TABLE OF CONTENTS:

S.NO 1

PARTICULARS INTRODUCTION I. II. III. IV V VI VII VIII Introduction of Venture Capital Origin of Venture Capital Venture Capitalist History Venture Capital in India Investment Philosophy Stages of Venture Capital Funding Methods of Venture Financing VCF IN INDIAN & VC INVESTMENT

2.

DEVELOPMENT OF PROCEDURE I. II. III. IV. V. VI. VII. VIII. IX.

Investment Procedure Investment in VC by Banks Corporate Venturing Consortium Financing Favorites of the Investors Promotion Strategies Incentives Initiatives Special purpose vehicle

3.

RESEARCH METHEDOLOGY I. II. III. IV. Objective of Study Literature Review Research Design Limitations of study

4.

ANALYSIS AND INTERPRETATION

5.

FINDINGS AND SUGGESTIONS I. II. Findings of study. Suggestions

6. 7.

CONCLUSION BIBLIOGRAPHY ANNEXURE ANNEXURE I Name of Venture Capital Firms outside of India ANNEXURE II Name of Venture Capital Firms in India

INTRODUCTION
The venture capital investment helps for the growth of innovative entrepreneurships In India. Venture capital has developed as a result of the need to provide nonconventional, Risky finance to new ventures based on innovative entrepreneurship. Venture capital is an investment in the form of equity, quasi-equity and sometimes Debt - straight or conditional, made in new or untried concepts, promoted by a Technically or professionally qualified entrepreneur. Venture capital means risk Capital. It refers to capital investment, both equity and debt, which carries substantial Risk and uncertainties. The risk envisaged may be very high may be so high as to Result in total loss or very less so as to result in high gains Small businesses never seem to have enough money. Bankers and Suppliers, naturally, are important in financing small business growth through loans and credit, but an equally important source of long term. Growth Capital is the venture capital firm. Venture Capital financing may have an extra bonus, for if a small firm has an adequate equity base; banks are more willing to extend credit. Venture capital is money provided by professionals who invest alongside management in young, rapidly growing companies that have the potential to develop into significant economic contributors. Venture capital is an important source of equity for start-up companies. Venture capital is capital typically provided by outside investors for financing of new, growing or struggling businesses. Venture capital investments generally are high risk investments but offer the potential for above average returns and/or a percentage of ownership of the company. A venture capitalist (VC) is a person who makes such investments. A venture capital fund is a pooled investment vehicle (often a partnership) that primarily invests the financial capital of third-party investors in enterprises that are too risky for the standard capital markets or bank loans. The term Venture Capital is understood in many ways. In a narrow sense, it refers to, investment in new and tried enterprises that are lacking a stable record of growth. In a broader sense, venture capital refers to the commitment of capital as shareholding, for the formulation and setting up of small firms specializing in new ideas or new technologies. It

is not merely an injection of funds into a new firm, it is a simultaneous input of skill needed to set up the firm, design its marketing strategy and organize and manage it. It is an association with successive stages of firms development with distinctive types of financing appropriate to each stage of development. According to International Finance Corporation (IFC), venture capital is equity or equity featured capital seeking investment in new ideas, new companies, new production, new process or new services that offer the potential of high returns on investments. As defined in Regulation 2(m)of SEBI (Venture Capital Funds) Regulation , 1996 "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. Thus venture capital is the capital invested in young, rapidly growing or changing companies that have the potential for high growth. The VC may also invest in a firm that is unable to raise finance through the conventional means. Professionally managed venture capital firms generally are private partnerships or closelyheld corporations funded by private and public pension funds, endowment funds, foundations, corporations, wealthy individuals, foreign investors, and the venture capitalists themselves. Venture capitalists generally:
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Finance new and rapidly growing companies; Purchase equity securities; Assist in the development of new products or services; Add value to the company through active participation; Take higher risks with the expectation of higher rewards; Have a long-term orientation

When considering an investment, venture capitalists carefully screen the technical and business merits of the proposed company. Venture capitalists only invest in a small percentage of the businesses they review and have a long-term perspective. Going forward,

they actively work with the company's management by contributing their experience and business savvy gained from helping other companies with similar growth challenges. Venture capitalists mitigate the risk of venture investing by developing a portfolio of young companies in a single venture fund. Many times they will co-invest with other professional venture capital firms. In addition, many venture partnership will manage multiple funds simultaneously. For decades, venture capitalists have nurtured the growth of America's high technology and entrepreneurial communities resulting in significant job creation, economic growth and international competitiveness. Companies such as Digital Equipment Corporation, Apple, Federal Express, Compaq, Sun Microsystems, Intel, Microsoft, Yahoo, Airtel and Genentech are famous examples of companies that received venture capital early in their development. Venture Capital is the business of establishing an investment fund in the form of equity financing via investments in the common stocks, preferred stocks and convertible debentures of various companies. These companies are seen to have a high growth potential and are able to be listed on the stock exchange in order to gain the highest returns in dividends and capital gain.

Literature Review

According to Subash and Nair, (May 2005) According to theses persons though the modern concept of venture capital stated During 1946 and now practiced by almost all economies around the world, there Seems to be a slowdown of venture capital activities after 2000.There may be a long List of reasons for this situation, where people feel more risky to put their money in New and emerging ventures. Hardly 5% of the total venture capital investment Globally is given to really stage ventures. In all the years people around the world has Seen the potentiality of venture capital in promoting different economies of the world By improving the standard of living of the people by expanding business activities, Increasing employment and also generating more revenue to the government.

According To Kumar, (June 2003) This study focus on the industry should concentrate more on early stage business Opportunities instead of later stage. It is the experience world over and especially in The United States of America that the early stage opportunities have generated Exceptional returns for the industry. He also suggests that individual capitalists should Follow a focused investment strategy. The specialization should be in a board Technology segment.

According to Kumar and Kaura, (March 2006) The present study reports four factors which are used by the venture capitalist to Screen new venture proposals. Using Kendalls tau-c analysis, the study brings out Strong association between several variable pair. Broadly, the analysis finds that: Successful venture teams put in sustained efforts o identified target markets. They are highly meticulous while attending to the details. These teams are adept at dealing with risk because of their impeccable past Experience. Indian venture capitalists do not seem to be much enamoured of technology Venturing; at least some of the successful funded by them do not seem to Show signs of being hi- tech. The study brings out four important variables which are highly unique to

Successful venture in India. They are: Ability to evaluate and react to risk Attention to details Market share Profits. Evaluating risk seems to be an area where unsuccessful venture fail. Since Successful teams focus on established markets and meticulously pursue these Markets to gain market share, they achieve desired profits.

According to Kumar, (May 2004) The Indian Venture Capital Industry has followed the classical model of venture Capital finance. The early stage financing which includes seeds, start-up & early stage Investment was always the major part of the total investment. Whenever venture Capitalists invest in venture certain basic preference play a crucial role in investment Decision. Two such considerations are location preferences and ownership Preferences. Seed stage finance is provided to new companies for the use in product Development & initial marketing company may be in the process of setting up the Business or may be in the business for short period but have not reach the stage of Commercialization.

According to Kumar, (March, 2004) The industry should concentrate more an early stage business opportunities instead of Later stage. It is the experience world over and especially in the United states of America that the early stage opportunities have generated exceptional for the Industry. It is recommended that the venture capitalists should retain their basic Feature that taking retain their basic feature that is taking high risk. The present Situation may compel venture capitalists to opt for less risky opportunities but it is Against the spirit of venture capitalism. The established fact is big gains are possible in High risk projects.

According to Chary, (September 2005) There has been a plethora of literature on venture capital finance, which is helping the Practitioners viz., venture capital finance companies and fund manager for better Understanding the role of venture capital in economic development. There are number Of studies on the venture capital and activities of venture capitalists in developed Countries.

According to Vijayalakshman & Dalvi, ((Jan., 2006) Whenever Indian policy makers have to encourage any industry. The usual practice is To grant that the industry tax breaks for a limited period. This definitely acts as a Positive incentive for that industry. However, what is required is a through Understanding of the industry requirement framing and implementation of aggregative Strategy for its development. VC funds are not even registered with SEBI in spite of All the benefit available. VC industry is one, which will today prepare a base for a Strong tomorrow. What is need for the development of VC industry is not only tax Breaks but simpler procedures legislation for simplified exit form investment, more Transparency and legal backing to participate in business amongst other things.

According to Kumar, (July, 2005) One of the integral aspects of venture funding is venture capitalists involvement with The entrepreneurial team. The relationship through broad interaction was explored by Rosenstein (1988). A comparison was drawn between small and large firms with Regard to board interaction. While it is important in large firms the relative power of Small conventional firms, board interaction generally is undermined. Rosenstein ET. A. (1993) studied the finer aspects of boards in the venture funded companies in the USA. From 98 candidates in the sample, the study attempted to bring out the changes In the board size, board composition and control and their relation to value added to The funded unit. The empirical analysis yielded results wherein the size of the board Increased after venture funding, indicating more transparency in board operations. Through a case based approach Lloyd ET. al. (1995) explored the aspect of Deal structuring and post investment staging of venture capitalists through venture Capitalists' co-investing strategy. The study finds that even through venture capitalists Fix tight milestones and time lines they themselves contribute to many of the delays

That are experienced by a typical start up firm. This is because of the hierarchical coin vesting Partners and the lack of understanding within the venture capitalist co investors As to what role they individually play in the development of their portfolio Company.

According to Robbie, (1997) Robbies, ET. al. (1997) highlights the monitoring policies of funded units by venture Capitalists and studies the performance targets, monitoring information, and Monitoring actions through a questionnaire-based survey. The survey was Administered to 108 British Venture Capital Association members and total of 77 Responses were gathered in the study. The findings related to performance targets and Other monitoring issues were considerable addition to the literature in the subject. The issues concerning board of directors' role in venture backed companies Are widely debated topics in academic research? The findings of the study by Fried ET. al. (1998) emphasize that the board of directors are a more involved in the venture backed Firms than boards where members do not have large ownership at stake. The Study provides an empirical evidence of variation in the boards' involvement and shows its relevance in performance management of funded units.

According to Mishra, (July 2004) There is abundant empirical research conducted in developed countries which address The relative investment evaluation criteria taken into account in the screening process for new venture investment proposals. Zopunidis (1994) provides a useful summary Of the previous research in this field. The identification of selection criteria has been Researched using different methodologies such as simple rating of criteria (perpetual and deal specific responses) Knight, 1986; Dixon, 1991; Hall and Hofer, 1993; Rah, Jung and Lee, 1994), construct analysis (Fried and Hirsch, 1994), verbal protocols (Zhacharakis and Meyer, 1998), and quantitative compensatory models (Musky, Barley and Telex, 1996; Shepherd, 1999). Multi methods (case analysis, study of Administrative records, published interviews, questionnaire and personal interviews) Approach has also been used (Riquelme, 1994) to enhance understanding of Investment criteria and also extend it to other aspects of investment process like deal Structuring and divestment.

Research Methodology
At the stage of Analysis of Data: After data collection, the task of analyzing is to be done. The analysis requires number of operations such as establishing categories, application of catagories to raw data through coding, tabulation and then drawing stastistical intererences. Editing is the procedure that improves the quality of the data for Coding. Research as a systematized effort to gain now Knowledge. It is a careful investigation for search of new facts in any branch of knowledge. The Purpose of research methodology section is to describe the procedure for conduction the study. It includes research design, sample size, data collection and procedure of analysis of research instrument. Research always starts with a question or a problem. Its purpose is to find answers to questions through the application of the scientific method. It is a systematic and Intensive study directed towards a more complete knowledge of the subject studied.

Research design:

Acc. to Kerlinger, Research design is the plan structure & strategy of Investigation conceived so as to obtain answers to research questions and to control Variance. Acc. to Green and Tull, A research design is the specification of methods And procedures for acquiring the information needed. It is the overall operational Pattern or framework of the project that stipulates what information is to be collected From which sources by what procedures. Its found that research design is purely and simply the framework for a study that Guides the collection and analysis of required data. Research design is broadly classified into Exploratory research design Descriptive research design Casual research design This research is an exploratory research. The major purpose of this research is Description of state of affairs as it exists at present.

Data Collection:-

Secondary data Secondary data is the data which is already collected by someone and complied for Different purposes which are used in research for this study. It includes: Internet Magazine Journal Newspaper

Objective of the Study: When we are going to study something there is specific purpose for our study. It may Be for our course, as hobby, for passing our time, to find out genuine solution for any Problem or to draw out certain inferences out of the available data. The objectives of My study is:

 To find out the venture capital investment volume in India.  To study the problem faced by venture capitalist in India.  To study the future prospects of venture capital financing.

Chapter Scheme
Chapter 1:Introduction of venture capital.

Chapter 2:Development of VCF in India & VC investment procedure.

Chapter 3:Research methodology.

Chapter 4:Analysis and interpretation.

Chapter 5:Findings and Suggestions.

Chapter 6:Conclusion.

Chapter 7:Bibliography.

Annexure:-

Bibliography
JOURNALS:y Mitra D (2000), The Venture Capital Industry in India, Journal of Small Business Management, Vol.38, No.2, pp. 67-79 y Dewan A.H (2000), Financing the Microprograms of NGOs: A case study, Journal of Developmental Entrepreneurship, vol.2, No.2, pp. 157-168 y Talluru Sreenivas and D. Nagayya (2005), Venture Capital Recent Trends in the Liberalisation Context, Unpublished paper

BOOKS:y Kothari C.R (Revised Second edition) Research Methodology Methods & Techniques, New Age International (p) Limited y y Panday I.M. Venture capital development process in India, Panday I.M. Venture capital the Indian experience,

News Papers and Magazines:Financial Express, Economic Times, Business World.

Web References:www.vcapital.com www.investopedia.com www.vcinstitute.com www.indiainfoline.com www.wikipedia.com www.venturecapital.com www.altaasset.net www.economictimes.com