Venture capital financing and Development of Venture Capital in India

Venture capital plays a strategic role in financial small – scale enterprise and high technology and risky ventures; The Venture capitalization is more popular in developed countries

Venture capital financing and Development of Venture Capital in India

Venture capital plays a strategic role in financial small – scale enterprise and high technology and risky ventures; The Venture capitalization is more popular in developed countries; India also get the root of venture capitalization; Venture capital has potential to become an important resource of small medium enterprises [SMEs];

What is Venture Capital?

Venture Capital [ VC ] is a significant innovation of twentieth century; it is generally considered as risky capital and early stage of financing of new and young companies which are seeking to grow rapidly; And Venture Capital applicable as an involvement by the venture capitalist in the management of the client enterprise; It has also come to be associated with the financing of high and new technology based enterprises; The conventional financiers generally support proven technologies with established markets;

Features of Venture Capital

Equity Participant

Venture financing is actual or potential equity participant through direct purchase of stocks, options or convertible securities; The goal is to make capital gains by selling off the investment once the enterprise become profitable;

Long Term Investment

Venture Financing is a long term illiquid investment and it cannot be repayable on demand; It requires long term investment attitude that necessitates the venture capital firms [ VCFs ] to hold the investment for long term; until and unless the enterprise get start to reach at breakeven point;

Participation in Management

Usually Venture Capitalist participant being part of team of management in enterprise’s business; As Venture Capitalist they can support, advice, share their management input on financing and sometimes Venture Capital firm share marketing, technology, planning and operational skills in the new firm;

Venture Capital evolved as a method of early – stage financing but total investment goes into the different stage of floating funds; VC include the development, expansion, and buyout financing for those enterprise which are unable to raise funds from the normal financing source; VCFs also provide turnaround finance to revitalize and revive sick enterprises sometimes; Venture Capitalization proving seed capital and financing for high technology; India has large potential for fostering the growth and development of enterprise; and need not to be confined only to technology, financing;

The Business Plan and Venture Capital

Any venture capitalist looking at first glance for best, dynamic, futuristic and planning base business plan from enterprise to start with and presenting same; Business plan must have certain vision and core business competencies as Enterprise owner;

 There are few important key elements involve in business plan as below;

  • Executive Summary
  • Background on Venture
  • The Product or Service or Concept Definition
  • Market Analysis
  • Marketing
  • Business Operations
  • The Management Team
  • Financial Projections
  • Amount and Use of Finance Requirement

As venture capital firms [VCFs] are looking for their own interest of area like Superior Businesses, Quality and Depth of Management, Corporate Governance and Structure, Appropriate and efficient investment structure; and Exit Plan for VCFs

The process of venture capital financing inclusive as Below

  • Deal Origination
  • Screening
  • Evolution & Risk analysis
  • Deal Structuring
  • Post Investment activity
  • Exit Plan

Data Source from https://sidbi.in