its venture in?
[ ] Automobile industry
[ ] Finance industry
[ ] Manufacturing
[ ] others
18. Do you recommend Venture Capital Source of Financing for future startups?
[ ] Yes
[ ] No
19.How much minimum funds one would require through Venture capital financing?
[ ] less than 500000
[ ] 500000 – 1000000
[ ] 100000 – 2500000
[ ] more than 2500000
[ ] Depends on the type of business
93

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Revised Syllabus for

VENTURE CAPITAL FINANCING AND ITS IMPACT ON VARIOUS

UNDER THE GUIDANCE OF

1, Shruti Shah the student of T.Y.BCom (BAF) Semester VI (2021 -

The concept of Venture Capital

Venture capital is money provided by professionals who invest alongside management in

Venture capitalists generally:

 Finance new and rapidly growing companies

 Purchase equity securities

 Assist in the development of new products or services

 Add value to the company through active participation

 Take higher risks with the expectation of higher rewards

 Have a long-term orientation

Private Equity Investing

The typical person-on-the-street depiction of a venture capitalist is that of a wealthy

2. Potential for Capital Gain:

3. Realistic Financial Requirement and Projections:

4. Owner's Financial Stake:

The Rockefeller Family, and in particular, L S Rockefeller, one of whose earliest

Venture capitalists can be generalists, investing in various industry sectors, or various

Stages of Venture Capital Funding

1. Pre seed Stage:

Here, a relatively small amount of capital is provided to an entrepreneur to conceive and

Financing is provided to complete product development and commence initial marketing

6. Bridge / Mezzanine Financing or Later Stage Financing Bridge / Mezzanine

Venture capital has made significant contribution to technological innovations and

 Helps in industrialization of the country

 Helps in the technological development of the country

 Helps in developing entrepreneurial skills

 Profit to venture capital companies.

 Helps them to employ their idle funds into productive avenues.

capitalists are rewarded by business success and the capital gain.

ENTREPRENEUR ECONOMY INVESTOR

Benefits of VC over other Funding Methods

Venture capital has a number of advantages over other forms of finance:

• The venture capitalist also has a network of contacts in many areas

3. Venture partners and entrepreneur-in-residence (EIR): Other positions at venture capital

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

Venture capitalists usually expect to be able to assign personnel to key management

Background of the Study

• Should one choose Venture Capital or any other mode of finance?

to business failures under production Industrial disputes and sometimes closures by

have been able to achieve with their businesses.

investors depends on their risk perception and the attractiveness of alternative

investment (which affects their willingness to invest). Government borrowing, the

general economic climate, availability of collateral, quality of record keeping,

Businesses owners are reluctant to be transparent or open up involvement of their

businesses to outsiders. They seem to be unaware of or oblivious to the obligations

development and establishment of business linkages. Management and support

services are perceived to be cost prohibitive and non-value adding.

Medium Enterprises (Enterprises) and to promote Venture Capital industry .

REDMEN & MORY defines, “Research as a systematized effort to gain now

 Exploratory research design

 Descriptive research design

 Casual research design

This research is a Exploratory research. The major purpose of this research is