Industry Research on Venture Capital Industry

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INDUSTRY PROFILE

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Products/service profile, sector classification and nature of industry:

Venture capital is money provided by investors to startup firms and small businesses with perceived long-term growth potential. This is a very important source of funding for startups that do not have access to capital markets. It typically entails high risk for the investor, but it has the potential for above-average returns. Companies in this industry invest capital in new business ventures. The US and Europe are the biggest venture hubs in the world. China, India, and Israel are growing markets for venture capital. The US venture capital industry includes about 520 active firms that invest between $20 billion and $30 billion annually, according to the National Venture Capital Association. There is about $200 billion of venture capital under management in the US. Demand is driven primarily by the pace of technological innovation and the number of companies created to commercialize new technologies. The profitability of individual companies depends on successfully choosing and managing a portfolio of investments. Individual investors, and large companies with strategic interests in early-stage companies are also sources of new venture funding.

Venture capital companies provide money to young, rapidly growing companies with promising new products or services in exchange for ownership (equity).

Regulatory environment:

Venture Capital in India is governed by the SEBI Act, 1992 and SEBI (Venture Capital Fund) Regulations, 1996. According to which, any company or trust proposing to carry on activity of a Venture Capital Fund shall get a grant of certificate from SEBI. However, registration of Foreign Venture Capital Investors (FVCI) is not obligatory under the FVCI regulations. Venture Capital funds and Foreign Venture Capital Investors are also covered by Securities Contract (Regulation) Act, 1956, SEBI (Substantial Acquisition of Shares & Takeover) Regulations, 1997, SEBI (Disclosure of Investor Protection) Guidelines, 2000.

India legal system and industrial jurisprudence evolved venture capital financing as a ‘sanjivni’ to business ideas. Positioning of legal framework is to facilitate more and more invitation to new and dynamic ideas. Further, tax burden have also been reduced to invite youth participation in national progress. In the near future, venture capital would be the prime financing opportunity to the coming business fraternity.

Economic environment, political and legal concerns:

The role of venture capital in economic development and job creation is significant and seems corroborated in several countries in which the industry is relatively mature. It also has a significant effect on the rate of innovation of businesses (measured in various ways) and even on the development of innovations that come out of university research centers. The role of venture capital is felt as much on access to the stock market for major funding as on the marketing of inventions.

The financial interventions of risk capital companies vary according to their mission and their legal structure. Some want to promote the creation or preservation of jobs, others regional development, and one group will only be interested in financial returns. Their mission influences the interventions by these companies as well as the overall return of their portfolio. This situation can be better understood by also looking at how the markets of other countries are organized and who dominates them, as some companies' financial return problems are directly transferred to the requesting businesses that hold out the most promise and, in their financing contracts, that have to take on the burden of businesses that are most likely to fail. One can then understand why venture capital is seen by many entrepreneurs as the capital of last resort and that very few thriving companies go that route to finance certain expansion, innovation or export projects. Such an understanding will also allow us to better situate the public financing institutions and the role of the State in this field.

The subjects dealt with include:

Relations between VC, governments and financial areas: concentration of the market and competition, government support, financial incentives, etc.

The behaviour of VC according to their legal structure: the choice of investment, exit methods, rates of return; financing contracts, etc.

RESEARCH METHODOLOGY

The word research is composed of two syllables, re and search. re is a prefix meaning again, new or over again search is a verb meaning to examine closely and carefully, to test and try, or to prove.

Population:

It is the larger group from which individuals are selected to participate in a study. Population is limited only to Indian automobile sector.

Criteria For Selection:

Criteria of selecting sampling procedure a researcher must consider all the points which can create an error in our result. And all those points and error must consider which comes in sampling procedure.

List Of Companies Chosen:

Helion Ventures

IDG Capital Partners India

Parameters Of Study & Tools Of Analysis:

Geographic Reach: Where the companies are expanding their footprint in order to serve customers they have not reached before – both in and around our current markets and in new markets.

Variety of products: A merchandising strategy in which a retailer stocks a large number of different products. A wide variety is used to draw in customers looking for an array of goods, but does not mean that the retailer will offer many different iterations of a specific product.

Tools of analysis:

Histogram: The most commonly used graph for showing frequency distributions, or how often each different value in a set of data occurs.

SPSS: SPSS Statistics is a software package used for statistical analysis.

Ms-excel: It features calculation, graphing tools, pivot tables, and a macro programming