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VENTURE CAPITAL INTRODUCTION : rVenture Capital' is an important source of finarce for those small and medium-sized for firms,

which have very few avenues raising funds' The term "Ventue Capital" refers which are lacking a stablerecordof grou4h. to investmenlin new and untried enterprises huge It is generallyknown as high dsk capital. Though such businessfirm may possess potentialfor eaming largeprofits in the futule and establishitself into a larger enterpdse, but the cornmoninvestorsare generallyunwilling to investtheir funds in them dueto risk involved in these t?e of investments.In order to provide financial support to such skills, the conceptofventwe capital emerged. entrepreneurial talent andbusiness

The conceptof venfire capitatgainsimportancefrom the fact thal it helpsto developand finance high technology based enterpdses.It provides risk capital to first generation venturecapital of entepreneus for establishment industrial projects.A higl y developed institution helpsto reducethe time lag betweentechnologicalinnovationard cornmeraial exploitation. lt increasesthe pace and quality of technological innovations lbr the products used in industry, agricultue, health, energy and other developmentalareas. Since barkers and investors will not be inclined to invest in an enterprise having of insufflcient equity capital, it acts as a cushion to supportborrowings. The presence well-developedventule capital in an economy helps the technocratsto develop and the malragelarge and medium-sizedindustdes.It helps to accelerate rate of industrial and grorth of an economy.Venture capital firms inducethe private sector development to sharethe responsibilitiesofcorporate financewith the public sector.

I'ENTURE CAPITAL FIRMS IN INDIA ! : Venfirc aapitalfirms in lndia can be divided into four categories (i) All-India Financial Institutions I (ii) Developmental Institutions ; (iii) Financial State-levelDevelopmental

Banksand (iv) by Ventw CapitatFundcrealed Commercial

Private Sector Venture CapitalFunds. FinancialInstitutions The following are the major 1. All India -Developmental providing venture capitalon all Indiabasis. financialinstitulions ofventwe (a) IndustiatDevelopment Bankof India(IDBI) - Theformation
it capital find of IDBI beginsin 1986.In the venturefinancing scheme, considersall those projects whose financial need extendsfrom Rs 5 in lakhs to Rs. 205 crores.It is also successful introducingtechnqlogical irmovations, reduction in matedal consumption,energ. consurption, cost, etc. It also provides finance required for survey promotional etc. activities,training of employees, (b) Industdat Finance Corporation of India (IFCI) - Industdal Finance ln Corporationof hdia is the oldestconcemin ventue capital business. 1975, the corporation patronizedRisk Capital Fourdation, which was later convertedinto a companyon January,1988,to provide risk capital of to first genemtionentepreneursfor establishment industrial projects. It also provides capital for technological development in high technologicalschemes. (c) Industrial Credit and Investnent Corporation of India (ICIC! The

ICICI establishedTechnologli Developme[t and Informalion Co. of

India (TDICI) in January,1988and startedits opemtionin July, 1988to finanae the new and establishedentepreneu$ for the developmentof indigenoustechnology.The function ofthis companyrelatesto supplyof data relating to technology and to giving advice and to support techrology and technology-managemenl to supply administrative and service regarding Progtamme for Advancement and Commercial Techaologli and Programmefor Acceleration of Commercial Energy Research.TDICI has also introduced Venture Capital Units Scheme (VECAUS Il) for providing financial assistarce the ventures. to 2. Statelevel DevelopmentalFinancial Institutions - In supply of venture capital the remarkable linancial institution in state level is Gujrat Ventue Finance limited, promotedby Gujrat Industrial InvestmentCorpontion, being established in the year 1990to provide venturefinancing to the new and existing companies along with technologicalinnovationsto rcduce aost and increaseprofit. Besides the this, in the statelevel of Andlra Pradesh, Andha PradeshVentue Capital Ltd. is established by Andhra PradeshState Industries Corporation to supply venturecapital in the state. 3. Venture Capital Fund created by Commercial Bants Different commercial

bants have itrtroduced differcnt progla.Innes fto providing venture capital. Among them three banks are remarkable Stale Bank, Canara Bank and

GrindlaysBank. The StateBark of India launchedCapital Market Fundswhich is used to invest in equif shareof a new and unknown ventues. CaaaraBank of India launchedits Venture Capital Fund in August, 1989 to provide finance to

ventweswhich havetechnologicalinnovationsand high-techtechnologyandhigh reflrm to the firnds. ANZ Grindlays Bant launcheda Venhue Capital Fund to provide facilities to non-residenlIndians to enjoy the benefits of geiting funds ventures. based from them in selectiveinvestnent for new-technology 4. Private SectorVentue Capital Funds- In oul county someventwe capital funds have been establishedin pdvate sectors.Cfedit Capital Venture Fund (CCVF) was establishedin January, 1990 to provide venture finanoe and invest in the in primary mafket. Indus Ventwe Capital Fund (IVCF) was established 1991as a p vate venture capital financier to invest in the equity of the ventures. The in TwentiethCenlury FinanceCompany(TCFC) was established 1992to provide venture capital. Infra-structual Leasingand Financial ServicesLimited (ILFSL) hasalsobeenproviding venturecapital. METIIODS OF VENTURE FINANCING : Venturefinancing, also known as risk financing is generallymadeequity or quasi-equity andloans.It is generaltyfound ofthe following thee Opesin lndia : 1. Equity - The ventwe capital funds in India provide equity upto 49 percentof the total capital of the ventures.Thus, the effective contol and majority ownership will remainin the hards ofthe entepreneur.It is a widely usedmethodofventwa financing yielding a high retum though capital gainsas they puchase the shares of an enterpdse with an intentionof ultimately selling them at a high price. 2. Conditional Loans A conditionalloan is a specialtype of loan which is

repayable the ventureswhen they eamprcfit. No interestis paid on suchloan by but the loan should be repaid in the form of rcyalty. It is helpful as the seed

of capital can start-up capital for the cornmencement production in large scale with heary investment.The mte of royalty in caseof suchloan is to someextent high becauseof its riskness and stand flow of retum. ln lndia these firms However the actual rate generally charge royalty at the rute of 2yo to 150/0. depends other factors like gestationperiod, natue of cost-flow, extent ofdsk, on etc. 3. Income Notes - A remarkableway of venturefinancing in India is the income of note. It is a hybrid securityhaving the characleristics conventionalloan and a conditional loan. The entepreneus pay royalty and interest to tie venture capitalists.But in suchincomenotes,the rate ofroyalty andinterestis very low. 4. Other methods - Venture capital is also hnanced by innovative financial secudties, viz. participating debentues, partially convertible debentwes, cumulative convertible preferenceshares.This method of financing is to some countrieslike USA, UK etc., venture extent costly to the venturers.In developed convedibleloan stock,specialordinary capital is also financedby deferredshares, etc. shares prefenedordinaryshares, and FUTUFJ PROSPECT OT VENTURE FINANCING IN INDIA : In a developing county like lndia, ventue capital is much prospectiveand plays the developmentalro1e. The unification of managerialand marketing expedise with the development riskful financemakesventurecapital an effective tool to tmnsfer enterprise ofthe following factorsare andtechnologyin developingcowrtries.In India the presence essential venhlle capital to succeed. for

1. The presence of creativity, innovation and initiative on the part of the enteprenew alongwith insphationfiom the societyandthe govemment. 2. An economic environrnentwith the opportunity for creation of high technology and quality goods. 3, The existenceof a liquid sharemaxketto meet the demandsof the small and mediumentrepreneurs. 4. Crcationof conidenoeamongthe investorsto investin equity. 5. Irrtroduction of a ventue-trend system of education where the scientists and engineers have knowledge about accounting, economics, finance and the and accourtantalso acquireknowledgein physicalscience engineering. 6, To increaseventurecapital proper marketing,promotion, implementationofnew ideas,etc. are needed. 7. To ensure technological upgradation, adequate amount of research and developmentploject should be inspired by tle govemment,public and private
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8. Effectivemanagement education trainingprogrammes needed develop and arc to professionals canpoperly manage who capital. venture