CHANDIGARH GROUP OF COLLEGES

PROJECT REPORT ON VENTURE CAPITAL IN INDIA

 DECLARATION

I hereby declare that the project report

entitled VENTURE CAPITAL IN INDIA submitted for

the degree of Master of Business Administration is my

original work and the project report has not formed the

basis for the award of any degree, associate ship,

fellowship or any other similar titles. It has not been

submitted to any other university or institution for the

award of any degree or diploma.

Place: PREETI BALA

Date:
 TO WHOM IT MAY CONCERN

This is to certify that this dissertation entitled,

VENTURE CAPITAL IN INDIA submitted to the

Punjab Technical University, Jalandhar, in partial

fulfillment of the requirements for the degree of Master of

Business Administration is prepared by PREETI BALA

(Roll No. 95512266662) under my supervision. To the best

of my knowledge and belief, dissertation under reference is

based on original research and has not been submitted for

any degree/ diploma at this or any other University/

Institution.

I wish his all success in life.

 PREFACE

The global economy of the day has endangered the survival

of every organization and in particular those who want to have a
competitive edge over the others. The competitive edge may be a
distant dream in the absence of Superior Quality Products which
otherwise is the function of well-trained employees. Today
resources are scarce and have to be used carefully and trainers of
all kinds are required to justify their position and account for their
activities. Training activities, which are ill directed and
inadequately focused, do not serve the purpose of the trainers. The
trainees or the organization hence identification of training needs
becomes the top priority of every progressive organization.
Identification of training needs, if done properly, provides the basis
on which all other training activities can be considered and will
lead to multiskilling, fitting people to take extra responsibilities
increasing all round competence and preparing people to take on
higher level responsibility in future.
The secondary data will be collected from relevant journals,
books and other published data.
The study will reveal that the training and development have
an impact in learning new technology and implementation for the
efficient working of an organization.
 ACKNOWLEDGEMENT

Firstly, I would like to thank my guide C.A MS.SMRITI

(Assistant Professor), who has been a constant source of

inspiration for me during the completion of this project. He gave

me invaluable inputs during my endeavor to complete this

project.

I would like to thank Dr. RAJIV KHOSLA (HOD MBA) for

continuously encouraging preparing the project.

It would be unfair on my part if I don’t acknowledge the role

of the respondent in not only sparing time but also parting with

their valuable information.

I would like to thank all the respondents met in the

preparation, who gave their valuable time to provide me required

information and their honest support to complete my project in

time.

PREETI BALA
CONTENTS
LIST OF TABLES AND CHARTS
 Venture capital
In need of new valuation tools?
CHAPTER - I
 Abstract

Venture capital investments have become a

major contributor the growth of start – up firm.
investing in start – up firm carries a substantial
risk of failure , only a minority of start – ups is
high return investment .this put great
responsibility to the valuation methods used by
the venture capital firm .it is argued that when
uncertainties about future pay – offs are high
traditional valuation tools are of little help , they
are said to be too static and not to comply with
change .a valuation method that is alleged to act
in accordance with a changing environment
where uncertainty is high is real option which is
said to consider these variables , thus giving a
more accurate valuation . The structure of
venture capital finding can be seen as well suited
for real option valuation.
The author find it interesting to find out how
venture capitalist screen possible invests , if the
traditional valuation methods hold in proportion
to the challenges they face and if the real option
approach could be suitable .

Concept of venture capital

The term venture capital comprises of two

words, namely venture and capital .the term
venture literally means a course or proceedings,
the outcome of which is uncertain but which is
attended by risk of danger of loss. On the other
hand, the term capital refers to the resources to
start the enterprise. However, the term venture
capital can be understood in two ways.

According to narrow sense, the capital which is

available for financing the new business venture
is called venture capital. Generally, it involves
lending finance to the growing companies.

In broad sense, venture capital is the investment

of long – term equity finance where the venture
capitalist earns his returns primarily in the form
of capital gain. It is under the assumption that
the entrepreneur and the venture capital would
act as partners. It is a commitment of capital for
the formation and setting up of small scale
enterprise specializing in new ideas or new
technologies. Venture capital does not deal in
financing the enterprise which is engaged in
trading, broking, investment or financial
services, and agencies. It is generally considered
as a high risk capital. venture capital is not an
injection of funds into new firm but also an input
of the skills needed to set up the firm , design its
marketing strategy , organize and then manage it

Origin of venture capital.

The origin of venture capital can be back to

U.S.A in 19th and 20th century’s. In 1946, the
American research and development
organization was established as first venture
organization which financed over 100
companies and made over 35 times its
investment. In 1989, the venture capital
company provided Rs .3,700 crore to 1,500
companies. Banks also invested equivalent of
over Rs 1,500 crore in 1988-89 .since then
venture capital is one of the important
contributors in the economic development of
U.S.A., U.K., Europe, and Japan. The real
development of venture capital took place in
1958 when the business administration act was
passed by the U.S. congress .venture capital was
also successful in Britain due to government’s
business expansion scheme which permitted
individuals to claim tax relief’s for investment in
companies not listed on the stock exchange .in
U.K., the concept became popular in the late
1960s, Japan got tempted by American to adopt
the concept and is now experiencing an
entrepreneurial and venture capital boom . In
U.S.A., venture capital created billion dollar
products through digital equipment corporations,
namely, Apple computers and Silicon Valley.
Observing the benefits reaped by western
countries from the venture capital market, India
has also initiated attempts to establish venture
capital. Hence the concept of venture capital is
gradually coming into vogue and the financial
institutions, public sector banks, and private
sector have formed units to enter this field.
Meaning and definition of venture
capital

Venture capital refers to an equity /equity-

related investment in a growth-oriented
small/medium business to enable the investors to
accomplish corporate objectives, in return of
monetary shareholding in business or the
irrevocable right to acquire it. Venture capital is
a typical ‘private equity investment’.

Venture capital is a popular method by which

investors support entrepreneurial talent with
finance and business skills to exploit market
opportunities with a view to obtain long-term
capital gains. It involves the provision of risk-
bearing capital, usually in the form of equity
participation, to companies with high growth
potential besides providing some value additions
in the form of management advice and
contribution to overall strategy.
Long-term investment, generally in high-risk
industrial projects with high reward possibilities,
is called venture capital’. The investment may
take place at any stage of implementation of the
project, between start-up and commencement of
commercial production. Venture capital is also
invested in financing the new business and
professional activities that carry a higher degree
of success and failure as well.

Definition of venture capital

ACCORDING TO 1995 FINANCE BILL,

‘‘Venture capital is defined as long-term equity
investment in novel technology based projects
with display potential for significant growth and
financial return”.
 Characteristics of venture capital

1. New venture: venture capital investment is generally

made in new enterprises that use new technology to
produce new product, in expectations of high gains or
sometimes, spectacular returns.
2. Continuous involvement: venture capitalists
continuously involve themselves with the client’s
investments, either by providing loans or managerial skills
or any other support.
3. Mode of investment: venture capital is basically an
equity financing method, the investment being made in
relatively new companies when it is too early to go to the
capital market to raise funds. In addition, financing also
takes the form of loan finance/convertible debt to ensure a
running yield on the portfolio of the venture capitalists.
4. Objective: the basic objective of a venture capitalist is to
make a capital gain on equity investment at the time of
exit, and regular return on debt financing it is a long-term
investment in growth-oriented small/medium firms. It is
long term capital that is injected to enable the business to
grow at a rapid pace, mostly from the start up stage.

5. high risk –return venture: