What is Venture Capital Fund in India

In 1973 Government of India understood the importance of Venture Capital  as a source of funding new entrepreneurs and technology but it started picking up only in 1990’s,and In 2006, total amount that was invested reached US$7.5 billion and is expected to reach $70-75 billion  in 2010-2015.

What is Venture Capital Fund

Just like how Banks give loans to people using the money deposited by people, same way venture capital firms have venture fund investors, which include both high net worth individuals and institutions with large amounts of available capital, such as state and private pension funds, university financial endowments, foundations, insurance companies, and pooled investment vehicles.

In simple terms VCs convince Rich people to invest in their firm so that they can invest that money in several startups out of which many will fail but the few which succeed will cover up the losses made on others. Investment is made on the basis of buying the equity or an ownership in the startups.

And the Venture Partners usually get 10-30% of the profit made when the venture capital firm sells the invested companies shares to public or its new owners.

Investing Styles

Venture Capital Funds are managed by experienced people, industry experts, scientists, and technology experts who decide and judge startups and take the crucial decision of whether to fund or not. And usually these people take a place in board of directors of the companies they are investing in. But not all firms invest in all kind of startups. Depends on the following

• Some VC’s go for innovative and new ideas only
• Early Stage Funding
• Expansion Funding
• Acquisition or buyout Funding
• Industry specific Funding
• National or Global
• long term or short term

So if you are looking for funds for your business, not only does VC’s have to select you, but you also have to select the proper VC for your start-up, or there can be conflicts and frequency mismatch between you and your investors, which can lead to more messier situations. Always keep in mind that VC not only brings money but also knowledge capital too, so never be in haste while choose your Venture Capitalist.

The process of raising capital – from venture capital investors – isn’t rocket science or a total mystery. Help is out there. There are some very clear things that you need to know, learn and understand as fully as possible before you even begin the process. The more prepared you are, the better your chances of success. Good luck!