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Venture Capital in India
In India, these funds are governed by the Securities and Exchange Board of India (SEBI) guidelines. According to this, venture capital fund means a fund established in the form of a company or trust, which raises monies through loans, donations, issue of securities or units as the case may be and makes or proposes to make investments in accordance with these regulations.

For accessing venture capital funding the venture should be typically started by a first generation entrepreneur with high growth potential and an innovative concept. Normally these types of ventures do not have any assets to offer as collateral, which is needed to get funding from the conventional sources. Venture capital funding may be by way of investment in the equity of the new enterprise or a combination of debt and equity, though equity is the most preferred route.

There are a number of funds currently operational in India and involved in funding start-up ventures. Most of them are not true venture funds, as they do not fund start-ups. What they do is provide mezzanine or bridge funding and are better known as private equity players. However, all this has changed in the last one year. With the Indian knowledge industry finally showing signs of readiness towards competing globally and awareness of venture capitalists among entrepreneurs higher than ever before, venture capitalists are really venturing out in funding new ideas and concepts particularly in internet related areas.

Certain venture capital funds are industry specific (i.e. they fund enterprises only in certain industries such as pharmaceuticals, infotech or food processing) whereas others may have a much wider spectrum. Again, certain funds may have a geographic focus – like Uttar Pradesh, Maharashtra, Kerala, etc whereas others may fund across different territories. The funds may be either close-ended schemes (with a fixed period of maturity) or open-ended.

Venture funds in India can be classified on the basis of genesis

  • Financial institutions led by ICICI ventures, RCTC, ILFS, etc.
  • Private venture funds like Indus, etc.
  • Regional funds like Warburg Pincus, JF Electra (mostly operating out of Hong Kong).
  • Regional funds dedicated to India like Draper, Walden, etc.
  • Offshore funds like Barings, TCW, HSBC, etc.
  • Corporate ventures like Intel, Satyam and Infosys.
To this list we may add venture catalysts/angel investors such as Global Technology Ventures who incubate and help grow companies. Merchant bankers and NBFCs who specialized in “bought out” deals also fund companies. Most merchant bankers now invest in IT companies.

Though the infotech companies are among the most favored by venture capitalists, companies from other sectors also feature equally in their portfolios. The healthcare sector with pharmaceutical, medical appliances and biotechnology industries also get much attention in India. With the deregulation of the telecom sector, telecommunications industries have joined the list of favorites.
 

Introduction to Venture Capital
The Venture Capital Investment Process
Accessing Venture Capital
Current Scenario

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