WINTER PROJECT REPORT ON

STATUS OF VENTURE CAPITAL IN INDIA

Submitted To

KUMAUN UNIVERSITY, NAINITAL For partial fulfillment of the degree of Master of Business Administration

PROJECT GUIDE
Dr. L.K SINGH ASSOCIATE PROFESSOR DMS , BHIMTAL

SUBMITTED BYLALIT MOHAN SANGURI MBA-IV SEM Roll no.112588

DEPARTMENT OF MANAGEMENT STUDIES, KUMAUN UNIVERSITY CAMPUS, NAINITAL

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Students declaration
This project has been undertaken as a partial fulfillment of the requirement for the award of the degree of MASTER BUSINESS ADMINISTRATION OF KUMAUN UNIVERSITY NANITAL. The project was executed during 4th semester of MBA programme under the guidance of Dr. L.K.SINGH. I declare that this project is my original work and the analysis and findings are for academic purpose only. This study has not been presented in any seminar or submitted elsewhere for the award of any degree or diploma.

Counter signed by: Dr. L.K. SINGH (Faculty of DMS)

LALIT MOHAN SANGURI Roll No. - 112588

ACKNOWLEDGEMENT
No learning is proper& effective without proper guidance Every study is incomplete without having a well plan and concrete exposure to the student. studies are not exception scope of the project at this level is very wide ranging .on the other hand it provide second basis to adopt the theoretical knowledge and on the other hand it gives an opportunities for exposure to real time situation. This study is an internal part of our MBA programmed and to do this project in a short period was a heavy task. Intention, dedication, concentration and hard work are very much essential to complete any task. But still it need a lot of support, guidance, assistance, cooperation of people to make it successful. I bear to imprint of my people who have given me their precious idea and time to enable me to complete the research and project report .I want to thanks for their continuous support in my research & writing efforts. I wish to record my thanks and indebtedness to Dr. L.K.SINGH (Faculty DMS CAMPUS, BHIMTAL) whose inspiration, dedication and helping nature provided me the kind of guidance necessary to complete this project. I am extremely grateful to department of management studies campus Bhimtal for granting me permission to be part of this college.

LALIT MOHAN SANGURI M,B,A, 4TH SEM

PREFACE

Practical knowledge is an important suffix to theoretical knowledge; one can not merely rely upon the theoretical knowledge. Classroom make the fundamental concept clear, but practical survey has significant role play in subject of business management for development managerial skills. It is necessary that we combine our classrooms learning with the knowledge of real business environment. I am extremely happy to present this research report before the esteemed teacher/management. It has not only helped me to enhance my knowledge about STATUS OF VENTURE CAPITAL IN INDIA but also gave new dimensions to my knowledge about venture capital.

EXECUTIVE SUMMARY

This First: The abundance of talent is available in the country. The low cost high quality Indian workforce that has helped the computer users world wide inY2K project is demonstrated asset. Second: A good number of successful Indian entrepreneurs in Silicon Valley should have a demonstration effect for venture capitalists to invest in Indian talent at home. Third: the opening up of Indian economy and its integration with the world economy is providing a wide variety of niche market for Indian entrepreneurs to grow and prove themselves. The topic deals with a specific aspect of business especially small business and the provision of risk- capital so essential to their birth, survival and profitable growth. It is not concerned with the banking instruments for short term finances e.g. overdrafts and loans. The topic concentrates on the provision of permanent or equity type capitals i.e. venture capital. In the broad terms, venture capital means long term risk equity finance where the primary reward for its provider is eventual capital gain and not the interest/dividend yield. India is on the threshold of a high technology revolution and growth. Slow growth of significant institutional set up

to provide much needed venture capital has hampered the growth of the economy. A radical change in the existing framework of venture capital financing in India is a must to achieve high economic growth.

Contents

DECLARATION PREFACE ACKNOWLEDGEMENT EXECUTIVE SUMMARY

Chapter-1.(6-17)
INTRODUCTION(7-15)

Literature Review(16-17)

Chapter-2.(18-20)
Research Methodology .(19-20)

Chapter-3..(21-39)
Conceptual Framework of Venture Capital ..(22-39)

Chapter-4.(40-52)
Regulatory Environment of Venture Capital.(41-52

Chapter-5.(53-67)
Data Analysis & Interpretation..(54-67)

Chapter-6 (68-69)
Conclusions & Suggestions.(69) BIBLIOGRAPHY

INTRODUCTIONVenture capital (VC) is financial capital provided to early-stage, high-potential, high risk, growth startup companies. The venture capital fund makes money by owning equity in the companies it invests in, which usually have a novel technology or business model in high technology industries, such as biotechnology, IT, software, etc. The typical venture capital investment occurs after the seed funding round as growth funding round (also referred to as Series A round) in the interest of generating a return through an eventual realization event, such as an IPO or trade sale of the company. Venture capital is a subset of private equity. Therefore, all venture capital is private equity, but not all private equity is venture capital.[1] In addition to angel investing and other seed funding options, venture capital is attractive for new companies with limited operating history that are too small to raise capital in the public markets and have not reached the point where they are able to secure a bank loan or complete a debt offering. In exchange for the high risk that venture capitalists assume by investing in smaller and less mature companies, venture capitalists usually get significant control over company decisions, in addition to a significant portion of the company's ownership (and consequently value). Venture capital is also associated with job creation (accounting for 2% of US GDP),[2] the knowledge economy, and used as a proxy measure of innovation within an economic sector or geography. Every year, there are nearly 2 million businesses created in the USA, and 600800 get venture capital funding[citation needed]. According to the National Venture Capital Association, 11% of private sector jobs come from venture backed companies and venture backed revenue accounts for 21% of US GDP. [3] Evolution of VC Industry in India The first major analysis on risk capital for India was reported in 1983. It indicated that new companies often confront serious barriers to entry into capital market for raising equity finance which undermines their future prospects of expansion and diversification. It also indicated that on the whole there is a need to revive the equity cult among the masses by ensuring competitive return on equity investment. This brought out the
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institutional inadequacies with respect to the evolution of venture capital. In India, the Industrial finance Corporation of India (IFCI) initiated the idea of VC when it established the Risk Capital Foundation in 1975 to provide seed capital to small and risky projects. However the concept of VC financing got statutory recognition for the first time in the fiscal budget for the year 1986-87.The Venture Capital companies operating at present can be divided into four groups: Promoted by All India Development Financial Institutions Promoted by State Level Financial Institutions Promoted by Commercial banks Private venture Capitalists.

Promoted by all India development financial institutions

The IDBI started a VC fund in 19876 as per the long term fiscal policy of government of India, with an initial capital of Rs. 10 Cr which raised by imposing access of 5% on all payments made for the import of technology know- how projects requiring funds fromrs.5 Lakhs to Rs 2.5 Cr were considered for financing. Promoters contribution ranged from this fund was available at a concessional interest rate of 9% (during gestation period) which could be increased at later stages. The ICICI provided the required impetus to VC activities in India 1986 , it started providing VC finance in 1998 it promoted, along with the Unit Trust of India (UTI) Technology Development and Information Company of India (TDICI) as the first VC company registered under the companies act, 1956. The TDICI may provide financial assistance to venture capital undertakings which are set up by technocrat entrepreneurs, or technology information and guidance services. The risk capital foundation established by the industrial finance corporation of India (IFCI) in 1975, was converted in 1988 into the Risk Capital and Technology Finance company (RCTC) as a subsidiary company of the IFCI the RCTC provides assistance in the form of conventional loans, interest free conditional loans on profit and risk sharing basis or equity participation in extends financial support to high technology projects for technological up gradations. The RCTC has been renamed as IFCI Venture Capital Funds Ltd. (IVCF)
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Promoted by State Level Financial Institutions

In India, the State Level financial institutions in some states such as Madhya Pradesh, Gujarat, Uttar Pradesh, etc., have done an excellent job and have provided VC to a small scale enterprises. Several successful entrepreneurs have been the beneficiaries of the liberal funding environment. In 1990, the Gujarat Industrial Investment Corporation, 56 promoted the Gujarat Venture Financial Ltd.(GVFL) along with other promoters such as the IDBI, the World Bank, etc. The GVFL provides financial assistance to businesses in the form of equity, conditional loans or income notes for technologies development and innovative products. It also provides finance assistance to entrepreneurs. The government of Andhra Pradesh has also promoted the Andhra Pradesh Industrial Development Corporation (APIDC) venture capital ltd. To provide VC financing in Andhra Pradesh.

Promoted by commercial banks

Can bank Venture Capital Fund, State Bank Venture Capital Fund and Grind lays bank Venture Capital Fund have been set up by the respective commercial banks to undertake VC activities. The State Bank Venture Capital Funds provides financial assistance for bought out deal as well as new companies in the form of equity which it disinvests after the commercialization of the project. Can bank Venture Capital Fund provides financial assistance for proven but yet to be commercially exploited technologies. It provides assistance both in the form of equity and conditional loans.

Private Venture Capital Funds

Several private sector venture capital funds have been established in India such as the 20 The Can Venture Capital Company, Indus Venture Capital Fund, Infrastructure Leasing and Financial Services Ltd .Some of the companies that have received funding through this route include: Mastek, on of the oldest soft warehouse in India Rusk an software, Pune based software consultancy SQL Star, Hyderabad-based training and software development consultancy Satyam info way, the first private ISP in India Hindi tron, makers of embedded software Select, provider of interactive software selection Yantra, ITL Infosys US subsidiary, solution for supply chain management Rediff on the Net, Indian website featuring electronic shopping, news, chat etc.

Phase I
-Formation of TDICI in the 80s and regional funds as GVFL & APIDC in the early 90s.The first origins of modern venture capital in India can be traced to the setting up of a Technology Development Fund in the year 1987-88, through the levy of access on all technology import payments. Technology Development Fund was started to provide financial support to innovative and high risk technological programmes through the Industrial Development Bank of India. The first phase was the initial phase in which the concept of VC got wider acceptance. The first period did not really experience any substantial growth of VCs. The 1980swere marked by an increasing disillusionment with the trajectory of the economic system and a belief that liberalization was needed. The liberalization process started in 1985 in a limited way. The concept of venture capital received official recognition in 1988 with the announcement of the venture capital
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guidelines. During 1988 to 1992 about 9 venture capital institutions came up in India. Though the venture capital funds should operate as open entities, Government of India controlled them rigidly. One of the major forces that induced Government of India to start venture funding was the World Bank. The initial funding has been provided by World Bank. The most important feature of the 1988 rules was that venture capital funds received the benefit of a relatively low capital gains tax rate which was lower than the corporate rate. The 1988 guidelines stipulated that VC funding firms should meet the following criteria: Introduction growthTechnology involved should be new, relatively untried, very closely held, in the process of being taken from pilot to commercial stage or incorporate some significant improvement over the existing ones in India Promoters / entrepreneurs using the technology should be relatively new, professionally or technically qualified, with inadequate resources to finance the project. Between 1988 and 1994 about 11 VC funds became operational either through reorganizing the businesses or through new entities. All these followed the Government of India guidelines for venture capital activities and have primarily supported technology oriented innovative businesses started by first generation entrepreneurs. Most of these were operated more like a financing operation. The main feature of this phase was that the concept got accepted. VCs became operational in India before the liberalization process started. The context was not fully ripe for the growth of VCs. Till 1995; the VCs operated like any bank but provided funds without collateral. The first stage of the venture capital industry in India was plagued by in experienced management, mandates to invest in certain states and sectors and general regulatory problems. Many public issues by small and medium companies have shown that the Indian investor is becoming increasingly wary of investing in the projects of new and unknown promoters. The liberation of the economy and toning up of the capital market changed the economic landscape. The decisions relating to issue of stocks and shares was handled by an office namely: Controller of Capital Issues (CCI). According to 1988 VC guideline, any organization requiring to start venture funds have to forward an application to CCI. Subsequent to the liberalization of the economy in 1991, the office of CCI was abolished in May 1992 and the powers were
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vested in Securities and Exchange Board of India. The Securities and Exchange Board of India Act, 1992 empowers SEBI under section 11(2) thereof to register and regulate the working of venture capital funds. This was done in1996, through a government notification. The power to control venture funds has been given to SEBI only in 1995 and the notification came out in 1996. Till this time, venture funds were dominated by Indian firms. The new regulations became the harbinger of the second phase of the VC growth.

Phase II
Entry of Foreign Venture Capital funds (VCF) between 1995 -1999The second phase of VC growth attracted many foreign institutional investors. During this period overseas and private domestic venture capitalists began investing in VCF. The new regulations in 1996 helped in this. Though the changes proposed in 1996 had a salutary effect, the development of venture capital continued to be inhibited because of the regulatory regime and restricted the FDI environment. To facilitate the growth of venture funds, SEBI appointed a committee to recommend the changes needed in the VC funding context. This coincided with the IT boom as well as the success of Silicon Valley start ups.

Phase III
(2000 onwards) - VC becomes risk averse and activity declines : Not surprisingly, the investing in 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. Consequently, during 2001-2003, the VCs started investing less money and in more mature companies in an effort to minimize the risks. This decline broadly continued until 2003.

Phase IV
2004 onwards - Global VCs firms actively investing in India Since Indias economy has been growing at 7%-8% a year, and since some sectors, including the services sector
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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 has been increasing substantially

GLOBAL TREND IN VENTURE CAPITAL INDUSTRY.

The 2007 Global Venture Capital Survey was sponsored by Deloitte &Touch LLP in conjunction with the National Venture Capital Association and other venture capital associations* throughout the world. It was administered in April and May 2007 to venture capitalists (VCs) in the Americas, Asia Pacific, Europe, the Middle East, and Africa. There were 528 responses from general partners, with 45 percent of respondents from the United States and 31 percent from Europe.

Investing globally by investing locally.

One way to build a comfort zone for global investing and to take advantage of opportunities abroad is to invest locally in companies with operations outside their home country, as opposed to investing directly in foreign countries. This year, there was a significant increase in the number of respondents who indicated that a sizeable number of their portfolio companies have a considerable amount of operations outside the country in which theyre head quartered. A significant number, 88 percent of U.S. respondents and 82 percent of non-U.S .respondents, indicated that at least some portion of their portfolio has significant operations outside of the country of headquarters. Again, moderation is evident as more than half of those indicated that less than 25 percent of their portfolio had significant foreign operations. Nonetheless, these numbers have increased significantly from prior years and reflect an increased trend in this method of investment

CURRENT TRENDS-

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The venture capital is growing 43% CAGR. However, in spite of the venture capital scenario improving, several specific VC funds are setting up shop in India, with the year 2006 having been a landmark year for VC funding in India. The total deal value in 2007 is 14234 USD Million. The NO. of deals are increase year by year. The no. of deals in 2006 only 56 and now in 2007 it touch the 387deals. The introduction stage of venture capital industry in India is completed in2003 after that growing stage of Indian venture capital industry is started. There are 160 venture capital firms/funds in India. In 2006 it is only but in 2007the number of venture capital firms are 146. The reason is good position of capital market. But in 2008 no. of venture capital firms increase by only 14. the reason is crash down of capital market by 51% from January to November 2008. The No. of venture capital funds are increasing year by year.

YEAR NO.OF VC FUND

2000 841

2001 77

2002 78

2003 81

2004 86

2005 105

2006 146

2007 160

Venture capital growth and industrial clustering have a strong positive correlation. Foreign direct investment, starting of R&D centres, availability of venture capital and growth of entrepreneurial firms are getting concentrated into five clusters. The cost of monitoring and the cost of skill acquisition are lower in clusters, especially for innovation. Entry costs are also lower in clusters. Creating entrepreneurship and stimulating innovation in clusters have to become a major concern of public policy makers. This is essential because only when the cultural context is conducive for risk management venture capital will take-of. Clusters support innovation and facilitates risk bearing. VCs prefer clusters because the information costs are lower. Policies for promoting dispersion of industries are becoming redundant after the economic liberalization. The venture capital firm invest their money in most developing sectors like healthcare, IT-ITes, telecom, Bio-technology, Media & logistics etc.
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Entertainment, shipping &

It is also a way in which public and private sectors can construct an institution that systematically creates networks for the new firms and industries, so that they can progress. This institution helps in identifying and combining pieces of companies, like finance, technical expertise, know of marketing and business models. Once integrated, these enterprises succeed by becoming nodes in the search networks for designing and building products in their domain. venture capital (VC) funding rebounded in the first quarter of 2013, raising $16 million in three deals after the previous quarter saw just one $500,000 VC deal, according to Mercom Capital Group, llc, a global clean energy communications and consulting firm. VC deals included Export Development Canada's $7 million financing of Endurance, a Vancouver-based manufacturer of wind turbines designed for power grid applications. Also receiving financing was Petaluma, a developer of a wind LiDAR (light detection and ranging) system for remote sensing of wind, which raised $5.5 million from Bright Capital, Cedar Fund, Evergreen Venture Partners, ABB and Draper Fisher Jurvetson. Heartland Energy Solutions, a manufacturer of 100 kW wind turbines and blades, on the other hand, raised $3.9 million. The report said most of the funding activity this quarter went towards project funding. Announced project funding in Q1 2013 came to $6.2 billion in 29 deals with some extremely large transactions recorded this quarter. Large-scale onshore wind projects received over $3.42 billion in 26 deals while offshore wind projects received over $2.74 billion in three deals. In the United States, wind became the most installed energy generation source in 2012 and has continued that momentum in the first quarter of 2013. According to Mercom, funding and M&A activity in the Indian wind energy sector in Q1 2013 was active with transactions in project, debt and other funding as well as project M&A. Notable transactions, according to Mercom, include Continuum Wind Energy receiving a $164 million loan from State Bank of India for its 175 MW wind project in Maharashtra, Gujarat Venture Finance picking up an equity stake in a special purpose vehicle of UK based SITAC group.
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LITRATURE REVIEW.

According to Subash and Nair, (May 2005).

The modern concept of venture capital state during 1946 and how practiced by almost all economies around the world, there seems to be a slowdown of venture capital activities after 2000.there may be a long list of reasons for this situation where people feel more risky to put their money in new and emerging ventures. Hardly 5% of the venture capital investment globally is given to really stage ventures in all years people around the world hessen the potentiality of venture capital in promoting different economies of the world by improving the standard of living of the people by expending business..

According To Kumar, (June 2003).

This study focus on the industry should concentrate more on early stage business opportunities instead of later stage. It is the experience world over and especially in the United States of America that the early stage opportunities have generated exceptional returns for the industry. He also suggests that individual capitalists should follow a focused investment strategy. The specialization should be in a board technology segment.

According to Kumar and Kaura, (March 2006).

The present study reports four factors which are used by the venture capitalist to screen new venture proposals. Using Kendalls tau-c analysis, the study brings out strong association between several variable pair. Broadly, the analysis finds that: Successful venture teams put in sustained efforts o identified target markets. They are highly meticulous while attending to the details. These teams are adept at dealing with risk because of their impeccable past experience.

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Indian venture capitalists do not seem to be much enamored of technology venturing; at least some of the successful funded by them do not seem to show signs of being hi- tech. The study brings out four important variables which are highly unique to successful venture in India. They are: Ability to evaluate and react to risk Attention to details Market share Profits.Evaluating risk seems to be an area where unsuccessful venture fail. Sinc e successful teams focus on established markets and meticulously pursue these markets to gain market share, they achieve desired profits.

According to Kumar, (May 2004).

The venture capital industry has followed the classical model of venture capital finance. the early stage financing which includes seed, start-up & early stage investment was always the major part of the venture investment. Whenever venture capitalists in venture certain basic preferences play a crucial role in investment decision. Two such consideration are location preferences and ownership preferences. According to Kumar, (March,2004)The industry should concentrate more an early stage business opportunities instead of later stage. It is the experience world over and espe cially in the United states of America that the early stage opportunities have generated exceptional for theindustry. It is recommended that the venture capitalists should retain their basicfeature that taking retain their basic feature that is taking high risk. The pr esentsituation may compel venture capitalists to opt for less risky opportunities but it isa gainst the sprit of venture capitalism. The established fact is big gains are possible in high risk projects.

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CHAPTER-2

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RESEARCH METHODOLOGY.
The term Research literally means to search diligently, investigate or experiment to discover facts, revise accepted theories on laws in light of new facts, or to discover a practical application of new facts, theories or laws. One uses research to get information to make decisions or implement a plan.

Research process.
DEFINE RESEARCH PROBLEM

REVIEW OF LITERATURE REVIEW CONCEPTS AND THEORIES REVIEW PREVIOUS RESEARCH FINDINGS

FORMULATE HYPOTHESIS

DESIGN RESEARCH FF FF

FF F ANALYSE DATA

COLLECT DATA (EXECUTION)

F INTERPRET AND REPORT

SUGGESTIONS AND CONCLUSION

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RESEARCH DESIGN .
The types of research are financial research type. Because financial instruments research studies are those studies which are concerned with exploratory the characteristics of a particular instrument. It includes surveys and fact finding enquires.

SAMPLE :
To conduct any research a scientific method must be followed. The universe of study is very large in which it is difficult to correct information from all the people. So, the sampling method has been followed for the study. The analysis is based On secondary data.

Research Area

:.VENTURE CAPITAL INDUSTRY IN INDIA.

DATA COLLECTION- The study is based on secondary data. I have collected data from different sources. I have collected the data with the help of various which are follow Internet Company magazines Various newspaper ( Business standard, Times of India, Economic Times) Past records

Objective of project :
To understand the concept of venture capital To examine the legal framework & regulations of the venture capital activity in India. To analyse the direction, pattern and growth of venture capital investment in India To analyse the relationship between economic growth and venture capital investment.

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CHAPTER-3

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Conceptual framework
Concept of Venture Capital
The term venture capital comprises of two words that is, Venture and Capital .Venture is a course of processing, the outcome of which is uncertain but to which is attended the risk or danger of loss. Capital means recourses to start an enterprise. To connote the risk and adventure of such a fund, the generic name Venture Capital was coined. Venture capital is considered as financing of high and new technology based enterprises. It is said that Venture capital involves investment in new or relatively untried technology, initiated by relatively new and professionally or technically qualified entrepreneurs with inadequate funds. The conventional financiers, unlike Venture capitals, mainly finance proven technologies and established markets. However, high technology need not be pre-requisite for venture capital. Venture capital has also been described as unsecured risk financing. The relatively high risk of venture capital is compensated by the possibility of high returns usually through substantial capital gains in the medium term. Venture capital in broader sense is not solely an injection of funds into a new firm, it is also an input of skills needed to set up the firm, design its marketing strategy, organize and manage it. Thus it is a long term association with successive stages of companys development under highly risk investment conditions, with distinctive type of financing appropriate to each stage of development. Investors join the entrepreneurs as co-partners and support the project with finance and business skills to exploit the market opportunities. Venture capital is not a passive finance. It may be at any stage of business/production cycle, that is, start up, expansion or to improve a product or process, which are associated with both risk and reward. The Venture capital makes higher capital gains through appreciation in the value of such investments when the new technology succeeds. Thus the primary return sought by the investor is essentially capital gain rather than steady interest income or dividend yield. Definition of Venture capitals-The support by investors of entrepreneurial talent with finance and business skills to exploit market opportunities and thus obtain capital gains.Venture capital commonly describes not only the provision of startup finance or seed corn capital but also development capital for later stages of business.
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A long term commitment of funds is involved in the form of equity investments, with the aim of eventual capital gains rather than income and active involvement in the management of customers business.

Features of Venture Capital.

High Risk By definition the Venture capital financing is highly risky and chances of failure are high as it provides long term start up capital to high risk-high reward ventures. Venture capital assumes four types of risks, these are: Management risk -Inability of management teams to work together. Market risk -Product may fail in the market. Product risk Product may not be commercially viable. Operation risk Operations may not be cost effective resulting in increased cost decreased gross margins.

High Tech

As opportunities in the low technology area tend to be few of lower order, and hitech projects generally offer higher returns than projects in more traditional areas, venture capital investments are made in high tech. areas using new technologies or producing innovative goods by using new technology. Not just high technology, any high risk ventures where the entrepreneur has conviction but little capital gets venture finance. Venture capital is available for expansion of existing business or diversification
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to a high risk area. Thus technology financing had never been the primary objective but incidental to venture capital.

Equity Participation & Capital Gains

Investments are generally in equity and quasi equity participation through direct purchase of shares, options, convertible debentures where the debt holder has the option to convert the loan instruments into stock of the borrower or a debt with warrants to equity investment. The funds in the form of equity help to raise term loans that are cheaper source of funds. In the early stage of business, because dividends can be delayed, equity investment implies that investors bear the risk of venture and would earn a return commensurate with success in the form of capital gains.

Participation In Management
Venture capital provides value addition by managerial support, monitoring and follow up assistance. It monitors physical and financial progress as well as market development initiative. It helps by identifying key resource person. They want one seat on the companys board of directors and involvement, for better or worse, in the major decision . This is a unique philosophy of hands on management where Venture capitalist acts as complementary to the entrepreneurs. Based upon the experience other companies, a venture capitalist advise the promoters on project planning, monitoring, financial management, including working capital and public issue. Venture capital investor cannot interfere in day today management of the enterprise but keeps a close contact with the promoters or entrepreneurs to protect his investment.

Length of Investment.
Venture capitalist help companies grow, but they eventually seek to exit the investment in three to seven years. An early stage investment may take seven to ten years to mature, while most of the later stage investment takes only a few years. The process of having significant returns takes several years and calls on the capacity and talent of venture capitalist and entrepreneurs to reach fruition.
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Illiquid Investment
Venture capital investments are illiquid, that is, not subject to repayment on demand or following a repayment schedule. Investors seek return ultimately by means of capital gains when the investment is sold at market place. The investment is realized only on enlistment of security or it is lost if enterprise is liquidated for unsuccessful working. It may take several years before the first investment starts to locked for seven to ten years. Venture capitalist understands this illiquidity and factors this in his investment decisions.

Difference between Venture Capital & Other

2.3.1 Venture Capital Vs Development Funds Venture capital differs from Development funds as latter means putting up of industries without much consideration of use of new technology or new entrepreneurial venture but having a focus on underdeveloped areas (locations). In majority of cases it is in the form of loan capital and proportion of equity is very thin. Development finance is security oriented and liquidity prone. The criteria for investment are proven track record of company and its promoters, and sufficient cash generation to provide for returns (principal and interest). The development bank safeguards its interest through collateral. They have no say in working of the enterprise except safeguarding their interest by having a nominee director. They do not play any active role in the enterprise except ensuring flow of information and proper management information system, regular board meetings, adherence to statutory requirements for effective management control where as Venture capitalist remain interested if the overall management of the project o account of high risk involved I the project till its completion, entering into production and making available proper exit route for liquidation of the investment. As against this fixed payments in the form of installment of principal and interest are to be made to development banks.

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Venture Capital Vs Seed Capital & Risk Capital

It is difficult to make a distinction between venture capital, seed capital, and risk capital as the latter two form part of broader meaning of Venture capital. Difference between them arises on account of application of funds and terms and conditions applicable. The seed capital and risk funds in India are being provided basically to arrange promoters contribution to the project. The objective is to provide finance and

encourage professionals to become promoters of industrial projects. The seed capital is provided to conventional projects on the consideration of low risk and security and use conventional techniques for appraisal. Seed capital is normally in the form of low interest deferred loan as against equity investment by Venture capital. Unlike Venture capital, Seed capital providers neither provide any value addition nor participate in the management of the project. Unlike Venture capital Seed capital provider is satisfied with low risk-normal returns and lacks any flexibility in its approach. Risk capital is also provided to established companies for adapting new technologies. Herein the approach is not business oriented but developmental. As a result on one hand the success rate of units assisted by Seed capital/Risk Finance has been lower than those provided with venture capital. On the other hand there turn to the seed/risk capital financier had been very low as compared to venture capitalist. BASIS SEED SCHEME BENEFICARIES Income or aid CAPITAL VENTURE SCHEME Commercial viability CAPITAL

SIZE OF ASSISTENCE

Very small entrepreneurs

Medium

and

large

entrepreneurs AMOUNT ASSISTENCE APPRAISAL PROCESS RETURN EXIT OPTION OF 15 lakhs (max) Normal 20% Sell back Upto equity Skilled &specialized 30% Public offer 40% of promoter

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Difference between Seed Capital Scheme and Venture capital Scheme

Venture capital was started as early stage financing of relatively small but rapidly growing companies. However various reasons forced venture capitalists to be more and more involved in expansion financing to support the development of existing portfolio companies. With increasing demand of capital from newer business, Venture capitalists began to operate across a broader spectrum of investment interest. This diversity of opportunities enabled Venture capitalists to balance their activities in term of time involvement, risk acceptance and reward potential, while providing on going assistance to developing business. Different venture capital firms have different attributes and aptitudes for different types of Venture capital investments. Hence there are different stages of entry for different Venture capitalists and they can identify and differentiate between types of Venture capital investments, each appropriate for the given stage of the investee company, These are:-

1.Early Stage finance

Seed Capital Startup Capital Early/First Stage Capital Later/Third Stage Capital

2. Later Stage Finance

Expansion/Development Stage Capital Replacement Finance Management Buy Out and Buy in Turnarounds Mezzanine/Bridge Finance not all business firms pass through each of these stages in a sequential manner. For instance seed capital is normally not required by service based ventures. It applies largely to manufacturing or research based activities. Similarly second round

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finance does not always follow early stage finance. If the business grows successfully it is likely to develop sufficient cash to fund its own growth, so does not require venture capital for growth. The table below shows risk perception and time orientation for different stages of venture capital financing. The characteristics of the seed capital may be enumerated as follows:

Finance

Period(funds locked in years)

Risk perception

Activity finance

to

be

Early stage finance 7-10 seed Start up 5-9

Extreme or concept For support and R&D idea for product Very high develop Initialization operation or develop prototype

First stage

3-7

High

Start

commercial and

production marketing Second stage 3-5 Sufficient Extend growth market

&

Absence of ready product market Absence of complete management team Product/ process still in R & D stage Initial period / licensing stage of technology transfer Broadly speaking seed capital investment may take 7 to 10 years to achieve realization. It is the earliest and therefore riskiest stage of Venture capital investment. The new technology and innovations being attempted have equal chance of success and failure. Such projects, particularly hi-tech, projects sink a lot of cash and need a strong financial support for their adaptation,
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commencement and eventual success. However, while the earliest stage of financing is fraught with risk, it also provides greater potential for realizing significant gains in long term. Typically seed enterprises lack asset base or track record to obtain finance from conventional sources and are largely dependent upon entrepreneurs personal resources. Seed capital is provided after being satisfied that the entrepreneur has used up his own resources and carried out his idea to a stage of acceptance and has initiated research. The asset underlying the seed capital is often technology or an idea as opposed to human assets (a good management team) so often sought by venture capitalists.

Venture capital financing processDeal origination:

In generating a deal flow, the VC investor creates a pipeline of deals or investment opportunities that he would consider for investing in. Deal may originate in various ways. referral system, active search system, and intermediaries. Referral system is an important source of deals. Deals may be referred to VCFs by their parent organizations , trade partners, industry associations, friends etc. Another deal flow is active search through networks, trade fairs, conferences, seminars, foreign visits etc. Intermediaries is used by venture capitalists in developed countries like USA, is certain intermediaries who match VCFs and the potential entrepreneurs. Screening: VCFs, before going for an in-depth analysis, carry out initial screening of all projects on the basis of some broad criteria. For example, the screening process may limit projects to areas in which the venture capitalist is familiar in terms of technology, or product, or market scope. The size of investment, geographical location and stage of financing could also be used as the broad screening criteria.

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Key considerations For investor/venture capitalist Ideal entrepreneur A venture capital (VC) who is financing the firm would as the first necessity assess and gauge the promoters. Because in the case of start-up where the product or the technology is yet to be tested, the only thing they can trust and their investment on the people behind it. While investing in a company what a VC is essentially looking for is a partnership and therefore the first decision making criterion is the character and personality of the promoters. However from a venture capitalists perspective, the ideal entrepreneur, is qualified in a hot area of interest Delivers sales or technical advances such as FDA approval

with reasonable probability Tells a compelling story and is presentable to outside investors, Recognizes the need for speed to an IPO for liquidity, Has a good reputation and can provide references that show competences and skill, Understand the need for a team with a variety of skill and therefore sees why equity has to be allocated to other people Works diligently toward a goal but maintains flexibility Get along with the investor group Understands the cost of capital and typical deal structures and is not offended by them Is sought after by many VCs Has a realistic expectation about process and outcome.

Besides the ideal entrepreneur, the investor tries to ensure the following for himself. Reasonable reward given in the level of risk. Sufficient influence on the management of the company through

board representation.. Minimization of taxes.

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 VCFs, before going for an in-depth analysis, carry out initial screening of all projects on the basis of some broad criteria. For example, the screening process may limit projects to areas in which the venture capitalist is familiar in terms of technology, or product, or market scope. The size of investment, geographical location and stage of financing could also be used as the broad screening criteria.

Due Diligence:
Due diligence is the industry jargon for all the activities that are associated with evaluating an investment proposal. The venture capitalists evaluate the quality of entrepreneur before appraising the characteristics of the product, market or technology. Most venture capitalists ask for a business plan to make an assessment of the possible risk and return on the venture. Business plan contains detailed information about the proposed venture. The evaluation of ventures by VCFs in India includes; Preliminary evaluation: The applicant required to provide a brief profile of the proposed venture to establish prima facie eligibility. Detailed evaluation: Once the preliminary evaluation is over, the proposal is evaluated in greater detail. VCFs in India expect the entrepreneur to have:- Integrity, long-term vision, urge to grow, managerial skills, commercial orientation. VCFs in India also Smake the risk analysis of the proposed projects which includes :Product risk, Market risk, Technological risk and Entrepreneurial risk. The final decision is taken in terms of the expected risk-return trade-off as shown in Figure.

Deal Structuring:
In this process, the venture capitalist and the venture company negotiate the terms of the deals, that is, the amount, form and price of the investment. This process is termed as deal structuring. The agreement also include the venture capitalists right to control the venture company and to change its management if needed, buyback arrangements, acquisition, making initial public offerings (IPOs),

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etc. Earned out arrangements specify the entrepreneur's equity share and the objectives to be achieved.

Post Investment Activities:

Once the deal has been structured and agreement finalized , the venture capitalist generally assumes the role of a partner and collaborator. He also gets involved in shaping of the direction of the venture. The degree of the venture capitalist's involvement depends on his policy. It may not, however, be desirable for a venture capitalist to get involved in the day-to-day operation of the venture. If a financial or managerial crisis occurs, the venture capitalist may intervene, and even install a new management team.

Exit:
Venture capitalists generally want to cash-out their gains in five to ten years after the initial investment. They play a positive role in directing the company towards particular exit routes. A venture may exit in one of the following ways: There are four ways for a venture capitalist to exit its investment: Initial Public Offer (IPO) Acquisition by another company Re-purchase of venture capitalists share by the investee company Purchase of venture capitalists share by a third party

Promoters Buy-back
The most popular disinvestments route in India is promoters buy-back. This route is suited to Indian conditions because it keeps the ownership and control of the promoter intact. The obvious limitation, however, is that in a majority of cases the market value of the shares of the venture firm would have appreciated so much after some years that the promoter would not be in a financial position to buy them back .In India, the promoters are invariably given the first option to buy back equity of their enterprises. For example, RCTC participates in the assisted firms equity with suitable agreement for the promoter to repurchase it. Similarly,
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Can fina -VCF offers an opportunity to the promoters to buy back the shares of the assisted firm within an agreed period at a predetermined price. If the promoter fails to buy back the shares within the stipulated period, Can fina-VCF would have the discretion to divest them in any manner it deemed appropriate. SBI capital Markets ensures through examining the personal assets of the promoters and their associates, which buy back, would be a feasible option. GVFL would make disinvestments, in consultation with the promoter, usually after the project as settled down, to a profitable level and the entrepreneur is in a position to avail of finance under conventional schemes of assistance from banks or other financial institutions.

Initial Public Offers (IPOs)

The benefits of disinvestments via the public issue route are, improved marketability and liquidity, better prospects for capital gains and widely known status of the venture as well as market control through public share participation. This option has certain limitations in the Indian context. The promotion of the public issue would be difficult and expensive since the first generation entrepreneurs are not known in the capital markets. Further,33 difficulties will be caused if the entrepreneurs business is perceived to be an unattractive investment proposition by investors. Also, the emphasis by the Indian investors on short-term profits and dividends may tend to make the market price unattractive. Yet another difficulty in India until recently was that the Controller of Capital Issues (CCI) guidelines for determining the premium on shares took into account the book value and the cumulative average EPS till the date of the new issue. This formula failed to give due weight age to the expected stream of earning of the venture firm. Thus, the formula would underestimate the premium. The Government has now abolished the Capital Issues Control Act, 1947 and consequently, the office of the controller of Capital Issues. The existing companies are now free to fix the premium on their shares. The initial public issue for disinvestments of VCFs holding can involve high transaction costs because of the inefficiency of the secondary market in a country like India. Also, this option has become far less feasible for small ventures on account of the higher listing
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requirement of the stock exchanges. In February 1989, the Government of India raised the minimum capital for listing on the stock exchanges from Rs 10 million to Rs 30 million and the minimum public offer from Rs 6 million to Rs 18 million.

Sale on the OTC Market

An active secondary capital market provides the necessary impetus to the success of the venture capital. VCFs should be able to sell their holdings, and investors should be able to trade shares conveniently and freely. In the USA, there exist welldeveloped OTC markets where dealers trade in shares on telephone/terminal and not on an exchange floor. This mechanism enables new, small companies which are not otherwise eligible to be listed on the stock exchange, to enlist on the OTC markets and provides liquidity to investors. The National Association of Securities Dealers Automated Quotation System (NASDAQ) in the USA daily quotes over 8000 stock prices of companies backed by venture capital. The OTC Exchange in India was established in June 1992. The Government of India had approved the creation for the Exchange under the Securities Contracts (Regulations) Act in 1989. It has been promoted jointly by UTI, ICICI, SBI Capital Markets, Can bank Financial Services, GIC, LIC and IDBI. Since this list of market-makers (who will decide daily prices and appoint dealers for trading) includes most of the public sector venture financiers, it should pick up fast, and it should be possible for investors to trade in the securities of new small and medium size enterprises. The other disinvestments mechanisms such as the management buyouts or sale to other venture funds are not considered to be appropriate by VCFs in India. The growth of an enterprise follows a life cycle as shown in the diagram below. The requirements of funds vary with the life cycle stage of the enterprise. Even before a business plan is prepared the entrepreneur invests his time and resources in surveying the market, finding and understanding the target customers and their needs. At the seed stage the entrepreneur continue to fund the venture with his own or family funds. At this stage the funds are needed to solicit the consultants services in formulation of business plans , meeting potential customers and technology partners. Next the funds would be required for development of the product/process and producing prototypes, hiring
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key people and building up the managerial team. This is followed by funds for assembling the manufacturing and marketing facilities in that order. Finally the funds are needed to expand the business and attaint the critical mass for profit generation. Venture capitalists cater to the needs of the entrepreneurs at different stages of their enterprises. Depending upon the stage they finance, venture capitalists are called angel investors, venture capitalist or private equity supplier/investor.

OTC MARKET PLAYERS-

Angels and angel clubs

Angels are wealthy individuals who invest directly into companies. They can form angel clubs to coordinate and bundle their activities. Besides the money, angel soften provide their personal knowledge, experience and contacts to support their investees. With average deals sizes from USD 100,000 to USD 500,000 they

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finance companies in their early stages. Examples for angel clubs are Media Club, Dinner Club , Angel's Forum.

Small and Upstart Venture Capital Funds

These are smaller Venture Capital Companies that mostly provide seed and start-up capital. The so called "Boutique firms" are often specialized in certain industries or market segments. Their capitalization is about USD 20 to USD 50million (is this deals size or total money under management or money under management per fund?) As for the small and medium Venture Capital funds strong competition will clear the marketplace. There will be mergers and acquisitions leading to a concentration of capital. Funds special in

different business areas will form strategic partnerships. Only the more successful funds will be able to attract new money. Examples

are: Artemis Comaford Abbell Venture Fund Acacia Venture Partners. Medium Venture Funds The medium venture funds finance all stages after seed stage and operate in all business segments. They provide money for deals up to USD 250 million. Single funds have up to USD 5 billion under management. An example is Aces Partners. Large Venture Funds As the medium funds, large funds operate in all business sectors and provide all types of capital for companies after seed stage. They often operate internationally and finance deals up to USD 500 million The large funds will try to improve their position by mergers and acquisitions with other funds to improve size, reputation and their financial muscle. In addition they will to diversify. Possible areas to enter are other financial services by means of M&As with financial services corporations and the consulting business. For the latter one the funds have a rich resource of expertise and contacts in house. In a declining market for their core activity and with lots of tumbling companies out

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there is no reason why Venture Capital funds should offer advice and consulting only to their investees. o Examples are: AIG American International Group Cap Vest Man 3i Corporate Venture Funds These Venture Capital funds are set up and owned by technology companies. Their aim is to widen the parent company's technology base in an win-win-situation for both, the investor and the investee. In general, corporate funds invest in growing or maturing companies, often when the investee wishes to make additional investments in echnology or product development. The average deals size is between USD 2 million and USD 5 million. large funds will try to improve their position by mergers and acquisitions with other funds to improve size ,reputation and their financial muscle. In addition they will to diversify. Possible areas to enter are other financial services by means of M&As with financial services corporations and the consulting business. For the latter one the funds have a rich resource of expertise and contacts in house. In a declining market for their core activity and with lots of tumbling companies out there is no reason why Venture Capital funds should offer advice and consulting only to their investees .Examples are: Oracle Adobe Dell Kyocera As an example, Adobe systems launched a $40m venture fund in 1994 to invest in companies strategic to its core business, such as Cascade Systems Inc and Lantana Research Corporation.- has been successfully boosting demand for its core products, so that Adobe recently launched a second $40m fund. Financial funds: A solution for could be a shift to a higher secursation of Venture Capital activities. That means that the parent companies shift the risk to their customers by creating new products such as stakes in an Venture Capital fund. However, the success of such products will depend on the overall climate and expectations in the economy. As long as the sown turn continues without any sign of recovery customers might prefer less risky alternatives.

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Industry shifts It is perhaps no surprise that the contraction is mostly concentrated in information technology and the business, consumer and retail industries, give the huge number of companies financed in the technology and Internet boom of 19992000, and the subsequent downturn. The healthcare pool, driven by investment in biopharmaceuticals and medical devices, has actually grown to some degree in the different geographies .In United States, the healthcare pool has grown consistently over the last several years, both in terms of number of companies and cumulative dollars invested. Key observations on the pool of private companies by industry:The information and technology pool has declined by just 6% since 2002; particularly due to increasing Interest in WEB 2.0 innovations. Since 2003, the IT pool has decreased by 27% in Europe and since 2004 17%in Israel. Cumulative investment has declined in similar amounts. The business, consumer and retail category has faced the steepest declines across the board. In US the number had fallen 54% since 2002 and 54% in Europe since 2003 .In Israel; it dropped 67% since 2004. The number of healthcare companies has grown in U.S. since 2002 by 27%and the capital risen 30% in last five years. Capital investment to the pool of healthcare companies in Europe and Israel has also climbed, although the number of companies dropped by 9%in Europe since 2003 and 9% in Israel since 2004. Clean technology is a small but increasing element of the pool. There were262 clean technology companies with a cumulative invested venture capital of US $38 billion in 2007. Mega trends Several global mega trends will likely have an impact on venture capital in the next decade:Beyond the BRICs: - A new wave of fast growing economies is joining the global growth leaders like Brazil, China, India, and Russia. The beginning of venture

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capital activity has been seen in others countries such as Indonesia, Korea, Turkey and Vietnam. The new multinationals: - A new breed of global company is emerging from developing countries and redefining industries through low-cost advantage, modern infrastructure, and vast customer databases in their home countries. These companies are potential acquirers of developed market companies at all stages of growth. Globalization of capital:- Changes in economic and financial landscape are creating a significant regional shifts in IPO activity. These changes have also sparked global consolidation alliances among stock exchanges. Transformation of the CFOs role and function:- With the globalization and increasingly complex regulatory environment, CFOs have a wider range of responsibilities broader mandates. Clean Technology: - Clean technology is poised to become the first break through sector of 21st Century. Encompassing energy, air and water treatment, industrial efficiency improvements, new material and waste management etc are playing very vital role globally because of which VC investors are enjoying rewards. Investment by stageNeed for growth of venture capital in India In India, a revolution is ushering in a new economy, wherein entrepreneurs mind set is taking a shift from risk averse business to investment in new ideas which involve high risk. The conventional industrial finance in India is not of much help to these new emerging enterprises. Therefore there is a need of financing mechanism that will fit with the requirement of entrepreneurs and thus it needs venture capital industry to grow in India. and finance function has been transformed to face

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CHAPTER-4

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Regulatory and legal framework Definition of Venture Capital Fund :

The Venture Capital Fund is now defined as a fund established in the form of a Trust, a company including a body corporate and registered with SEBI which: A. Has a dedicated pool of capital; B. Raised in the manner specified under the regulations; and C. To invest in venture capital undertakings in accordance with the regulations."

Definition of Venture Capital Undertaking

Venture Capital Undertaking means a domestic company:-a. Whose shares are not listed on a recognized stock exchange in India b. Which is engaged in business including providing services, production or manufacture of articles or things, or does not include such activities or sectors which are specified in the negative list by the Board with the approval of the Central Government by notification in the Official Gazette in this behalf?

The negative list

includes real estate, non-banking financial services, gold financing, activities not permitted under the Industrial Policy of the Government of India.

Minimum contribution and fund size

:the minimum investment in a Venture Capital Fund from any investor will not be less than Rs. 5 lakhs and the minimum corpus of the fund before the fund can start activities shall be at least Rs. 5 crores. Investment Criteria : The earlier investment criteria has been substituted by a new investment criteria which has the following requirements : Disclosure of investment strategy; maximum investment in single venture capital undertaking not to exceed 25% of the corpus of the fund; Investment in the associated companies not permitted;
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 At least 75% of the investible funds to be invested in unlisted equity shares or equity linked instruments. Not more than 25% of the investible funds may be invested by

way of:a. Subscription to initial public offer of a venture capital undertaking whose sh aresare proposed to be listed subject to lock-in period of one

year; b. Debt or debt instrument of a venture capital undertaking in which the venture capital fund has already made an investment by way of equity. It has also been provided that Venture Capital Fund seeking to avail benefit under the relevant provisions of the Income Tax Act will be required to divest from the investment within a period of one year from the listing of the Venture Capital Undertaking.

Disclosure and Information to Investors; In order to simplify and expedite the process of fund raising, the requirement of filing the Placement memorandum with SEBI is dispensed with and instead the fund will be required to submit a copy of Placement Memorandum/ copy of contribution agreement entered with the investors along with the details of the fund raised for information to SEBI. Further, the contents of the Placement Memorandum are strengthened to provide adequate disclosure and information to investors. SEBI will also prescribe suitable reporting requirement from the fund on their investment activity. QIB status for Venture Capital Funds: The venture capital funds will be eligible to participate in the IPO through book building route as Qualified Institutional Buyer subject to compliance with the SEBI (Venture Capital Fund) Regulations. Relaxation in Takeover Code: The acquisition of shares by the company or any of the promoters from the Venture Capital Fund under the terms of agreement shall be treated on the same footing as that of acquisition of shares by promoters/companies from the state level financial institutions and shall be exempt from making an open offer to other shareholders.

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Investments by Mutual Funds in Venture Capital Funds: In order to increase there sources for domestic venture capital funds, mutual funds are permitted to invest upto5% of its corpus in the case of open ended schemes and up to 10% of its corpus in the case of close ended schemes. Apart from raising the resources for Venture Capital Funds this would provide an opportunity to small investors to participate in Venture Capital activities through mutual funds.

Government of India Guidelines: The Government of India (MOF) Guidelines for Overseas Venture Capital Investment in India dated September 20, 1995 will be repealed by the MOF on notification of SEBI Venture Capital Fund Regulations. The following will be the salient features of SEBI (Foreign Venture Capital Investors) Regulations, 2000 : Definition of Foreign Venture Capital Investor Any entity incorporated and established outside India and proposes to make investment in Venture Capital Fund or Venture Capital Undertaking and registered with SEBI.

Eligibility Criteria Entity incorporated and established outside India in the form of investment company, trust, partnership, pension fund, mutual fund, university fund, endowment fund, asset management company, investment manager, investment management company or other investment vehicle incorporated outside India would be eligible for seeking registration from SEBI. SEBI for the purpose of registration shall consider whether the applicant is regulated by an appropriate foreign regulatory authority; or is an income tax payer; or submits a certificate from its banker of its or its promoters track record where the applicant is neither a regulated entity nor an income tax payer.

Hassle Free Entry and Exit: The Foreign Venture Capital Investors proposing to make venture capital investment under the Regulations would be granted registration by SEBI.SEBI registered Foreign Venture Capital Investors shall be permitted to make investment on an automatic route
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within the overall sectoral ceiling of foreign investment under Annexure III of Statement of Industrial Policy without any approval from FIPB. Further, SEBI registered FVCIs shall be granted a general permission from the exchange control angle for inflow and outflow of funds and no prior approval of RBI would be required for pricing, however, there would be ex-post reporting requirement for the amount transacted. Trading in unlisted equity : The Board also approved the proposal to permit OTCEI to develop a trading window for unlisted securities where Qualified Institutional Buyers(QIB) would be permitted to participate. 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 exceed49 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 convention all 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. Venture financing practices and procedures

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Entrepreneurs who need VC financing for their enterprises should have sufficient information to be able to choose a VC company or fund suitable for their requirement and have a broad understanding of the procedures required to be followed for obtaining financial assistance at different stages of implementation of their projects. Basically they need to develop a business plan or prototype to get venture finance. The business plan is document that conveys a companys prospects and growth potential, and thereby sells the business to potential backers. The process is to be managed just as most other business task is managed. It requires advance preparation, delegation , refinement, and disciplines do most important business functions ..Companies are increasingly being called on to provide written business plans, financial backers, especially VCs and other private investors , have long sought business plans before making investment decisions. In addition, organization

and individuals considering long term relationships with the companies, large customers, suppliers and distributors are much more inclined to seek written plans. The business plan process involves gathering accurate and convincing information as well as carefully outlining the plan before writing. Executives should also determine what kind of plan they need, ranging from a summary plan full plan or an operating plan. Once all these considerations have been formulated, the plan is ready for final rewriting and presentation. Extensive editing is recommended, along with careful attention to presentation details like the cover and concerns of its likely readers .perhaps most important, the plan should be used to guide the company. Thus it should be reviewed and updated. In project appraisal, feasibility of the project is assessed from different angels with stress on production process and marketability, as the lending institutions are backed by the security of movable and immovable assets of the borrower and chiefly concerned with the return of the investment with interest. In venture capital financing the venture capitalist has a different approach because of equity participation, risk sharing and involvement in the management of project. Investment by a venture capitalist indifferent stage of enterprise calls for an analysis of factors related to each stage. However, the order of preference followed by the venture capitalists in evaluating of business is under:1 Analysis of management. 2.

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Analysis of organization pattern.3. Analysis of production process.4. Analysis of mark eting & sales.5. Financial analysis and projections.6. Analysis of reference information. Venture capital comparison venture capital and alternative1. Leasing Your equipment instead of purchasing it outright. 2. Fund From Operations Look for ways to tweak your business in order to reduce the cash flowing out and increase the cash flowing in. Funding found in business operations come free of finance charges, can reduce future financing charges and can increase the value of your business. Month-by-month operating and cash projections will show how well we have planned, how you can optimize the elements of your business that generate cash and allow you to plan for new investments and contingencies. 3. Licensing Sell licenses to technology that is non-essential to our company or grant limited licensing to essential technology that can be shared. Through out licensing we can generate revenue from up-front fees, access fees, royalties or milestone payments. 4. Vendor Financing Similar to the trade credit related to bootstrap financing, vendors can splay a big role in financing your new business. Establish vendor relationships through our trade association and strike deals to offer their product and pay for it at a date in the near future. Selling the product in time is up to us. In hopes of keeping you as a customer, vendors may also be willing to work out an arrangement if we need to finance equipment or supplies. Just make sure to look for stability when you research a vendors credentials and reputation before you sign any kind of agreement. And keep in mind that many major suppliers (GE Small Business Solutions, IBM Global Financing) own financial companies that can help you. 5. Self Funding Search between the couch cushions and in old jacket pockets for whatever extra money you might have lying around and invest it into your business. Obviously loose change will not be enough for extra business funding, but take a look at your savings, investment portfolio, retirement funds and employee buyout options from your previous
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employer. You wont have to deal with any creditors or interest and the return on your investment could be much higher. However, make sure that you consider the risks involved with using your own resources. How competitive is the market that you are about to enter into? How long will it take to pay yourself back? Will you be able to pay yourself back? Can you afford to lose everything that you are investing if your business were to fail? Its important that your projected returns are more than enough to cover the risk that you will be taking. 6. SBIR and STTR Programs Coordinated by the SBA, SBIR (Small Business Innovation Research) and STTR (Small business Technology Transfer) programs offer competitive federal funding awards to stimulate technological innovation and provide opportunities for

small businesses. You can learn more about these programs at SBIRworld.com.

7. State Funding If youre not having any luck finding funding from the federal government take a look at what your state has to offer. There is a list of links to state development agencies that offer an array of grants and financial assistance for small businessessonsAbout.com..8. 8. Community Banks These smaller banks may have fewer products than their financial institution counterparts but they offer a great opportunity to build banking relationships and are generally more flexible with payment plans and interest rates. 9. Microloans These types of loans can range from hundreds of dollars to low six-figure amounts. Although some lenders regard microloans to be a waste of time because the amount is so low, these can be a real boon for a startup business or one that just needs to add some extra cash flow. 10. Finance Debt It may be more expensive in the long run than purchasing, but financing your equipment, facilities and receivables can free up cash in the short term or reduce the amount of money that you need to raise.
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11. Friends Ask your friends if they have any extra money that they would like to invest .Assure them that you will pay them back with interest or offer them stock options or a share of the profits in return. 12. Family Maybe you have a rich uncle or a wealthy cousin that would be willing to lend you some money get your business running or send it to the next level. Again, make it worth their while by offering interest, stocks or a share of the profits. 13. Form A Strategic Alliance Aligning your business with a corporation can produce funding from upfront or access fees to your service, milestone payments and royalties. In addition, corporate partners may be able to provide research funding, loans and equity investments. 14. Sell Some Assets Find an interested party to buy some of your assets (computers, equipment, real estate, etc) and then lease them back to you. This provides an instant source of cash and you will still be able to use whatever assets you need. 15. Business Lines of Credit If your business has positive cash flow and has proven that it will cover its debts then you may be eligible for a business line of credit. This type of financing is a common service offered by most business banks and serves as business capital, up to an agreed upon amount, that you can access at any time. 16. Personal Credit Cards Using personal credit cards to finance a business can be risky but, if you take the right approach, they can also give your business a lift. You should only consider using this type of financing for acquiring assets and working capital. Never consider this to be a long-term option. Once your company breaks even or moves into the black, ditch the credit cards and move toward traditional bank financing or lease agreements. 17. Business Credit Cards Business credit cards carry similar risks as personal credit cards but tend to be as after alternative. While the activity on this card goes toward your credit report, a business

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credit card can help you to build business credit, keep your business expenses separate from your personal expenses and can make tax season easier to manage. Political factors: Venture Capital being a very sensitive institutional form due to the high-risk nature of its investments it was prerequisite for the government to be careful to ensure that its policies do not adversely affect its venture capitalists. There are number of rules and regulation for VC and these would broadly come under either of the following heads: The Indian Trust Act, 1882 or the company Act,1956 depending on whether the fund is set up as a trust or a company. The foreign investment Promotion Board (FIPB) and the RBI in case of an offshore fund. These funds have to secure the permission of the FIPB while setting up in India and need a clearance from the RBI for any repatriation of income. The Central Board of Direct Taxation (CBDT) governs the issues pertaining to income tax on the proceed from VC funding activity. The long term capital gain tax is at around 10% in India and the relevant clauses to VC may be found in Section 10(sub section 23) Minimum contribution and fund size the minimum investment in a Venture Capital Fund from any investor will not be less than Rs. 5 lakhs and the minimum corpus of the fund before the fund can start activities shall beat least Rs. 5 crores. Short term capital gain Rate of tax on short term capital gains under Section 111A & Section 115AD increased to 15 per cent from earlier 10%. QIB status for Venture Capital Funds: The venture capital funds will be eligible to participate in the IPO through book building route as Qualified Institutional Buyer subject to compliance with the SEBI (Venture Capital Fund) Regulations. Relaxation in Takeover Code: The acquisition of shares by the company or any of the promoters from the Venture Capital Fund under the terms of agreement shall be treated on the same footing as that of acquisition of shares by promoters/companies from the state level financial institutions and shall be exempt from making an open offer to other shareholders.
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Investments by Mutual Funds in Venture Capital Funds: In order to increase the resources for domestic venture capital funds, mutual funds are permitted to invest up to 5% of its corpus in the case of open ended scheme sand up to 10% of its corpus in the case of close ended schemes. Apart from raising the resources for Venture Capital Funds this would provide an opportunity to small investors to participate in Venture Capital activities through mutual funds. Government of India Guidelines: The Government of India (MOF)Guidelines for Overseas Venture Capital Investment in India dated September 20, 1995 will be repealed by the MOF on notification of SEBI Venture Capital Fund Regulations. GUIDELINES FOR OVERSEAS VENTURE CAPITAL INVESTMENT IN INDIA In recognition of growing importance of Venture Capital as one of the sources of finance for Indian industry, particularly for the smaller unlisted companies, the Government has announced a policy governing the establishment of domestic Venture Capital Funds/Companies. An amendment has also been carried out in the SEBI Act empowering the Securities and Exchange Board of India (SEBI) to register and regulate Venture Capital Funds (VCFs) and Venture Capital Companies (VCCs) through specific regulations. With a view to augment the availability of Venture Capital, the Government has decided to allow overseas venture capital investments in India subject to suitable guidelines as outlined below: a. Offshore investment may invest in approved domestic Venture Capital

Funds/Companies set up under the new policy after obtaining FIPB approval for the investment. There is no limit to the extent of foreign contribution to a domestic venture capital company/ fund. An offshore venture capital company may contribute 100% of the capital of domestic venture capital fund and may also set up a domestic asset management company to manage the Fund. b.Establishment of an asset management company investment in non-bank financial services companies. c. Once the initial With foreign investment to manage such funds would require FIPB approval and would be subject to the existing norms for foreign FIPB approval has been obtained, the subsequent
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investment b y the domestic venture capital company/fund in Indian companies will not require FIPB approval. Such investments will be limited only by the general restriction applicable to venture capital companies viz. (i)A minimum lock-in period three years will apply to all

suchinvestments.ii. VCFs and VCCs shall invest only in unlisted companies and their investment shall be limited to 40% of the paid up capital of the company. (ii) The ceiling will be subject to relevant equity investment limits that may be in force from time to time in relation to areas reserved for the Small Scale Sector iii. Investment in any single company by a VCF/VCC shall not exceed 20% of the paid-up corpus of the domestic VCF/VCC. d. The tax exemption available to domestic VCFs and VCCs under Section10(23F) of the Income Tax Act, 1961, will also be extended to domestic VCFs and VCCs which attract overseas venture capital investments provided these VCFs/VCCs conform to the guidelines applicable for domestic VCFs/VCCs. However, if the VCF/VCC is willing to forego the tax exemptions available under Section 10(23F) of the Income Tax Act, it would be within its rights to invest in any sector .e. Income paid to offshore investors from Indian VCFs/VCCs will be subject to tax as per the normal rates applicable to foreign investors. f. Offshore investors may also invest directly in the equity of unlisted Indian companies without going through the route of a domestic VCF/VCC. However, in such cases each investment will be treated as a separate act of foreign investment and will require separate approval as required under the general policy for foreign investment proposals. Hassle free entry/exit for foreign venture capital firm SEBI registered Foreign Venture Capital Investors shall be permitted to make investment on an automatic route within the overall sectorial ceiling of foreign investment under Annexure III of Statement of Industrial Policy without any approval from FIPB. Further, SEBI registered FVCIs shall be granted a general permission from the exchange control angle for inflow and outflow of funds and no prior approval of RBI would be required for pricing, however, there would be ex-post reporting requirement for the amount transacted. DTAT (Double Tax Avoidance Treaties)
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Foreign funds investing in India directly into Indian portfolio companies will not be affected by the proposed amendment. As most of these funds have been set up in tax neutral jurisdictions like Mauritius, they will continue to enjoy tax exemption on capital gains tax under the Double Tax Avoidance Agreements, effectively getting the equivalent of a pass through notwithstanding which sector they invest in.

Controller of Capital Issue The exist route available to the venture capitalist were restricted to the IPO route. Pricing of the issue was dependent on Controller of Capital Issues (CCI) regulations before deregulations. Many of the issues were underpriced. Failure of OTCEOI so small companies could not hope for BSE/NSE listing.

RELAXATION IN IPO NORMS : The SEBI norms for an IPO by a Venture Capital company / fund be relaxed. The requirement of three years track record should be waived off for a Venture Capital company / fund registered with S$EBI. This will help the Venture Capital company/ fund to generate resources locally.. SEBI registered VCFs have been permitted to invest in equity and equity linked instruments of offshore venture capital undertakings, subject to overall limit of USD 500 million and with prior SEBI approval. Investment can be made only in those companies which have an Indian connection and the investment can not exceed 10% of the VCFs investible funds. Taxes on emerging sector As per Union Budget 2007 and its broad guidelines, Government proposed to limit passthrough status to venture capital funds (VCFs) making investment in nine areas. These nine areas are biotechnology, information technology, nanotechnology, seed research and development, R&D for pharma sectors, dairy industry, poultry industry and production of bio-fuels. Pass-through status means that the incomes earned by funds are taxable now.

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CHAPTER-5

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DATA ANAYSIS AND INTERPRETATION

Objective-1 To understand the concept of venture capital:
The support by investors of entrepreneurial talent with finance and business skills to exploit market opportunities and thus obtain capital gains.Venture capital commonly describes not only the provision of startup finance or seed corn capital but also development capital for later stages of business. A long term commitment of funds is involved in the form of equity investments, with the aim of eventual capital gains rather than income and active involvement in the management of customers business. Venture capital includes different risks like-management risk, market risk, product risk, operation risk. Venture capital is different from other funds the financing stages are early stage finance startup capital, third stage capital, later stage capital. venture capital investment globally is given to really stage ventures in all years people around the world hassen the potentiality of venture capital in promoting different economies of the world by improving the standard of living of the people by expending business.. Whenever venture capitalists in venture certain basic preferences play a crucial role in investment decision. Two such consideration are location preferences and ownership preferences. Venture capital is a very good tool for improving the economy of the country and utilize the resources in optimum and effective manner. When we tells about the India so a new techniques comes into picture which are helpful to make better utilization of the resources. Venture capital growth and industrial clustering have a strong positive correlation. Foreign direct investment, starting of R&D centers, availability of venture capital and growth of entrepreneurial firms are getting concentrated into five clusters. The cost of monitoring and the cost of skill acquisition are lower in clusters, especially for innovation. Entry costs are also lower in clusters.(detailed inchapter-3)
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Objective -2 To examine the legal framework & regulations of venture capital in India.
The Venture Capital Fund is now defined as a fund established in the form of a Trust, a company including a body corporate and registered with SEBI which: A. Has a dedicated pool of capital; B. Raised in the manner specified under the regulations; and C. To invest in venture capital undertakings in accordance with the regulations. SEBI has been a regulatory body for venture capital companies or funds with effect from January 25, 1995. It issued certain guidelines on December 4.1996 which defines venture capital fund as fund e stablishment on the form of a company or trust which raises money through loans, donation. Issue of securities or units as the case may be, and make or proposes to make investments in accordance with these regulations. The guidelines are listed for registration of venture capital funds, investment conditions, contents of placement memorandum, foreign venture capital investment funds. The foreign investment Promotion Board (FIPB) and the RBI in case of an offshore fund. These funds have to secure the permission of the FIPB while setting up in India and need a clearance from the RBI for any repatriation of income. SEBI regulation,2000 (foreign venture capital investment (FVCI); foreign VC/PE players can invest in India either directly under the foreign direct investment (FDI) regime or may invest under the FVCI regime. While it is not mandatory to register with the SEBI as a FVCI, several benefits have been granted to registered users. A restricted definition of venture capital is followed in india for the purpose of tex concessions. The approved venture capital firms are eligible for tax exemption on the capital gains on equity investment.

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Objective-3- To analyze the direction, pattern, and growth of venture capital

investment in India- to fulfillment of this objective, I want to link the venture capital with two economic measure(GDP growth & index(BSE sensex). this table shows the growth investment in venture capital in india from year 1995 to 2013. Total amount investment in growth venture capital Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 3976738900 4202909400 4869073700 7154706700 16347380700 28547154800 7334293400 4346840500 3706946200 5444545400 5907005500 6291826300 7711954400 6545999300 3480491300 4286009200 5438590200 4217891800 903083600 5.68 15.85 46.94 128.40 74.62 -74.30 -40.73 -14.72 46.87 8.49 6.51 22.57 -15.11 -46.83 23.14 26.89 -22.44 -78.58 investment year in( %) per

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InterpretationIf we analyze this diagram so easily define that starting growth is very high in amount investment. in 2000 the growth rate is 74% which was so high .but coming next year the growth rate was drastically decrease by 74% approx. and we can see that the growth rate is very low last few years. The growth rate in declining year by year.

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Percentage Growth in deals from year 1995 to 2012- table is shows the
no. of deals which have been done from 1995 to 2013no. Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 deals 901 1146 1304 1430 2469 3390 1234 850 776 975 1076 1280 1417 1308 828 1086 1325 1203 203 27.19 13.78 9.66 72.65 37.30 -63.59 -31.11 -8.70 25.64 10.35 18.95 10.70 -7.69 -36.69 31.15 22.00 -9.20 -83.12 of growth in deals %

Interpretation - now look upon the data which refers to no. of deals in venture
capital. Initial stage the deals growth rate was in a peak. 72% deals have took place in year 1999 .which refers that the investors ware more influenced by venture capital growth. Next years the rate is declining in very fast pace .from year 2008 the rate going down which indicate that the investors are not interested to invest the money in venture capital.
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This table shown that what is the growth amount investment in per year in per unitsGrowth in investment per year in per unit (industry)-

growth in average investment in each investment Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 unit per year 4413694.673 3667460.209 3733952.224 5003291.399 6621053.341 8420989.617 5943511.669 5113930 4776992.526 5584149.128 5489782.063 4915489.297 5442451.941 5004586.621 4203491.908 3946601.473 4104596.377 3506144.472 4448687.685 -16.9072516 1.813026201 33.99452105 32.33395407 27.18504417 -29.42027078 -13.95776967 -6.588621163 16.89675247 -1.689909471 -10.4611214 10.72045145 -8.045368608 -16.00721045 -6.111357903 4.003315387 -14.58004272 26.88261194 year(%) per

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INTERPRETATIONHere I analyzing that what kind of rate is going on the investment in each unit per year. Most investment in each unit in year 1999 which indicate the high investment in each unit in year 1999.that also refers that the investors have done the high investment in this year to see the growth of venture capital. But again the things went wrong from year 2001 and the rate in very low last years. means that the investors are not

interested in investment in risk capital.

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INVESTMENT IN YEAR 2012 (%)

2012 investment
45 40 35 30 25 20 15 10 5 0

2012 investment

Interpretation- this is the chart which showing the investment in year of 2012.we can
easily identified that which sector is more influencing the investors. Here clearly shows that the software industry is looks more influencing the investors rather then other sectors. the software industry contribution 42 approx in total investment.

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TOP FIVE INDUSTRY IN 2013

CONTIBUTION(%)
media & entertainment computer& 6% sevices 9%

IT 5%

bio-tech 9%

software 71%

Investment by industryLed by the $12 million investment by Bellwether and others into Chennai-based

microfinance firm Equit as, BFSI emerged as the second largest (in value terms) for VC investments during the period. Other microfinance firms that attracted investments during Q2,2013 included Kolkata-based Arohan Financial Services (which raised funding from Lok Capital and others) and Guwahati- based Asomi Finance (IFC and Aavishkaar Goodwell).

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VC INVESTMENT BY INDUSTRY

industry IT

HEALTHCARE MEDIA
TELECOM MANUFECTURING

INTERPRETATION- The chart is based on data which showing

investors .then the bio-tech, computer services ,media& entertainment, IT.

the top five

industry. We can easily says that the software industry is the most attractive for the

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Objective-4 To analyse the relationship between economic growth and venture

capital investment as it is known that GDP growth rate and index (BSE sensex) which measures the actual performance of the economy (detailed analysis given below)

RELATION BETWEEN THE ANNUAL GROWTH RATE OF GDP & AMOUNT INVESTMENT IN VENTURE CAPITAL- This table is shows the relation between the amount investment in venture capital and BSE(index) with quarterly closing from

year1999 to 2013. I want to analyse, is there any kind of relation between these two or not.(detailed analysis is given below:

AMOUNT YEAR 1999 Q1 Q2 Q3 Q4 2000 Q1 Q2 Q3 Q4 8642448400 8431280800 6111988000 5361437100 5156 4721 4090 3826 3635 3456 2667 3184 3516 3264 1963194000 3313160800 4089296100 6981729800 3597 4111 4797 4861 INVESMENT INDEX(BSE)

2001Q1 2809354700 Q2 Q3 Q4 2007158100 1265218800 125261800

2002Q1 1310487500 Q2 123225910

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Q3 Q4

978536400 825557500

3021 3382 3140 3500 4297 5791 5571 4644 5511 6498 6535 7049 8222 9372 11280 10130 12173 13340 13308 14650 16899 19162 16371 13802 13570 9328 9568 14993 16781 17360

2003Q1 763826600 Q2 Q3 ssQ4 971230900 847882300 1124006400

2004Q1 1086100900 Q2 Q3 Q4 1338404700 1322914100 1697125700

2005Q1 1464223300 Q2 Q3 Q4 156146010 1498072400 1383249700

2006Q1 1440642800 Q2 Q3 Q4 1668113700 1663015800 1520054000

2007Q1 1622074100 Q2 Q3 Q4 197365340 1907716500 2208510400

2008Q1 1851475800 Q2 Q3 Q4 1762273100 1660647500 1271202900

2009Q1 653791800 Q2 Q3 Q4 84611340 804927300 1175659100

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2010Q1 945289000 Q2 Q3 Q4 1133207700 1292751800 914760700

17644 17755 20117 19911 19290 18492 16162 15813 17121 16972 18762 19444

2011Q1 1272155300 Q2 Q3 Q4 1601657900 1294548100 1296928900

2012Q1 921439700 Q2 Q3 Q4 1106686800 1065075300 1124690300

INTERPRETATION-The coefficient of correlation = -0.294

This value is refers that there is no positive correlation between the amount investment in venture capital and index(BSE).

The relation between

the

amount investment in venture capial and

annual GDP

growth(%)-Here I analyzing that what is the relation between the GDP growth(%) and amount investment. the table is given below-

Year 2008 2009 2010 2011 2012 2013

Amount investment($) 6545999300 3480491300 4286009200 5438590200 4217891800 903083600

GDP growth(%) 3.9 8.5 10.5 6.3 5.5 4.8

Coefficient of correlation- -0.077

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Interpretation- the value is explain that

there is a very slight negative correlation

between these two. But we can not say that only this amount investment will affect the GDP because other factors also contribute in GDP.

LIMITATION OF THE STUDY

A study of this type cannot be without limitation. it has been observed that venture capital are very secretive about their performance as well as their investments. this attitude has been a major hurdle in data collection .however venture capital funds /companies that are members of Indian venture capital association are included in the study.

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CHAPTER-6

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Conclusions & SuggestionsConclusions1- The reason for inadequate growth and expansion of venture capital in India may be attributed to unfavorable and political regality environment bureaucracy in documentation process and approvals aggravate the problem. 2- Growth in venture capital was quite satisfactory until 2000. Their after it has come down significantly. The government since then has taken a no of measures to promote venture capital. 3- The presence of venture capital is highest in the IT sector followed by bio-tech and media & Entertainment. Other sector like retail have not benefited much due to lack of venture capital available for this sectors. 4- Venture capital is more flourishing in IT sector and focusing more on bio-tech, media & entertainment the investment in the other sectors like retail and financial services are not significant.. 5- There is no relationship between the GDP and venture capital & also there is no relationship between the venture capital and index (BSE). Because other factors also contributes in GDP growth rate and index moment

Suggestions1- There is huge potential for growth in retail and services sector more inflow venture capital into these sectors would definitely contribute to growth of these sectors and the Indian economy.

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BIBLOGRAPHYBooks Pandey, I.M. and jang, A; (1996), Venture capital of financing techonology in Taiwan. Pp.499-514. MacMillan, I.C.S;Robin;subba Narasimha,p.n.;1985.Crieteria used by venture capitalists to evaluate new venture proposals. Journal of business venturing,1(1): 119-129

Websites www.national venture capital association(may 2013) www.wikipedea.com(may 2013) www.sebi.com(may 2013) www.management paradise.com(may 2013) www.moneycontrol.com(may 2013)

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