Q1. Give examples of various venture capital funds that are present and examples of some business ventures that have been successful with venture capital financing.

 Indian Venture Capital Scenario

In India, the emergence of venture capital companies is a relatively new phenomenon. Until 1985, individual investors and Development Finance Institutions (DFIs) have played the role of venture capitalists in the absence of an organised venture capital industry. During that time entrepreneurs have largely depended on private placements, public offerings and lending by financial institutions. The venture capital phenomenon has arrived at a take-off stage in India with the easy availability of risk capital in all forms. In the earlier stage, it was easy to raise only growth capital but financing of ideas or seed capital is now available after the introduction of venture capital phenomenon. The number of players offering growth capital and the number of investors is rising rapidly.

In India, the concept of venture capital was initiated by the Industrial Finance Corporation of India (IFCI) when it established the Risk Capital Foundation (RCF) to provide seed capital to small and risky projects. However, the concept of venture capital financing first time got statutory recognition in the fiscal budget for the year 1986 to 1987.

The venture capital companies operating at present in India can be divided into four categories based on their mode of promotion. Let us read about each mode.

Promoted by All-India Development Financial Institution (IDFI)

The ICICI provided the required impetus to venture capital activities in India. In 1986 it started providing venture capital finance. In 1998, it promoted with the Unit Trust of India (UTI) and Technology Development and Information Company of India (TDICI) as the first venture capital company registered under the Companies Act, 1956.

The risk capital foundation established by the IFCI in 1975 was converted to Risk Capital and Technology Finance Company (RCTC). The RCTC was established as a subsidiary company of IFCI to provide assistance in form of conventional loans and to give financial support to high technology projects.

Promoted by state level finance institution

In India, the state level financial institutions in some states like Gujarat, Uttar Pradesh have done an excellent job by providing venture capital finance to small scale enterprises.

Promoted by commercial banks

Venture capital funds have been established by their corresponding commercial banks to undertake venture capital financing activity. Examples of these funds are Canbank venture capital fund, State bank venture capital fund, and Grindlays bank.

Private venture capital funds

In India, several venture capital funds have been established to provide funding to various small scale enterprises. Examples of these funds established in India are 20th Century Venture Capital Corporation and Indus venture capital fund.