VENTURE CAPITAL

INTRODUCTION: - The lack of sufficient capital is the most common obstacle to the birth and success of new science and technology based companies. Without financial resources, it is virtually impossible even for best ideas to succeed. Venture financing has become a boon to such prospectors. As it involves high risk funding, a sound and balanced business plan is the required foundation for successful venture financing.

The concept of venture capital is relatively new in India. It was mooted in the fiscal budget for 1986-87 when it was decided to impose a 5% on all technology import payments to create a venture fund to be operated by Industrial Development Bank of India. The schemes offered by most of the venture capital institutions focus on projects with technological risk and provide support to indigenous effort in technology development. The financing concepts are home grown and adapted to the Indian legal environment. These institutes offer both equity and debt instruments like total equity finance in USA. Venture capital in India is available in three patterns i.e., Equity Conditional loans, Income notes. Venture capital is just taking off in India; some of the areas funded are risky ventures in technology development and long gestation technology development projects. Greater attention is focused on individual proposals irrespective of the investment scale. Major fields of investment in India through venture capital include softwares, biotechnology, chemical polymers, drugs and pharmaceuticals, environment engineering, non-conventional energy etc.

Venture Capital often referred to as risk capital is capital invested in a project which contains an element of risk. It is opposite to secured capital and is made witch expectations of high return. In a Venture Capital investments at three stages are involved:

1. Seed capital to finance the launching of the enterprise,

2. Venture capital to carry the enterprise to a stage where it can secure capital and loans from other conventional sources and,

3. Growth capital for a major expansion.

In a venture capital proposal specifics like following are looked into:

· The people involved,

· Technology,

· Product,

· Market,

· Size of investment,

· Capital securing procedures.