11 Chapter 5

Chapter V
FACTORS INFLUENCING VENTURE CAPITAL UNDERTAKINGS
5.1 INTRODUCTION
Capital is the lifeline of business. Venture capital capitalist business is

reliant much, on financial resources for its success, although money alone does
not guarantee a successful venture. There are certain distinctive characteristics of
the venture business, which highlight this pressing dependence on finance.
Venture is identified as an innovative business idea, which holds the

potential to reap significantly higher returns than conventional business ideas, but
commensurately it runs significantly higher risks of failure. The business ideas
could be related to any field, manufacturing or service. The innovative aspects of
the ideas lead to the prospects of higher returns. Such innovative features might be
related to the product, nature of service, process, technology or the market catered
to.
Over the last few years, venture capital in Tamil Nadu has evolved its own
set of business processes. The foremost of these practices is the manner in which
the venture firms in Tamil Nadu choose their investments. Like their counterparts
in the US and Europe, venture capitalists here look for investments with
characteristics of high risk and high returns. The choice of investment is the
224
function of the venture capitalists policy with regards to the preferred industries
and the stage of the investee company. Yet the exact choice of investment varies
from one venture capital fund to another.
The venture capitalists aim to invest in newly established firms capable of

growing quickly and thereby creating capital gains of at least 10 times their
investment in less than 5 years. They evaluate companies needing finance to
determine if a partnership meets their criteria. When approaching a venture
capitalist for finance, a company should be aware of the venture capitalists
expectations. Venturing is a relatively unique form of investment. Venture
capitalists invest in new, unproven enterprises which traditional financial
institutions ignore.
Typically, in venture financing it has been observed that 5-6 out of 10

ventures fail and the venture capitalists lose their entire investment. In 2-3
ventures, moderate returns are earned, while in the remaining venture very high
returns (compounded annualized yield in excess of 50%) are generated. Thus, the
venture capitalist has to consciously look for potential star performers.
Consequently such capitalists subject applications for finance through a stringent
225
criteria of due diligence. In Tamil Nadu, the strike rate of proposals finding favour
with venture capitalists is indicated to be less than 10%.89
This chapter deals with the socio-economic profile of venture capitalists or

entrepreneurs and their satisfaction towards the functional coverage and
performance of venture capital companies, which is measured through the Likert
Five-Point Scale.
The socio-economic background of the respondents was
compared with their level of satisfaction with the functions of the venture capital
companies in Tamil Nadu. The opinion of the entrepreneurs on the services of the
venture capital companies may vary from person to person.
The level of
satisfaction of the entrepreneurs is meant to indicate the extent to which the

services have been availed of by them. For better exposition, this chapter is
organized under the following headings for the purposes of analysis.
1. Socio-economic background of the entrepreneurs and their units

2. Measurement of the level of satisfaction of the entrepreneurs
3. Factors influencing the level of satisfaction of the entrepreneurs.
89
Kannan, Obtaining Venture Capital What Venture Capitalists Look for,

Glimpses Special Issue on Entrepreneurship, ICFAI, Business School, Chennai,
2001, p.57.
226
5.2
SOCIO-ECONOMIC BACKGROUND OF THE RESPONDENTS
This section furnishes a detailed report on the analysis of the socioeconomic background of the entrepreneurs in Tamil Nadu. It includes the factors,
gender, age, marital status, educational qualification, occupation, annual income,
nature of family, family size and the like.
5.2.1 Gender-wise distribution
Gender is one of the important profile variables of the entrepreneurs. It has

its own impact on their expectation and perception on venture capital. Hence, the
present study includes the gender as one of the important socio-economic
variables. The gender-wise classification of the respondents is shown in Table 5.1.
TABLE 5.1
GENDER-WISE DISTRIBUTION
SL. No.
Gender
Number of
Respondents
Percentage
1.
Male
98
65.33
2.
Female
52
34.67
Total
150
100.00
Source: Primary data.
227
Out of the 150 entrepreneurs, 98 (65.33 %) are males whereas the

remaining 52 respondents (34.67 %) are females. It can be concluded that the
males are interested in the activities of venture capital market than females.
5.2.2. Age-Wise Classification
Since the age of respondents is one of the important segments in their life,
it is included in the present study. The age of the respondents is the completed
age at the time of collecting data. In the present study, the age of the respondents
is classified into below 21 years, 21 to 30 years, 31 to 40 years, 41 to 50 years and
above 50 years. The age-wise classification of the respondents is presented in
Table 5.2.
TABLE 5.2
AGE-WISE CLASSIFICATION
Sl.
No.
Age (in years)
Number of
Respondents
Percentage
1.
Below 31
32
21.33
2.
31 40
33
22.00
3.
41 50
35
23.33
4.
51 60
28
18.67
5.
Above 60
22
14.67
Total
150
100.00
228
The important age groups of the respondents are 41 to 50 years and 31 to

40 years.
They constitute 23.33 and 22.00 % to the total respectively. The
respondents who are below 31 years constitute 21.33 %. It is followed by the age
group of 51-60 years and above 60 years.
5.2.3 Marital Status

The
marital
status
is
classified
into
married,
unmarried
and
widows/widowers. The marital status of the respondents is shown in

Table 5.3.
TABLE 5.3
MARITAL STATUS OF THE RESPONDENTS
Sl.
No.
Marital Status
Number of
Respondents
Percentage
1.
Married
95
63.34
2.
Unmarried
40
26.66
3.
Widowers/Divorced
15
10.00
150
100.00
Total
The majority of the respondents are married. They constitute 63.34 % to

the total respondents. It is followed by unmarried respondents and
widowers/divorced, which constitute 26.33 % and 10.33 % respectively. The
229
analysis reveals that the married respondents have availed the facilities of the
venture capital.
5.2.4 Educational Status
The level of education represents the level of formal education completed
by the respondents at the time of collecting the data. Since the level of education
provides awareness on venture capital, the highly educated respondents may
compare the services offered by the venture capital companies with those of
others. The level of education may increase the level of expectation and also
determine the level of satisfaction with the functioning of venture capital
companies. In the present study, the level of education is classified to SSLC / +2,
Diploma, Graduate, Post graduate and Professional/technical . Table 5.4 presents
details about the educational status of the respondents.
TABLE 5.4
EDUCATIONAL STATUS OF THE RESPONDENTS
Sl.
No.
Educational Qualification
Number of
Respondents
Percentage
1.
SSLC / +2
29
19.33
2.
Diploma
30
20.00
3.
Graduate
34
22.67
4.
Post Graduate
32
21.33
5.
Professional / Technical
25
16.67
150
100.00
Total
230
Table 5.4 illustrates the level of education among the respondents. The
important levels of education among them are graduation and post-graduation
which constitute 22.67 % and 21.33 % respectively. It is followed by diploma,
SSLC/+2 and professional/technical education which constitute 20.00 %, 19.33 %
and 16.67 % respectively. The analysis reveals that the respondents with graduate
education have used the venture capital.
5.2.5 Occupation-wise Distribution
The occupational pattern classification of the respondents represents the

nature of occupation at the time of interview. Since the occupational background
of the respondents leads to more expectations from the service of the venture
capital companies, it is included as one of the profile variables. The occupations
among the entrepreneurs in the present study are confined to agricultural family,
business family, government employment family and private employment family.
The distribution of respondents on the basis of their occupational pattern is shown
in Table 5.5.
231
TABLE 5.5
OCCUPATION-WISE DISTRIBUTION
Sl.
No.
Occupation
Number of
Respondents
Percentage
1.
Agricultural family
52
34.67
2.
Business family
47
31.33
3.
Government employment
family
38
25.33
4.
Private employment family
13
8.67
150
100.00
Total
232
The important occupational pattern of the respondents belongs to

agricultural family, who constitute 34.67 %. The business family constitutes
31.33 % to the total respondents. 25.33 % of them are government employment
family and only 8.67 % are private employment family.
5.2.6 Income-wise Distribution
The monthly income of the entrepreneurs represents the income earned by

them through venture capital undertakings during a year. Since the income of the
entrepreneurs has its own impact on expectation, family requirement and
perception of various aspects of life, it is included as one of the socio-economic
variables. The income of the respondents is classified into: Below Rs.10,000,
Rs.10,000 to 20,000, Rs.20,000 to 30,000, Rs.30,000 to 40,000 and above
Rs.40,000. The distribution of respondents according to their monthly income is
presented in Table 5.6.
233
TABLE 5.6
INCOME-WISE DISTRIBUTION OF THE RESPONDENTS
Sl.
Monthly Income
No.
(in Rs.)
Number of
Respondents
Percentage
1.
Below 10,000
19
12.67
2.
10,000 20,000
40
26.67
3.
20,000 30,000
36
24.00
4.
30,000 40,000
35
23.33
5.
Above 40,000
20
13.33
150
100.00
Total
It is inferred from the above table that the important monthly income
groups among the respondents in the present study are Rs. 10,000 to 20,000 and
Rs. 20,000 to 30,000, which constitute 26.67 and 24.00% to the total, respectively.
The respondents who belong to the monthly income group of Rs.30, 000 to 40,000
constitute 23.33%. It is followed by the monthly income group of above Rs.
40,000 and below Rs.10, 000 which constitute 13.33 and 12.67 %, respectively.
5.2.7 Distribution of Respondents according to their Nature of Family
234
The nature of family represents the type of family pattern of the

respondents. In the Indian set up, the traditional family systems are joint family
system and nuclear family system. In the joint family system, the respondents
live along with their parents, brothers, sisters and their children as one family. In
the nuclear family system, the respondents family live alone.
The respondents
belonging to joint family and nuclear family systems in the present study are
shown in Table 5.7.
TABLE 5.7
CLASSIFICATION OF THE RESPONDENTS ACCORDING TO THEIR
NATURE OF FAMILY
Sl.
No.
Nature of Family
Number of
Respondents
Percentage
43
28.67
1.
Joint family
2.
Nuclear family
107
71.33
Total
150
100.00
It is found from Table 5.7 that out of 150 respondents, 107(71.33) % of

them belong to the nuclear family system, and the remaining 28.67 % of the
respondents belong to the joint family system. The analysis reveals that the
nuclear family system is the dominant system among the respondents in the study
area.
235
5.2.8 Distribution of Respondents according to their Family Size
The family size represents the number of family members living along with
the respondents in their respective families. The family size is one of the
important factors that determine the standard of living of the respondents. The
family size in the present study is confined to below 3, 3 to 6, above 6 members.
The distribution of the respondents according to their family size is presented in
Table 5.8.
TABLE 5.8
SIZE OF THE FAMILY-WISE DISTRIBUTION OF THE RESPONDENTS
Sl.
Category
No.
Number of Respondents
Percentage
1.
Below 3
37
24.67
2.
36
77
51.33
3.
Above 6
36
24.00
150
100.00
Total
It is found from Table 5.8 that the majority of the respondents households
have the family size of 3-6 members. It constitutes 51.33 % and it was followed
by below 3 members and above 6 members respectively which constitute 24.67 %
and 24.00 % respectively.
236
5.2.9 Religion
India is a country of many religions. People in India follow many religions,

the major religions followed being Hinduism, Islam and Christianity. To analyze
the religion of the res, data are collected and tabulated. Table 5.9 shows the
respondents distribution of the sample respondents according to their religion.
TABLE 5.9
RELIGION WISE CLASSIFICATION OF THE MEMBERS
Sl.
No.
Religion
Percentage
120
80.00
1.
Hindu
2.
Muslim
6.00
3.
Christian
21
14.00
150
100.00
Total
Source: Primary data

Note: Figures in brackets denote percentages to total.
From Table 5.9, it has been observed that nearly 120 (80.00 %) of the
members belong to Hinduism, 21 (14.00 %) belong to Christianity and 9 (6.00 %)
of them belong to Islam. Thus, it is clearly understood that the majority of the
members are Hindus in the study area.
5.2.10 Caste
237
Caste is an important social factor influencing social activities. Caste

moulds peoples attitude and personality towards their occupation. Even though
the level of education modifies the behaviour of the individual, caste remains the
basis of the respondents activity. In the present study, the major caste
classification of the respondents considered is: Forward Caste, Backward Class,
Most Backward Class and Scheduled Caste/Tribes. The distribution of
respondents according to the caste is presented in Table 5.10.
TABLE 5.10
CASTE-WISE DISTRIBUTION OF RESPONDENTS
Sl.
No.
Caste
Percentage
1.
Forward Class
35
23.33
2.
Backward Class
55
36.67
3.
Most Backward Class
48
32.00
4.
Scheduled Caste/Tribe
12
8.00
150
100.00
Total
Source: Primary data

238
Fig 5.2 CASTE-WISE DISTRIBUTION OF

RESPONDENTS
8%
23%
Forward class
Backward class
32%
Most backward class

Scheduled Caste/Tribe
37%
Table 5.10 reveals that majority of the members belong to the Backward
Class which constitutes 55(36.67%) followed by Most Backward Class, Forward
Class and Scheduled Caste/Scheduled Tribe which constitutes 32.00%, 23.33%
and 8 %) respectively. It is concluded that the majority of the respondents belong
to BC among the venture capital respondents.
5.2.11 Location of the Residence
The respondents are classified into two categories such as who are residing
in rural area and urban area. Table 5.11 portrays the location-wise classification
of the respondents.
239
TABLE 5.11
LOCATION-WISE CLASSIFICATION OF THE RESPONDENTS
Sl.
Location
No.
No. of the Respondents
Percentage
1.
Rural
52
34.67
2.
Urban
98
65.33
Total
150
100.00

Note : Figures within parentheses represent percentage to total.
It is understood from Table 5.11 that out of 150 sample respondents, the
majority of them (65.33%) fall under the category of urban area and the remaining
34.67 % fall under the category of rural area.
5.2.12 Earning Members in the Family
The number of earning members in the family includes part-time, fulltime

workers and daily wage earners. In the present study the number of earning
members is classified into one, two, three, four and above four. The earning
members in the family are shown in Table 5.12.
240
TABLE 5.12
EARNING MEMBERS IN THE FAMILY
Sl.No.
Earning Members
No. of Respondents
Percentage
1.
One
55
36.67
2.
Two
64
42.67
3.
Three
20
13.33
4.
Four
4.00
5.
Above four
3.33
Total
150
100.00
From Table 5.12, it has been inferred that families with two earning
members constitute 64 (42.67 %) followed by 55 (36.67 %) with only one earning
member in the family and 20 (13.33 %) with three members in the family. The
families with four and above four earning members together constitute only 11
(7.33 %) of the total.
5.2.13 Sources of Income other than Venture Capital Undertaking

The other sources of income of the entrepreneurs are classified into four
categories, namely agriculture, business, house property and investment. The
distribution of respondents according to their other sources of income is shown in
Table 5.13.
241
TABLE 5.13
DISTRIBUTION OF THE RESPONDENTS ACCORDING TO THEIR
OTHER SOURCES OF INCOME
Sl.
No.
Other Sources
Percentage
1.
Agriculture
27
18.00
2.
Business
39
26.00
3.
House Property
50
33.33
4.
Investment
34
26.67
150
100.00
Total
Table 5.13 shows that the majority of the respondents income from other
source is house property. They constitute 33.33 % and they were followed by
respondents whose income from other sources
are investment, business and
agriculture which constitute 26.67 %, 26.00 % and 18.00 % respectively.
5.2.14 Total Family Income
The monthly total family income of the entrepreneurs represents the

income earned by them from all possible and available sources of the family
during a year. The total family income is classified into:
Below Rs.20,000,
Rs.20,000 to 40,000, Rs.40,000 to 60,000, Rs.60,000 to 80,000, Rs.80,000 to
242
1,00,000 and above Rs.1,00,000.
The distribution of respondents according to
their annual income is presented in Table 5.14.

TABLE 5.14
TOTAL FAMILY INCOME-WISE DISTRIBUTION OF THE
RESPONDENTS
Sl.
Total Family Income
No.
(in Rs.)
Number of
Respondents
Percentage
1.
Below 20,000
10
6.67
2.
20,000 40,000
49
32.67
3.
40,000 60,000
31
20.67
4.
60,000 80,000
26
17.33
5.
80,000 1,00,000
14
9.33
5.
Above 1,00,000
20
13.33
150
100.00
Total
It is shown from Table 5.14 that the important total family income groups
among the entrepreneurs in the present study are Rs. 20,000 to 40,000 and Rs.
40,000 to 60,000, which constitute 32.67 and 20.67 % to the total, respectively. It
is followed by the income group such as Rs.60,000 to 80,000, above Rs.1,00,000,
Rs.80,000 to 1,00,000 and below Rs.20,000 which constitute 17.33 %, 13.33 %,
9.33 % and 6.67 % respectively.
243
5.2.15 Share of contribution to the Family Income
The share of contribution to the family income by the entrepreneurs is

classified into four segments, namely up to 25 %, 25 to 50 %, 50 to 75 % and 75
to 100%. The distribution of entrepreneurs according to their share of
contribution to the family income is furnished in Table 5.15.
TABLE 5.15
DISTRIBUTION OF THE ENTREPRENEURS ACCORDING TO THEIR
SHARE OF CONTRIBUTION TO FAMILY INCOME
Sl.
No.
Share in
Percentage
Percentage
1.
Up to 25
42
28.00
2.
25 50
36
24.00
3.
50 75
32
21.33
4.
75 100
40
26.67
150
100.00
Total
It is found from Table 5.15 that out of 150 entrepreneurs, 42 (28.00%)

contribute their share for family is up to 25% and it is followed by 75 to 100%, 25
to 50% and 50 to 75% respectively.
244
5.2.16. Distribution of respondents according to their category
Generally, the entrepreneurship is classified into two categories, namely,

hereditary and fist generation. The distribution of respondents according to their
category is given in Table 5.16.
TABLE 5.16
CATEGORY-WISE DISTRIBUTION OF THE RESPONDENTS
SI. No.
Category
Number of
Respondents
Percentage
1.
Hereditary
82
54.67
2.
First Generation
68
45.33
150
100.00
Total
It is understood from the above table that out of the 150 entrepreneurs,
82 (54.67%) belong to the category of hereditary and 68 (45.33%) of them are
coming under the category of first generation.
5.3
PROFILE OF VENTURE CAPITAL UNDERTAKINGS
This section presents the details about the profile of venture capital
undertakings in Tamil Nadu. It includes number of years of doing business,
245
category of organization, stage of development of undertaking, type of industry

and type of organization.
5.3.1. Years of doing business
The distribution of respondents according to the years of doing business is

given in Table 5.17.
TABLE 5.17
YEARS OF DOING BUSINESS
Sl.
No.
Years of doing Business
Number of
Respondents
Percentage
1.
Less than 5
16
10.67
2.
5 10
19
12.67
3.
10 -15
67
44.67
4.
15- 20
28
18.66
5.
More than 20
20
13.33
150
100.00
Total
Table 5.17 shows that a majority (44.67%) of the respondents is doing

business for 10 to 15 years and it is followed by 15-20 years, more than 20 years,
5 to 10 years and less than 5 years which constitute 18.66%, 13.33%, 12.67% and
10.67% respectively.
246
5.3.2. Categories of Organization

Generally, the categories of organization are classified into four, namely,
micro enterprises, small scale industries, medium scale industries and big or large
scale industries. The distribution of respondents according to the category of
organization is presented in Table 5.18.
TABLE 5.18
CATEGORY OF ORGANIZATION
Sl.
Category
No.
Number of
Respondents
Percentage
1.
Micro
30
20.00
2.
Small
65
43.33
3.
Medium
39
26.00
4.
Big or Large
16
10.67
150
100.00
Total
247
It is portrayed from Table 5.18 that out of 150 venture capitalists, 65 (43.33
%) of them come under the category of small enterprises followed by medium,
micro and big enterprises which constitute 26.00 %, 20.00 % and 10.67 %
respectively. It is concluded that the majority of the venture capitalists in the
study area belong to the category of small enterprises.
5.3.3. Stages of Development of Undertaking
The stages of venture capital undertakings are classified into six categories,
namely, seed stage, start up stage, early growth stage, expansion stage, matured
stage and turn around stage. The distribution of respondents according to the
stages of development of undertaking is presented in Table 5.19.
248
TABLE 5.19
STAGES OF DEVELOPMENT OF UNDERTAKINGS
Sl.
Reasons
No.
Number of
Respondents
Percentage
1.
Seed stage
19
12.67
2.
Start up stage
22
14.67
3.
Early growth stage
29
19.33
4.
Expansion stage
32
21.33
5.
Matured stage
26
17.33
6.
Turn around stage
22
14.67
150
100.00
Total
249
It is understood from Table 5.19 that out of the 150 entrepreneurs,

32(21.33%) come under the category of expansion stage and it is followed by
early growth stage, matured stage, start up stage, turn around stage and seed stage
which constitute 19.33%, 17.33%, 14.67%, 14.67% and 12.67% respectively. It is
concluded from the above table that the most of the venture capital undertakings
belong to the category of expansion stage in the study area.
5.3.4 Type of Industries

Table 5.20 furnishes the details of the type of selected industries.
TABLE 5.20
TYPE OF UNDERTAKINGS
Sl.
No.
Type of Undertakings
Number of
Respondents
Percentage
1.
Manufacturing
21
14.00
2.
IT & ITES
14
9.33
3.
Health care & Life Sciences
30
20.00
4.
Banking & Financial Services
18
12.00
5.
Media & Entertainment
27
18.00
6.
Engineering & Communication
16
10.67
7.
Shipping and Logistics
10
6.67
8.
Energy
4.00
9.
Telecom
5.33
150
100.00
Total
250
It is inferred from Table 4.20 that out of the 150 respondents, 30(20.00%)
come under the category of health care and life sciences industries and it is
followed by media and entertainment, manufacturing, banking and financial
services, engineering and communication, IT & ITES, shipping and logistics,
telecom and energy which constitute 18.00%, 14.00%, 12.00%, 10.67%, 9.33%,
6.67%, 5.33% and 4.00% respectively.
5.3.5 Type of Organization

The details about the type of organization are presented in Table 5.21.
251
TABLE 5.21
TYPE OF ORGANISATION
Sl.
No.
Type of Organization
Number of
Respondents
Percentage
1.
Proprietary Concern
46
30.67
2.
Partnership / LLP
34
22.67
3.
Co-operative Society / Trust
18
12.00
4.
Self-Help Group
4.67
5.
Private Limited Company
40
26.66
6.
Public Limited Company
3.33
Total
150
100.00
252
It is observed from Table 5.21 that out of the 150 respondents, 46 (30.67
%) come under the category of proprietary concern and it is followed by private
limited company, partnership/LLP, co-operative society/trust, self-help group and
public limited company which constitute 26.66%, 22.67%, 12.00%, 4.67% and
3.33% respectively.
FACTORS INFLUENCING STARTING THE VENTURE CAPITAL
UNDERTAKINGS
The analysis on factors influencing the respondents starting the venture capital
undertaking is essential to frame suitable approach by the venture capital fund
companies. The present study confined these variables to Independence, Family
background, Technical skill /Background, New idea with business potential, The
Prospect of challenges, Long cherished dream to become a respondent, Market
opportunity, Incentives for investment, Risk bearing capacity and
Passion for
innovation.
In order to find out the significant relationship among venture capital fund
companies regarding the factors influencing starting the venture capital
undertakings, t-test was applied. The importance of the variables that influence
253
starting the venture capital undertaking has been exhibited with the help of its
mean score and the computed results of t-test in Table 5.22.
TABLE 5.22
FACTORS INFLUENCING STARTING THE VENTURE CAPITAL
UNDERTAKINGS
Sl.
No.
Factors
Mean Scores among

ICICI
Entreprene
urs
IFCI
Entreprene
urs
tValues
1.
Independence
3.8036
2.5023
3.2361*
2.
Family background
3.8027
3.8617
3.3011*
3.
Technical skill/background
3.3142
3.6086
0.4041
4.
New idea with business potential
3.6082
3.1942
0.6897
5.
The prospect of challenges
3.2141
3.4041
0.4896
6.
Long cherished dream to become

an entrepreneur
2.6073
3.8186
3.4081*
7.
Market opportunity
3.6244
3.0814
0.5169
8.
Incentives for investment
2.8132
2.9097
0.6233
9.
Risk bearing capacity
3.6143
3.5342
0.6861
10.
Passion for innovation
3.7182
3.7241
3.1142*
Source: Computed data.

* Significant at 5 % level.
254
Fig 5.7 FACTORS INFLUENCING STARTING THE VENTURE

CAPITAL UNDERTAKINGS
Passion for innovation
3.7182
3.7241
3.1142
Risk bearing capacity
3.6143
3.5342
0.6861
Incentives for investment
2.8132
Market oppurtunity
2.9097
3.6244
0.6233
3.0814
0.5169
Long cherished dream to become an

entrepreneur
2.6073
3.8186
ICICI entreprenuers
3.4081
The prospect of challenges
3.2141
IFCI entreprenuers
3.4041
0.4896
New idea with business potential
3.6082
t-values
3.1942
0.6897
Technical skill/background
3.3142
3.6086
0.4041
Family background
3.8027
3.8617
3.3011
Independence
3.8036
2.5023
3.2361
10
12
The important variables that influence the respondents starting the venture
capital undertakings through ICICI are independence, family background and
passion for innovation since the mean scores are 3.8036, 3.8027 and 3.7182
respectively. Among the respondents belonging to the IFCI, these are family
background, long cherished dream to become a respondent and passion for
innovation since the respective mean scores are 3.8186, 3.8617 and 3.7241.
Regarding the perception on the factors influencing the respondents to start
venture capital undertaking, the significant difference among the two group of
255
respondents has been identified in the perception on independence, family

background, long cherished dream to become an entrepreneur and passion for
innovation since the respective t statistics are significant at 5% level.
5.4
FACTORS INFLUENCING IN ATTRACTING THE VENTURE

CAPITAL FUNDS
The analysis on factors influencing the respondents to attract the venture

capital fund for their undertaking are Idea is unique and patented, Experience and
competency of the respondents, Financial indicators and projections, Technical
Skills, Marketing Strategy, Differentiation with competition, Business model is
scalable, Core competency of the respondent, Innovation and creativity,
Collaboration and teamwork, Integrity and ethical behaviour, Risk profile, Tax
benefits, Track record and High Quality of Products & Services.
companies regarding the factors influencing to attract the venture capital fund,
t-test was applied. The importance of the variables that influence to attract the
venture capital fund has been exhibited with the help of its mean score and the
computed results of t-test in Table 5.23.
256
TABLE 5.23
FACTORS INFLUENCING TO ATTRACT THE VENTURE CAPITAL
FUND
Sl.
No.
Variables
1.
Mean Scores among
tValues
ICICI
Entrepreneurs
IFCI
Entrepreneurs
Idea is unique and patented
2.8589
3.2162
1.3329
2.
Experience and
competency of the
entrepreneur
2.0685
3.8625
3.3917*
3.
Financial indicators and

projections
3.3084
3.7874
1.5061
4.
Technical Skills
2.7173
3.7078
1.1211
5.
Marketing Strategy
3.7976
3.0811
3.2101*
6.
Differentiation with
competition
3.8681
3.4503
1.8917
7.
Business model is scalable
2.8019
3.7611
3.4612*
8.
Core competency of the

entrepreneur
2.5124
3.3676
3.3038*
9.
Innovation and creativity
3.8181
2.9691
3.0917*
10.
Collaboration and
teamwork
3.6026
2.5728
1.8118
11.
Integrity and ethical

behaviour
2.3381
3.8186
3.4086*
12.
Risk profile
3.7172
2.3417
3.1917*
13.
Tax benefits
2.8081
3.8086
1.4506
14.
Track record
2.5153
3.7171
1.9234
15.
High Quality of Products

& Services
2.4118
3.4611
3.2029*

*Significant at five % level.
257
Fig 5.8 FACTORS INFLUENCING TO ATTRACT THE

VENTURE CAPITAL FUND
High quality of products and services
2.4118
2.5153
Track record
3.7171
2.8081
Tax benefits
3.7172
Risk profile
Integrity and behaviour
3.4611
2.3381
3.8086
2.3417
3.8186
3.6026
Collaboration and teamwork
3.8181
innovation and creativity
2.5728
2.9691
3.2029
1.9234
1.4506
3.1917
3.4086
1.8118
3.0917
Core competency of the entrepreneur
2.5124
3.3678
3.3038
business model is scalable
2.8019
3.7611
3.4612
3.8681
Differentiation with competition
3.4503
1.8917
Marketing strategy
3.7976
Technical skills
2.7173
3.7078
1.1211
Financial indicators and projections
3.3084
3.7874
1.5061
Experience & competency of the

entrepreneur
2.0685
3.0811
3.8625
2.8589
Idea is unique and patended
0%
20%
40%
ICICI
entrepreneurs
IFCI
entrepreneurs
t-values
3.2101
3.3917
3.2162
1.3329
60%
80% 100%
It is inferred from Table 5.23 that the important variables that influence the
respondents to attract the venture capital fund through ICICI are differentiation
with competition, innovation and creativity and marketing strategy since the mean
scores are 3.8681, 3.8181 and 3.7976 respectively. Among the respondents
belonging to the IFCI, these are experience and competency of the respondent,
integrity and ethical behaviour and tax benefit mean scores are 3.8625, 3.8186 and
258
3.8086. Regarding the perception on the factors influencing the entrepreneurs to

attract venture capital fund, the significant difference among the two group of
respondents has been identified in the perception experience and competency of
the respondent, marketing strategy, business model scalable, core competency of
the respondent, innovation and creativity, integrity and ethical behaviour, risk
profile and high quality of products & services since the respective t statistics
are significant at 5 % level.
5.5
LEVEL OF SATISFACTION OF THE RESPONDENTS

The level of satisfaction has been determined by the score values calculated
for 15 statements which are related to the performance evaluation of venture

capital fund companies in Tamil Nadu by adopting a scaling technique namely the
Likert Five Point Scale90. The statements are:
1.
Instruments of Venture capital Investment
2.
Valuation of business
3.
Venture capital ownership
4.
Investment amount, trenches and milestones
5.
Anti-dilution and Preemptive rights
6.
Information rights
7.
Board of directors representation
8.
Control over management decisions
9.
Employment agreements with founders and key employees

90
Claire Selthiz et.al. Research Methods in Social Relations, Methuen & Co. Ltd.,
London, 1965, p.366.
259
10.
Monitoring fees
11.
Exit rights
12.
Exclusivity
13.
Confidentiality
14.
Fees
15.
Condition precedent
To secure the total score for every positive statement scores are allotted in
the order by 5 for highly satisfied; 4 for satisfied; 3 for indifferent; 2 for
dissatisfied and 1 for highly dissatisfied. Similarly for every negative
statement scores are allotted in the order of 1 for highly satisfied, 2 for
satisfied 3 for indifferent 4 for dissatisfied and 5 for highly dissatisfied. All
positive statements bear odd numbers and negative statements even numbers in
the 15 statements. This enabled the respondents to record their responses with
proper understanding of the settlements.
The level of satisfaction has been classified into three categories, namely
low level, medium level and high level for analytical purpose. The score
value (X+SD) and the score value (X- SD) have been classified as high level
satisfaction and low level satisfaction respectively. The score values between
(X + SD) and (X-SD) have been classified as medium level satisfaction, X and
260
SD are the arithmetic mean and standard deviation91 calculated from the score
values of 150 entrepreneurs.
(X+SD) = (56.72 + 10.98) = 66.70 and above High level.

(X - SD) = (54.71 - 10.87) = 45.74 and below low level.
(X - SD) to (X + SD) = 45.74 to 66.70 medium level.
In order to examine the relationship between the level of satisfaction and

the profile variables of the respondents, the Chi-square test has been used. It is
calculated by adopting the following formula.
(O E ) 2
Chi-square =
with (r-1) (c-1) degree of freedom
E
Where,
O observed frequency
E Expected frequency
Row total x Column total
E=
Grand total
c = Number of columns in a contingency table
r = Number of rows in a contingency table.
Whenever theoretical frequencies are less than 5, they should be

amalgamated92.
91
Gupta, S.P., Statistical Methods, Sultan Chand & Sons, New Delhi, 1991,
pp.E8-28.
92
Grewal, P.S., Methods of Statistical Analysis, Sterling Publishers Private
Limited, New Delhi, p.1093.
261
Table 5.24 reveals the level of satisfaction of the 150 sample respondents.
TABLE 5.24
LEVEL OF SATISFACTION OF THE RESPONDENTS
Sl.
No.
Level of Satisfaction
Number of
Respondents
Percentage
1.
High
39
26.00
2.
Medium
79
52.67
3.
Low
32
21.33
100
100.00
Total
From Table 5.24, it is clear that out of the 150 respondents 39 (26.00 %)
fall under the high level satisfaction group, 79 (52.67 %) come under the category
of medium level satisfaction and 32 (21.33 %) fall under the low level satisfaction
group
5.5.1. Gender and Level of Satisfaction
Gender is an important factor in determining the level of satisfaction of
respondents. The gender of the respondents has been identified as the first
variable. Table 5.25 shows the gender of the respondents and their level of
satisfaction.
262
TABLE 5.25
GENDER OF THE RESPONDENTS AND THE LEVEL OF
SATISFACTION
Sl.
Gender
No.
1.
2.
Male
Female
Total
Total
High
Medium
Low
26
55
17
98
(66.67)
(69.62)
(53.13)
(65.33)
13
24
15
52
(33.33)
(30.38)
(46.87)
(34.67)
39
79
32
150
(100.00)
(100.00)
(100.00)
(100.00)

Table 5.25 reveals that out of the 150 respondents, 98(65.33%) are males
and 52(34.67%) are females. Out of the 39 respondents with high level of
satisfaction, 26(66.67%) are male and the remaining 13(33.33%) are female. Out
of the 79 respondents with medium level of satisfaction 55(69.62%) are male and
24(30.38 %) are females. Out of 32 respondents with low level of satisfaction, 17
(53.13%) are female and the remaining 15(46.87%) are male, respectively.
In order to test the relationship between the gender and the level of
satisfaction of the respondents the following null hypothesis was formulated.
Gender is independent from the level of satisfaction of the respondents. The
chi-square test was applied to examine the null hypothesis and the computed
results are given below:
263
Calculated value
2.09755
Table value at 5 %
5.991
Degrees of freedom
Inference
Insignificant
It is evident from the results that the calculated value is less than the table
value. Hence the null hypothesis is accepted. Therefore, it could be inferred that
the gender does not influence the level of satisfaction of respondents.
5.5.2 Age and Level of Satisfaction
Age is one of the important factors in determining the satisfaction of the

respondents. The age of the respondents and the level of satisfaction are shown in
Table 5.26.
264
TABLE 5.26
AGE OF THE RESPONDENTS AND LEVEL OF SATISFACTION
Sl.
No.
1.
2.
3.
4.
5.
Level of satisfaction
Age (in years)
Below 30
31 40
41 50
51 60
Above 60
Total
Total
High
Medium
Low
10
16
32
(25.64)
(20.25)
(18.75)
(21.33)
22
33
(20.51)
(27.85)
(9.38)
(22.00)
12
14
35
(23.08)
(15.19)
(43.75)
(23.33)
16
28
(12.82)
(20.25)
(21.88)
(18.67)
13
22
(17.95)
(16.46)
(6.25)
(14.67)
39
79
32
150
(100.00)
(100.00)
(100.00)
(100.00)
Source: Primary Data.

From Table 5.26, it is observed that out of the 39 respondents with high
level of satisfaction, 10(25.64%) are in the age group below 30 years followed by
9(23.08%) in the age group between 41 and 50 years, 8(20.51%) in the age group
between 31 and 40 years, 7(17.95%) in the age group of above 60 years and 5
(12.82%) in the age group of between 51 and 60 years. Out of the 79 respondents
with medium level of satisfaction, 22(27.85%) are in the age group of between 31
265
and 40 years followed by 16 (20.25 %) each in the age group of below 30 years
and 51 and 60 years, 13 (16.46 %) in the age group of above 60 years and 12
(15.19 %) in the age group between 41 and 50 years. Further it also shows that out
of the 32 respondents with low level of satisfaction, 14(43.75%) are in the age
group of between 41and 50 years followed by 7(21.88%) in the age group of
between 51 and 60 years, 6(18.75%) in the age group of below 30 years, 3(9.38
%) in the age group of between 31 and 40 years and 2(6.25%) in the age group of
above 60 years, respectively.
In order to test the relationship between age and level of satisfaction of the
respondents, the following null hypothesis was formulated. Age is independent
from the level of satisfaction of the respondents. The chi-square test was applied
to examine the null hypothesis and the computed results are given below:
Calculated value
14.7618
Table value at 5 %
15.507
Degrees of freedom
Inference
Insignificant
It is evident from the chi-square that the calculated value is less than the
table value at the 5 % level. Hence the null hypothesis is accepted. Therefore, it
could be inferred that the age does not influence the level of satisfaction of
respondents towards the performance of venture capital fund.
266
5.5.3. Marital Status and Level of Satisfaction

The level of satisfaction may also depend upon the marital status of the
respondents. An attempt has been made to study the relationship between marital
status and level of satisfaction. The marital status of the respondents and their
level of satisfaction are shown in Table 5.27.
TABLE 5.27
MARITAL STATUS OF THE RESPONDENTS
AND LEVEL OF SATISFACTION
Sl.
No.
Marital Status
High
Medium
Low
Total
1.
Married
25
(64.10)
56
(70.89)
14
(43.75)
95
(63.34)
2.
Unmarried
9
(23.08)
14
(17.72)
17
(53.12)
40
(26.66)
3.
Widowers/Divorced
5
(12.82)
9
(11.39)
1
(3.13)
15
(10.00)
39
79
32
150
(100.00)
(100.00)
(100.00)
(100.00)
Total
It is revealed from Table 5.27 that out of the 39 respondents with high level
of satisfaction, 25(64.10%) are married followed by 9(23.08%) who are
unmarried and 5(12.82%) who are widowers/divorced. Out of 79 respondents with
medium level of satisfaction, 56(70.89%) are married followed by 14(17.72%)
who are unmarried and 9(11.39%) who are widowers/divorced. Further it also
267
shows that out of the 32 respondents with low level of satisfaction 14(43.75%) are
unmarried followed by 17(53.12%) who are married and only one (3.13%) is
widower/divorced, respectively.
With a view to test the following null hypothesis namely the level of
satisfaction is independent of the marital status the Chi-square test was applied
and the results are shown below:
Calculated value
13.93845
Table value at 5 % level
9.488
Degrees of freedom
Inference
Significant
The chi-square results reveal that the calculated value is greater than the
Table value at the 5% level. Hence the null hypothesis is rejected. It could be
inferred that there exists a relationship between marital status and level of
satisfaction of respondents.
5.5.4 Educational Qualification and Level of Satisfaction

Education is the vital factor which influences the level of satisfaction of
respondents. The independent identity of the respondents can be proved only
through education. Generally educated persons are able to appreciate the
268
importance and the performance of venture capital funds. Education widens

knowledge, understanding and capability of doing things. Educational
qualification of the respondents and their level of satisfaction are shown in Table
5.28.
TABLE 5.28
EDUCATIONAL QUALIFICATION OF THE RESPONDENTS AND
LEVEL OF SATISFACTION
Sl.
No.
Educational
Qualification
High
Medium
Low
Total
1.
SSLC / +2
5
(12.82)
13
(16.46)
11
(34.38)
29
(19.33)
2.
Diploma
5
(12.82)
15
(18.99)
10
(31.25)
30
(20.00)
3.
Graduate
7
(17.95)
23
(29.11)
4
(12.50)
34
(22.67)
4.
Post Graduate
9
(23.08)
19
(24.05)
4
(12.50)
32
(21.33)
5.
Professional /
Technical
13
(33.33)
9
(11.39)
3
(9.37)
25
(16.67)
39
79
32
150
(100.00)
(100.00)
(100.00)
(100.00)
Total
From Table 5.28, it is seen that out of 39 respondents with high level of
satisfaction, 13(33.33%) have professional/technical qualification followed by 9
(23.08%) who have post graduate level education, 7(17.95%) who have graduate
level education, 5(12.82%) each have SSLC/+2 and diploma level education. Out
269
of the 79 respondents with medium level of satisfaction, 23(29.11%) have

graduate level education followed by 19(24.05%) who have post graduate level
education, 15(18.99 %) who have diploma, 13(16.46%) who have SSLC/+2 level
education and 9(11.39%) who have professional/technical qualification. Further it
also shows that out of the 32 respondents with low level of satisfaction, 22 (34.38
%) have SSLC/+2 level education followed by 10 (31.25 %) who have diploma
level education, 4 (12.50 %) each who have graduate and post graduate level
education and 3 (9.37 %) who have professional/technical level education.
For finding the relationship between educational qualification and level of
satisfaction, the following null hypothesis was formulated. These exists no
relationship between educational qualification and level of satisfaction. To test
the above hypothesis, the chi-square test was applied. The computed results of
chi-square are presented below:
Calculated value
21.99795
Table value at 5 %
15.507
Degrees of freedom
Inference
Significant
The calculated value of the Chi-square is greater than the table value at the
5 % level. Hence the null hypothesis is rejected. Therefore, it could be inferred
270
that the educational qualification does influence the level of satisfaction of the
respondents
5.5.5 Family Size and Level of Satisfaction

Responsibilities of the respondents differ with the size of their family.
Hence the researcher has made an attempt to study the relationship between the
family size of the respondents and their level of satisfaction. Family size and level
of satisfaction of the respondents are shown in Table 5.29.
TABLE 5.29
FAMILY SIZE OF THE RESPONDENTS AND LEVEL
OF SATISFACTION
Sl.
No.
Family size
Total
High
Medium
Low
1.
Below 3
9
(23.08)
10
(12.66)
18
(56.25)
37
(24.67)
2.
36
24
(61.54)
44
(55.70)
9
(28.13)
77
(51.33)
3.
Above 6
6
(15.38)
25
(31.64)
5
(15.62)
36
(24.00)
39
79
32
150
(100.00)
(100.00)
(100.00)
(100.00)
Total
From Table 5.29, it is inferred that out of the 39 respondents with high
level of satisfaction 24(61.24%) have families of between 36 members followed
271
by 9(23.08%) who have families below 3 members and 6(15.38%) who have
families of above 6 members. Out of the 39 respondents with medium level of
satisfaction 44(55.70%) they have families of between 3-6 members followed by
25(31.64%) who have families of size above 6 members and 10(12.66%) who
have families of below 3 members. Further it also shows that, out of the 32
respondents with low level of satisfaction, 18(56.25%) have families of below 3
members followed by 9(28.13%) who have families of between 3 and 5 members
and 10(15.62%) who have families of above 6 members, respectively.
In order to test the relationship between the family size and the level of
satisfaction the following null hypothesis was formulated. There exists no
relationship between the family size and the level of satisfaction. The above null
hypothesis was tested by applying the Chi-square test. The computed results are
given below:
Calculated value
26.10630
9.488
Degrees of freedom
Inference
Significant
It is evident from the Chi-square results that the calculated value is greater
than the table value at the 5 % level. Hence the null hypothesis is rejected. There
272
exists a relationship between the family size and the level of satisfaction of the
respondents.
5.5.6 Nature of Family and Level of Satisfaction

Responsibilities of the respondents differ with the size of their family.
Hence the researcher has made an attempt to study the relationship between the
family size of the respondents and their level of satisfaction. Family size and level
of satisfaction of the respondents are shown in Table 5.30.
TABLE 5.30
NATURE OF FAMILY AND LEVEL OF SATISFACTION
Sl.
No.
Nature of Family
Total
High
Medium
Low
1.
Joint
9
(23.08)
16
(20.25)
18
(56.25)
43
(28.67)
2.
Nuclear
30
(76.92)
63
(79.75)
14
(43.80)
107
(71.33)
39
79
32
150
(100.00)
(100.00)
(100.00)
(100.00)
Total
From Table 5.30, it is clear that out of the 39 respondents with high level
of satisfaction, 9 (23.08 %) come under the category of joint family and 30 (76.92
%) come under the category of nuclear family. Out of the 79 respondents with
273
medium level of satisfaction, 16 (20.25 %) come under the category of joint

family and 63 (79.75 %) come under the category of nuclear family. Further it
also shows that, out of the 32 respondents with low level of satisfaction, 18 (56.25
%) come under the category of joint family and 14 (43.80 %) come under the
category of nuclear family.
In order to test the relationship between the nature of family and the level
of satisfaction the following null hypothesis was formulated. There exists no
relationship between the nature of the family and the level of satisfaction. The
above null hypothesis was tested by applying the Chi-square test. The computed
results are given below:
Calculated value
15.7661
5.991
Degrees of freedom
Inference
Significant
It is evident from the Chi-square results that the calculated value is greater
than the table value at the 5 % level. Hence the null hypothesis is rejected. There
exists a relationship between the nature of the family and the level of satisfaction
of respondents.
274
5.5.7. Occupation and Level of Satisfaction

Occupation is also a vital factor in determining the level of satisfaction of
the respondents. Hence an attempt has been made to study the relationship
between the occupation of the respondents and their level of satisfaction.
Table 5.31 shows the occupation and the level of satisfaction of the respondents.
TABLE 5.31
OCCUPATION OF RESPONDENTS AND
LEVEL OF SATISFACTION
Sl.
No.
Occupation
Total
High
Medium
Low
29
(36.71)
27
(34.18)
16
(20.25)
14
(43.75)
10
(31.25)
5
(15.63)
52
(34.67)
47
(31.33)
38
(25.33)
1.
Agricultural family
2.
Business family
3.
Government
employment family
9
(23.08)
10
(25.64)
17
(43.59)
4.
Private
employment family
3
(7.69)
7
(8.86)
3
(9.37)
13
(8.67)
39
79
32
150
(100.00)
(100.00)
(100.00)
(100.00)
Total
Source: Primary Data.
From Table 5.31, it is seen that out of the 39 respondents with high level of
satisfaction, 9 (23.08 %) belong to agricultural family, 10 (25.64 %) are business
family, 17 (43.59 %) are government employment family and 3(7.69 %) are
275
private company employment family. Out of 79 respondents with medium level of

satisfaction, 29 (36.71 %) are agricultural family, 27 (34.18 %) are business
family, 16 (20.25 %) are government employment family and 7 (8.86 %) are
private employment family. Further it also shows that, out of the 32 respondents
with low level of satisfaction 14 (43.75 %) are agricultural family, 10 (31.25 %)
are business family, 5 (15.63 %) are government employment family and 3 (9.37
%) are private employment family.
In order to test the relationship between occupation and level of satisfaction
of respondents, the following null hypothesis was formulated. The level of
satisfaction is independent of the occupation. The chi-square test was applied to
examine the null hypothesis. The computed results are given below:
Calculated value
16.02465
12.592
Degrees of freedom
Inference
Significant
It has been inferred from the results that the calculated value is greater than
the Table value. Hence the null hypothesis is rejected. Therefore, it could be
inferred that the occupation influences the level of satisfaction of the respondents.
276
5.5.8. Monthly Income and Level of Satisfaction

Table 4.32 presents the level of satisfaction and monthly income of the
respondents.
TABLE 5.32
MONTHLY INCOME OF RESPONDENTS AND LEVEL OF
SATISFACTION
Sl.
No.
Monthly Income
(in Rs.)
Total
High
Medium
Low
1.
Below 10,000
8
(20.52)
9
(11.39)
2
(6.25)
19
(12.67)
2.
10,000 20,000
10
(25.64)
28
(35.44)
2
(6.25)
40
(26.67)
3.
20,000 30,000
18
(46.15)
12
(15.19)
6
(18.75)
36
(24.00)
4.
30,000 40,000
2
(5.13)
19
(24.06)
14
(43.75)
35
(23.33)
5.
Above 40,000
1
(2.56)
11
(13.92)
8
(25.00)
20
(13.33)
39
79
32
150
(100.00)
(100.00)
(100.00)
(100.00)
Total
It is observed from Table 5.32 that out of the 39 respondents with high
level of satisfaction 18 (46.15 %) have monthly income between Rs.20,000
30,000 followed by 10 (24.64 %) who have monthly income between Rs.10,000
20,000, 8 (20.52 %) them who have monthly income below Rs.10,000, 2 (5.13 %)
277
who have monthly income between Rs.30,000 to 40,000 and only one (2.56 %)
who have monthly income of above Rs.40,000. Out of the 79 respondents with
medium level of satisfaction, 28 (35.44 %) who have monthly income of between
Rs.10,000 20,000 followed by 19 (24.06 %) who have monthly income between
Rs.30,000 to 40,000, 12 (15.19 %) who have annual income between Rs.20,000
30,000, 11 (13.92 %) who have monthly income above Rs.40,000 and 9 (11.39 %)
who have monthly income below Rs.10,000. Further it also shows that, out of 32
respondents with low level of satisfaction, 14 (43.75 %) have monthly income
between Rs.30,00040,000 followed by 8 (25.00 %) who have monthly income
above Rs.40,000, 6 (18.75 %) who have monthly income between Rs.20,000
30,000, 2 (6.25 %) each who have monthly income between Rs.10,000- 20,000
and below Rs.10,000 respectively.
In order to test the relationship between the monthly income and the level
of satisfaction the following null hypothesis was formulated. The level of
satisfaction is independent of the income. The chi-square test was applied to
examine the null hypothesis and the computed results are given below:
Calculated value
40.6267
Table value at 5 %
15.507
Degrees of freedom
Inference
Significant
278
It is evident from the results that the calculated value is greater than the
table values. Hence the null hypothesis is rejected and it is inferred that the annual
income does influence the level of satisfaction.
5.6 FACTORS INFLUENCING THE SATISFACTION OF VENTURE

CAPITAL
UNDERTAKINGS
TOWARDS
PERFORMANCE
OF
VENTURE CAPITAL FUND COMPANIES
In order to study the factors influencing the satisfaction of entrepreneurs

towards the performance of venture capital fund companies, the researcher has
formulated 15 statements, each title (vide Appendix 1) and they are qualified by
using Likerts five point scale. The five point scale consists of strongly agree,
agree, no opinion, disagree and strongly disagree. The score of each statement in
the five point scale is five, four three, two and one respectively.
In the present study, the principal factor analysis method with the
Orthogonal Varimax Rotation is used to identify the factors influencing the
satisfaction of entrepreneurs towards the performance of venture capital fund
companies.
The principal component factor analysis method was applied to the inter
correlation matrix of the fifteen dimensions of the satisfaction scale and the results
were rotated using the Kaiser Varimax criteria. The data validity for factor
279
analysis has been examined with the help of the Kaiser-Meyer-Olkin (KMO)
measures of sampling adequacy and the Bartlett test of Sphericity. The KMO
measure of 0.5803 at the zero level significance of chi-square satisfies the validity
of data for factor analysis. The factor analysis results in seven factors. The factor
loading of the variables in seven factors, its communality, Eigen value and
percentage of variable explained are shown in table 5.33.
280
TABLE 5.33
ROTATED FACTOR MATRIX FOR SATISFACTION OF
RESPONDENTS
Sl.
No.
Rotated Factor Loading

Variables
F1
F2
F3
F4
F5
F6
F7
h2
1.
Venture capital ownership
0.9082
0.1537
-0.1729
-0.0299
0.0886
0.0385
0.0378
0.7
8
2.
Instruments of Venture
capital Investment
0.8900
0.1106
-0.1495
-0.0765
0.0595
0.0306
0.0426
0.7
9
3.
Investment amount,
trenches and milestone
0.6957
-0.2691
0.0654
0.4552
-0.0496
-0.0145
-0.0565
0.9
1
4.
Information rights
0.0904
0.9425
0.2056
-0.0361
0.0642
0.0298
0.0059
0.9
4
5.
Anti-dilution and
Preemptive rights
0.0512
0.9423
0.2105
-0.0284
0.0467
0.0079
0.0065
0.8
9
6.
Control over management

decisions
-0.1461
0.2095
0.9149
0.0528
0.0137
0.1012
-0.0429
0.`7
7
7.
Board of directors
representation
-0.1443
0.1935
0.9017
0.0437
0.0640
0.1043
-0.0205
0.3
9
8.
Confidentiality
0.0804
0.0451
0.0325
0.8947
0.0189
0.0516
-0.0309
0.8
7
9.
Valuation of business
0.2648
0.0465
0.2435
0.6679
0.1236
-0.0431
0.1629
0.6
4
10.
Fees
0.1161
0.1280
0.0743
-0.1848
0.8503
0.0840
-0.0026
0.8
0
11.
Monitoring fees
0.0025
-0.0081
-0.0039
0.2639
0.8390
-0.1205
0.0216
0.8
3
12.
Exit rights
0.0675
-0.0644
0.1163
-0.0280
-0.0379
0.8673
-0.1783
0.8
1
13.
Exclusivity
0.0008
0.0952
0.2909
-0.2770
-0.0950
0.5889
0.3430
0.8
8
14.
Condition precedent
-0.0674
0.4294
-0.3444
0.3855
0.2681
0.5574
0.0237
0.9
3
15.
Employment agreements
with founders and key
employees
0.0407
-0.0032
-0.0628
0.1171
0.0217
-0.0531
0.9237
0.8
3
Eigen values
2.9431
2.5609
1.6752
1.4916
1.2900
1.1915
1.0028
% of variation
19.6
17.1
11.2
9.9
8.6
7.9
6.7
Cumulative percentage
19.6
36.7
47.9
57.8
66.4
74.4
81.0
281
The first factor is designed as Ownership Status on the basis of loaded

variables. Three variables in this category are important with high factor loading.
It indicates that among the various satisfaction scale, Venture capital ownership
(0.9082), Instruments of Venture capital Investment (0.8900) and Investment
amount, trenches and milestone (0.6957) are important attributes in this category.
Thus, the status of ownership of venture capital undertakings is identified as an
important factor to influence the satisfaction of entrepreneurs with the
performance of venture capital fund companies.
The second factor is narrated as Information Rights on the basis of

loaded variables. Two variables in this category are important with high factor
loading. It indicates that among the various satisfaction scale, Information rights
(0.9425) and Anti-dilution and Preemptive rights (0.9423) are important
attributes. Thus, the knowledge of information rights is identified as an important
factor to influence the satisfaction of respondents with the service of the venture
capital fund companies.
The third factor is identified as Management Activities on the basis of

the loaded variables. Two variables in this category are important with high
factor loading. It indicates that among the various satisfaction scales, Control
over management decisions (0.9149) and Board of directors representation
282
(0.9017) are important attributes. Thus, the management activities of venture

capital fund companies are identified an important factor to influence the
satisfaction of respondents.
The fourth factor is identified as Confidentiality on the basis of the

loaded variables. Two attributes, Confidentiality (0.8947) and Valuation of
business (0.6679) are important in this category. Thus, the confidentiality is
identified as an important factor to influence the satisfaction of entrepreneurs.
The fifth factor clearly indicates the combination of two attributes Fees
(0.8503) and Monitoring fees (0.8390). This factor is termed Fees levied by
the VCFC which influenced the satisfaction of entrepreneurs with the
performance of the venture capital fund companies (VCFC).
The sixth factor is designed as Individuality Status on the basis of
loaded variables. Three variables in this category are important with high factor
loading. It indicates that among the various satisfaction scale, Exit rights
(0.8673), Exclusivity (0.5889) and Condition precedent (0.5574) are
important attributes in this category. Thus, the individuality status is identified as
an important factor to influence the satisfaction of the respondents.
The seventh factor clearly indicates that only one attribute, that is,
employment agreements with founders and key employees. This factor is
283
termed as Employment agreements with founders and key employees (0.9237)

which influenced the satisfaction of respondents with the performance of the
venture capital fund companies in Tamil Nadu.
Factors influencing the success of venture capital undertakings
The analysis on factors influencing the respondents to success their venture
capital undertakings are Process-driven undertaking not impacted by management
Shake-ups, Frugal cash management and cost control enhances profitability,
VCs vast network enables the recruitment of talented people, Resolving legal
disputes,
Facilitating
accountability for
value
creation
and
protection,
Enhancement of reporting system, Extending technical and management

assistance, VCs vast network facilitating mobilization of finance at favorable
terms, Enhanced HR systems and practices, Creativity and innovation,
Transparency in operation, VCs vast network helps in devising Strategies to
maximize marketing effect and enhancing scalability, Overall improvement in
corporate governance, Follow on funding and VCs role in planning and executing
a successful exit plan.
companies regarding the factors influencing to success of the entrepreneurs
venture capital undertakings, t-test was applied. The importance of the variables
that influence to success the venture capital undertakings has been exhibited with
the help of its mean score and the computed results of t-test in Table 4.34.
284
TABLE 5.34
FACTORS INFLUENCING THE SUCCESS OF THE VENTURE
CAPITAL UNDERTAKINGS
Sl.
No.
1.
2.
3.
Mean Scores among
Variables
tICICI
IFCI
Values
Entrepreneurs Entrepreneurs
Process-driven undertaking not

impacted by management Shakeups.
Frugal cash management and cost
control enhances profitability
VCs vast network enables the
recruitment of talented people
2.6943
3.6824
3.0123*
3.4331
2.4581
1.8187
3.8489
3.6814
3.1196*
4.
Resolving legal disputes
3.2114
3.5962
0.6864
5.
Facilitating accountability for value

creation and protection
2.9096
3.2161
1.3382
6.
Enhancement of reporting system
3.2114
2.4547
1.4048
2.8673
2.3296
3.2768*
3.0866
2.6817
1.4542
7.
8.
Extending technical and

management assistance
VCs vast network facilitating
mobilization of finance at favorable
terms.
9.
Enhanced HR systems and practices
2.3049
3.0684
1.7871
10.
Creativity and innovation
3.6923
2.4562
3.0814*
11.
Transparency in operation
2.7821
3.0809
1.9476
3.2457
2.8681
0.8789
2.7081
3.8386
1.3827
12.
13.
VCs vast network helps in

devising Strategies to maximize
marketing effect and enhancing
scalability.
Overall improvement in corporate
governance
14.
Follow on funding
3.6109
2.2672
1.9163
15.
VCs role in planning and

executing a successful exit plan.
2.3317
3.5233
3.4562*

* Significant at five % level.
285
Table 5.34 shows that the important variables that influence the
respondents for their success through venture capital undertakings for ICICI
respondents are VCs vast network enables the recruitment of talented people,
VCs vast network facilitating mobilization of finance at favorable terms and
Creativity and innovation since the mean scores are 3.8489, 3.0866 and 3.6923
respectively. Among the respondents belonging to the IFCI, these are Overall
improvement in corporate governance, Process-driven undertaking not impacted
by management Shake-ups and VCs vast network enables the recruitment of
talented people mean scores are 3.8386, 3.6824 and 3.6814. Regarding the
perception on the factors influencing the respondents for their success, the
significant difference among the two group of respondents has been identified in
the Process-driven undertaking not impacted by management Shake-ups, VCs
vast network enables the recruitment of talented people, Extending technical and
management assistance, Creativity and innovation and VCs role in planning and
executing a successful exit plan, since the respective t statistics are significant at
5 % level.
286

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Chapter V

FACTORS INFLUENCING VENTURE CAPITAL UNDERTAKINGS

Capital is the lifeline of business. Venture capital capitalist business is

Venture is identified as an innovative business idea, which holds the

The venture capitalists aim to invest in newly established firms capable of

Typically, in venture financing it has been observed that 5-6 out of 10

This chapter deals with the socio-economic profile of venture capitalists or

The socio-economic background of the respondents was

satisfaction of the entrepreneurs is meant to indicate the extent to which the

1. Socio-economic background of the entrepreneurs and their units

Kannan, Obtaining Venture Capital What Venture Capitalists Look for,

SOCIO-ECONOMIC BACKGROUND OF THE RESPONDENTS

Gender is one of the important profile variables of the entrepreneurs. It has

Source: Primary data.

Out of the 150 entrepreneurs, 98 (65.33 %) are males whereas the

Age (in years)

Source: Primary data.

The important age groups of the respondents are 41 to 50 years and 31 to

They constitute 23.33 and 22.00 % to the total respectively. The

5.2.3 Marital Status

widows/widowers. The marital status of the respondents is shown in

The majority of the respondents are married. They constitute 63.34 % to

5.2.5 Occupation-wise Distribution

The occupational pattern classification of the respondents represents the

Private employment family

The important occupational pattern of the respondents belongs to

5.2.6 Income-wise Distribution

The monthly income of the entrepreneurs represents the income earned by

5.2.7 Distribution of Respondents according to their Nature of Family

The nature of family represents the type of family pattern of the

Source: Primary data.

It is found from Table 5.7 that out of 150 respondents, 107(71.33) % of

5.2.8 Distribution of Respondents according to their Family Size

India is a country of many religions. People in India follow many religions,

Source: Primary data

Caste is an important social factor influencing social activities. Caste

Most Backward Class

Source: Primary data

Fig 5.2 CASTE-WISE DISTRIBUTION OF

Most backward class

5.2.11 Location of the Residence

No. of the Respondents

Source: Primary data.

5.2.12 Earning Members in the Family

The number of earning members in the family includes part-time, fulltime

5.2.13 Sources of Income other than Venture Capital Undertaking

are investment, business and

agriculture which constitute 26.67 %, 26.00 % and 18.00 % respectively.

5.2.14 Total Family Income

The monthly total family income of the entrepreneurs represents the

Rs.20,000 to 40,000, Rs.40,000 to 60,000, Rs.60,000 to 80,000, Rs.80,000 to

1,00,000 and above Rs.1,00,000.

The distribution of respondents according to

their annual income is presented in Table 5.14.

Total Family Income

5.2.15 Share of contribution to the Family Income

The share of contribution to the family income by the entrepreneurs is

It is found from Table 5.15 that out of 150 entrepreneurs, 42 (28.00%)

5.2.16. Distribution of respondents according to their category

Generally, the entrepreneurship is classified into two categories, namely,

PROFILE OF VENTURE CAPITAL UNDERTAKINGS

category of organization, stage of development of undertaking, type of industry

5.3.1. Years of doing business

The distribution of respondents according to the years of doing business is