Venture capital

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What is venture capital

• Venture capital means funds made available for
  start up firms and small business with
  exceptional growth and potential
• Venture capital is risk capital to finance high
  technology projects which involves risk but at
  the same time has strong potential for growth.

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Why companies need finance?

• For product development and innovation
• For day to day working of the company
• payment of wages and other expenses

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Features of venture capital

• High risk.
• Equity participation and capital gains.
• Venture capital investment are made in
  innovative projects.
• Suppliers of venture capital participate in
  management.

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Venture capitalist

• Venture capitalist is a financial intermediary,
  person or firm who collect money from investors
  and invest the money in to companies on the
  behalf of the investors.

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• Methods of venture capital
• Equity
• Conditional loan
• Participative debenture

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Advantages of venture capital
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• Economy oriented-
• Help in industrialization of the country and
  generate employment.
• Help in the technological development of the
  country.

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• Investor oriented-
• Investor invest only after company start earning
  profit, so the risk is less and healthy growth of
  capital market is entrusted.
• Helps them to employ their idle funds into
  productive use.

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• Entrepreneur oriented-
• Venture capital provide a solid capital base to
  company for future growth.
• The venture capital is a business partner,
  sharing the risk and rewards.

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• As the investor become part of autonomy and
  control of the founder is lost.
• It is lengthy and complex procedure.
• It is uncertain form of financing.

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• Venture capital in India-
• The concept of venture capital was formally
  introduced in India in 1987, when government a
  announced the creation of venture fund to be
  operated by industrial development bank of India.

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• Venture fund in India can be categorized into
  following groups-
• Those venture capital fund which promoted by the
  Central government controlled development finance
  institution,
• For e.g.-
• ICICI ( industrial credit and investment
  corporation of India) venture capital fund Ltd.
• IFCI( Industrial finance corporation of
  India)venture capital fund Ltd.
• SIDBI( small industrial finance corporation of
  India) venture capital fund ltd.

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• Those promoted by the state government controlled
  development finance institution,
• For eg -
• Gujarat venture finance Ltd.
• Kerala venture capital fund Pvt. ltd.
• Venture capital fund promoted by public
  sector banks , private sector banks and foreign
  banks.

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Conclusion

• Venture capital provide long term funding to
  unquoted companies to grow and succeed. Raising
  venture capital is a bit different from borrowing
  money from lender have the right to interest on
  the loan and repayment of loan.
• On the other hand, venture capital investment
  provides equity stake to the investor and the
  return on investment relies on the growth and
  profitability.

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