ANALYSIS OF VENTURE CAPITAL
ASHISH KUMAR JHA
M.M.S. ‘IV’ Finance
Roll No: 09
Prof. PANKAJ TRIVEDI
In partial fulfillment of the requirements for the degree of Masters of Management Studies
K. J. Somaiya Institute of Management Studies & Research
VidyaVihar (E), Mumbai 400077.
1) Executive Summary1-2
2) What is Venture Capital?3-5
3) Why Venture Capital is Needed?6-14
4) Venture Capital & Stages of Development14-18
5) Types of Venture Capital Organisations19-23
6) Steps for Obtaining Venture Capital Finance24-40
7) Venture Capital Practices & Procedure40-49
8) Venture Capital in India49-60
9) Regulatory Environment for VC in India60-69
10) Opportunities in Biotech Sector69-71
12) ANNEXURES & Case Study76-95
The venture capital industry in India is still at a nascent stage. With a view to promote innovation, enterprise and conversion of scientific technology and knowledge based ideas into commercial production, it is very important to promote venture capital activity in India. India’s recent success story in the area of information technology has shown that there is a tremendous potential for growth of knowledge based industries. This potential is not only confined to information technology but is equally relevant in several areas such as bio-technology, pharmaceuticals and drugs, agriculture, food processing, telecommunications, services, etc. Given the inherent strength by way of its skilled and cost competitive manpower, technology, research and entrepreneurship, with proper environment and policy support, India can achieve rapid economic growth and competitive global strength in a sustainable manner.
A flourishing venture capital industry in India will fill the gap between the capital requirements of technology and knowledge based startup enterprises and funding available from traditional institutional lenders such as banks. The gap exists because such startups are necessarily based on intangible assets such as human capital and on a technology-enabled mission, often with the hope of changing the world. Very often, they use technology developed in university and government research laboratories that would otherwise not be converted to commercial use. However, from the viewpoint of a traditional banker, they have neither physical assets nor a low-risk business plan. Not surprisingly, companies such as Apple, Exodus, Hotmail and Yahoo, to mention a few of the many successful multinational venture-capital funded companies, initially failed to get capital as startups when they approached traditional lenders. However, they were able to obtain finance from independently managed venture capital funds that focus on equity or equity-linked investments in privately held, high-growth companies. Along with this finance came smart advice, hand-on management support and other skills that helped the entrepreneurial vision to be converted to marketable products.
Beginning with a consideration of the wide role of venture capital to encompass not just information technology, but all high-growth technology and knowledge-based enterprises, the endeavor should be to facilitate the growth of a vibrant venture capital industry in India. The report examines (1) the concept of Venture Capital (2) its comparison with other methods of financing (3) Types of Venture Capitalists & how they finance at different stages of development of business (4) Venture Capital Process (5) Indian Venture Capital Industry Scenario (6) Regulatory Issues and (7) A case study.
WHAT IS 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...