1. VENTURE CAPITAL

2. BACKGROUND FINANCIAL INSTITUTIONS THOUGH HAVE REMARKABLE WORK IN INDIA DURING LAST 3/4 DECADES, THEIR WORK IS SIMILAR TO COMMERCIAL BANKS. THOUGH SOME SCHEMES LIKE SEED CAPITAL, RISK CAPITAL FUNDS HAVE BEEN INTRODUCED STILL EVALUATION OF PROJECT AND FINANCING IS MAINLY ON THE CRITERIA SAFETY, SECURITY, LIQUIDITY, PROFITABILITY AND NOT POTENTIALITY. CAPITAL MARKET DOES NOT COME MUCH TO HELP THE RISKY ENTERPRISES. WE ARE AMIDS THE TECHNOLOGICAL REVOLUTION AND NEW BREED OF ENTREPRENEURS. TO MAKE THEIR INNOVATIONS SUCCESSFUL FINANCIAL SUPPORT IS VERY ESSENTIAL.

3. CONCEPT OF VENTURE CAPITAL IN NARROW SENSE VENTURE CAPITAL IS INVESTMENT IN NEW AND TRIED ENTERPRISES LACKING TRACK RECORD. IN BROADER SENSE, IT REFERS TO COMMITMENT OF CAPITAL IN SHAREHOLDING FOR THE FORMATION AND SETTING UP OF SMALL FIRMS WITH NEW IDEAS AND TECHNOLOGY. IT IS NOT ONLY PROVIDING FUNDS BUT GUIDANCE AND HELP FOR OPTHER ACTIVITIES ALSO DEFINITION OF VENTURE CAPITAL COMPANY— “ A FINANCING INSTITUTION WHICH JOINS AN ENTREPRENEUR AS A CO-PROMOTER IN A PROJECT AND SHARES THE RISKS AND REWARDS OF THE ENTERPRISE.”

4. FEATURES OF VENTURE CAPITAL 1. IT IS USUALLY IN THE FORM OF AN EQUITY PARTICIPATION, MAY ALSO TAKE FORM OF CONVERTIBLE DEBT OR LONG TERM LOAN. 2. INVESTMENT IS ONLY IN HIGH RISK BUT HIGH GROWTH POTENTIAL PROJECTS. 3. IT IS FOR COMMERCIALISATION OF NEW IDEAS /TECHNOLOGIES AND NOT FOR ENTERPRISES IN TRADING,FINANCING,AGENCY ETC. 4. THERE IS CONTINUOUS INVOLVEMENT IN THE ENTERPRISE. 5. SHARING OF RISKS AND REWARDS. 6. ONCE THE ENTERPRISE REACHES ITS FULL POTENTIAL LEVEL VENTURE CAPITALIST WILL DIVEST EITHER TO PROMOTERS OR IN THE MARKET. AND GET CAPITAL APPRECIATION.

5. DISINVESTMENT MECHANISM 1) PROMOTER’S BUYBACK 2) PUBLIC ISSUE 3) SALE TO OTHER VENTURE CAPITAL FUND 4) SALE IN OTC MARKET 5) MANAGEMENT BUY OUTS.

6. SCOPE OF VENTURE CAPITAL VENTURE CAPITAL MAY TAKE DIFFERENT FORMS AT DIFFERENT STAGES 1) DEVELOPMENT OF IDEAS—SEED FINANCE 2) IMPLEMENTATION STAGE– START UP FINANCE 3) FLEDGING STAGE – ADDITIONAL FINANCE – MANUFACTURING STAGE –FUNDS FOR MATKETING INFRASTRUCTURE 4) ESTBLISHMENT STAGE– ADDITIONAL FINANCE FOR EXPANSION AND DIVERSIFICATION

7. IMPORTANCE OF VENTURE CAPITAL 1. ADVANTAGES TO INVESTING PUBLIC— -- RISK REDUCTION OF INVESTING PEOPLE, VENTURE CAPITAL INSTITUTES INVOLVEMENT REDUCES CHANCES OF MALPRACTICES. -- MORE ACCURATE EVALUATION OF THE PROPORSAL -- CONTINUOUS FEEDBACK ABOUT THE PERFORMANCE 2. ADVANTAGES TO PROMOTERS— -- NEED NOT APPROACH UNDERWRITERS, BROKERS, INVESTORS WILL HAVE TO CONVINCE ONLY VENTURE CAPITALIST -- PUBLIC ISSUE NEEDS LOT OF PREPARTION,INVOLVES HIGH COST AND UNCERTAINTY, WHICH CAN BE AVOIDED. -- COST OF PUBLIC ISSUE HIGHER, SOMETIMES 10% OF THE TOTAL ISSUE. MANY RECURRING COSTS –SHARE HOLDERS REGISTERS, MEETINGS ETC. CAN BE AVOIDED.

8. ADVANTAGES CONTD.. III.GENERAL— --- TIME LAG BETWEEN INNOVATION AND COMMERCIAL EXPLOITATION REDUCED. -- NEW VENTURES FREE FROM CORPORATE BUREAUCRACY -- VENTURE CAPITAL ACTS AS A CUSHION –BANKERS/INVESTORS AND BUSINESS ENTERPRISE. -- ENTRY OF TECHNOCRATS IN THE BUSINESS WORLD FACILITATED. -- THERE CAN BE JOINT EFFORTS BY PRIVATE AND PUBLIC SECTOR.