•Form of Equity Financing
•Designed for funding high
risk and reward projects
•Direct investment in
•Fostering growth and
•Evaluation of new
•In India venture capital is
of recent origin
New guidelines to Venture Capital
• Venture capital funds/Companies can be set up by public
sector financial institutions, SBI and scheduled banks.
• Joint ventures between private sector and institutional
promoters are permitted if:
Private sector holding is 20% or less; and
Private sector holding is not the largest single holding.
Minimum fund size is Rs. 10 crores.
Debt equity ratio should also not exceed 1:1.5
Foreign equity is permitted up to 25% while NRI to 74% on
non repatriable basis and up to 25% to 40% on repatriable
basis is permitted.
•Some invest solely in certain
•Some prefer operating locally while
others will operate nationwide or
•VC expectations often vary. Some
may want a quicker public sale of the
company or expect fast growth. The
amount of help a VC provides can
vary from one firm to the next.
Drawbacks of VC Industry
Insufficient understanding of venture capital as
Support to the venture capital industry, by the
govt. is inadequate.
Exit options available to the venture capitalist are
Market limitations hinder the growth of venture
The inadequacy of the legal frame work of venture