Venture capital in India. The requisities to the success of Venture Capital in India.

Rapidly changing economic environment accelerated by the high technological expansion, emerging needs of new generation of entrepreneurs in the process and inadequacy of the existing venture capital funds schemes are indicative of the tremendous scope for venture capital in India and pointers to the need for the creation of a sound and broad based venture capital movement in India.

                   There are many entrepreneurs in India with a good project ideas, but no previous entrepreneurship track record to leverage their firms, handle customers and bankers. Venture capital can open a new window for such entrepreneurs and help them to launch their projects successfully.

                   With rapid international growth march of technology, demand for newer technology and products in India has gone up tremendously. The pace of development of new and indegineous technology in the country has been slack in view of the fact that several processes developed in laboratories are not commercialised because of unwillingness of people to take entrepreneurial risk, i.e., risk their funds as also undergo the ordeal of marketing the products and process. In such a situation, venture financing assumes more significance. It can act not only as a financial catalyst but also provide a short impetus for entrepreneurs to develop products involving newer technologies and commercialise them. This will give a fillup to the development of new technology and would go a long way in broadening the industrial base, creation of jobs, provide a thrust to exports and help in the overall enrichment of the economy.

               In addition venture capital will be needed urgently to solve the serious problems of sickness which has plagued many Indian industries. There are large number of sick companies which offer opportunities for them around different way or in any other manner. What is needed is the supply of equity to persons who have fertile ideas, necessary expertise and competence and who can bring about improvements in some units.

                   Another type of situation commonly found in our country is where the local group and a multi national company may be ready to enter into a joint venture but the former doesn't have sufficient funds to put its share of the equity and the latter is restricted to a certain percentage. For personal reasons or because of competition, the local group may be keen to invite anyone in its industry or any major private investors to contribute equity and may prefer a venture capital company as a less intimately involved and temporary shareholder. Venture capitalist can also lend their expertise and standing to the entrepreneurs.

                        A large number of smaller units serving as ancillaries to major industrial group's need capital, expertise and contacts of Venture Capitalists for upgradation of their technology in tune with the demands from the major industrial units. It is generally found that small suppliers are faced with a choice of going out of business, losing their major clients, being acquired by the clients or obtaining at an exorbitant rate from a source outside the industry. Venture capitalists can help these units and save them from the crisis.

                       In service sector which has immense growth prospects in India. Venture capitalist can play significant role in tapping it's potentiality to the fall. For instance, venture capitalist can provide capital and expertise to organisations selling antique, remodeled jewellery, builders of resort hotels, baby and health care markets retirement homes and small houses.

               In view of the above, it will be desirable to establish separate national venture capital fund to which the financial institutions and banks can contribute. In scope and contents such a national venture capital fund should cover. 

 (I) All the aspects of venture capital financing in all the 3 stages of conceptual, developmental and exploitation phases in the process of commercialisation of technological, innovation and

(II) As many of the risk stages development manufacturing, marketing management and growth as possible under Indian conditions. The fund should offer a comprehensive package of technical, commercial, managerial and financial assistance and services to building entrepreneurs and be in a position to offer innovative solutions to the varied problems faced by them in business promotion, transfer and innovation. To this end, the proposed national venture capital fund should have as it's command multi disciplinary technical expertise. The major thrust of this fund should be on the promotion of virtue new business in India to take advantage on the oncoming high technology revolution and setting up of high growth industries so as to take Indian economy to commanding heights.

      Pre- requisities to success of Venture Capital in India.

 The success of Venture Capital in India requires the following: 

(I) An entrepreneurial traditional must be more broad based and less family based.

(II) Attractive customer opportunities of high technology type should be created.

(III) Tax policies need to be carefully serutinised to climate those provisions which work heavily against the emergence to risk capital.

(IV) There have to be some institutional changes which offer the venture capitalist the opportunity to sourish the investment. Disinvestment avenues has to positively encouraged and in this both the government and the securities markets have to play a positive role.

(V) The association of Venture Capital with high technological and investment opportunities must be delinked. There is need for venture capital for development of many products and services which are relevant to our country and which can be produced with less domestic technological innovation and smaller domestic markets.