287

CHAPTER VI

SWOT ANALYSIS OF VENTURE CAPITAL UNDERTAKINGS

INTRODUCTION

The main focus of this chapter is the analysis of the organisational factors such

as strengths and weaknesses and the environmental factors namely opportunities

and threats in order to formulate strategies for enhancing the venture capital

undertakings.

As Peter Drucker93 cautions, “all institutions have to make global

competitiveness a strategic goal. No institution, whether a business, a university

or a hospital, can hope to survive, let alone succeed, unless it measures up to the

standards set by the leaders in its field, any place in the world”. Keegan94 rightly

puts it, “The world economy has undergone revolutionary changes during the past

50 years. Perhaps the greatest and most profound change is the emergence of

global market, global competitors, and winners and losers in global competition”.

The strength, weakness, opportunity and threat analysis is needed for all

organisations. The threat represents the competitive pressures in the global

93 Peter F. Drucker, Management Challenges for the 21

st century, Harper

Business, New York, 1999, p.41

94 Warren J. Keegan, Global Marketing Management, Prentice-Hall of India Pvt. Ltd, New Delhi, 7th Edition 2003, p533.

288

economy. Nowadays, all organizations encounter threats and opportunities. The

success of the organisation depends upon how the organisation converts its

threats into opportunities. For that conversion, the organisation has to go for

self evaluation i.e. analyse their weakness and strength.

6.1 SWOT Analysis

SWOT is a tool created by Albert Humphrey in the 1970’s. It is used today as a

basic process of examining the factors in business that pertains to both success

and failure, allowing companies to evaluate their current situation95.

SWOT analysis is used to identify strategies for enhancing competitiveness of

venture capital fund companies. Hence, the organisational factors (i.e., the

strengths and weakness) and the environmental factors (i.e., the opportunities and

threats) are analysed to formulate strategies for enhancing competitiveness of

venture capital fund companies in Tamil Nadu.

6.1.1. Strengths

Strength means the core competencies, corporate capabilities and resources that

provide the basis for strategy formulation. It is the competitive advantage and

positive factor possessed by the organisation to face the competition and to satisfy

the customers’ needs and wants. In the venture capital undertakings have come

95 Kim Warren, Strategic Management, John Wiley and Sons Ltd, 2008,

ISBN 978-0-470-06067-4

289

across much strength. The strengths of the venture capital undertakings in Tamil

Nadu are identified and described in this section.

The higher the average scores for strength, the more was the success for the

undertakings. The calculated results are given in Table 6.1.

TABLE 6.1

STRENGTHS OF VENTURE CAPITAL UNDERTAKINGS

Sl.

No. Items of Strength

ICICI

Entrepreneurs

IFCI

Entrepreneurs

Average

Score Rank

Average

Score Rank

1. Profitable business with positive cash flows

2.53 1 2.62 1

2. Vast network 2.29 2 2.54 2

3. Quality products 2.19 3 1.99 7

4. Constant innovation 2.13 4 2.39 3

5. Experienced & competent management

2.03 5 2.14 6

6. Matured Processes 1.99 6 2.35 4

7. Attractive price points 1.75 7 1.85 9

8. Patended technology 1.68 8 1.9 8

9. In-house expertise in critical areas

1.61 9 2.31 5

10. Big growing market share

1.06 10 1.56 10

Source: Primary data.

290

It is observed from table 6.1 that the statement namely profitable business

with positive cash flows ranked first by both the category of entrepreneurs

among ICICI and IFCI venture capital companies. The vast net work is the next

strength for both types of entrepreneurs. Ranking differs for other strengths and

the big growing market share is considered as the least strength by both

category of entrepreneurs.

6.1.2. Weaknesses

Weaknesses are the qualities that prevent the organization from

accomplishing their mission and achieving their full potential. These

weaknesses deteriorate influences on the organizational success and growth.

Weaknesses are the critical part of business that must either be strengthened or

hidden from the competitors, which tend to decrease the competencies of the

firm, in comparison with its competitors. The following are considered as

weaknesses of the venture capital undertakings.

The average score of each weakness of ICICI and IFCI venture capital

companies’ entrepreneurs is presented in table 6.2:

291

TABLE 6.2

WEAKNESSES OF VENTURE CAPITAL UNDERTAKINGS

Sl.

No. Items of Weaknesses

ICICI

Entrepreneurs

IFCI

Entrepreneurs

Average

Score Rank

Average

Score Rank

1. Technological of obsolescence

2.06 1 2.14 2

2. Poor inventory control 1.99 2 2.19 1

3. Limited product life 1.88 3 0.99 10

4. Poor planning and decision making

1.80 4 2.01 3

5. Inefficient processes 1.79 5 1.99 4

6. High prices due to inefficiencies

1.67 6 1.86 5

7. Lack of research and development

1.43 7 1.75 6

8. Lack of marketing expertise

1.33 8 1.51 7

9. Unproductive workforce 1.22 9 1.33 8

10. Lack of working capital 1.03 10 1.22 9

Source: Primary data.

It is clear from table 6.2, that ICICI entrepreneurs accorded first place to

technological of obsolescence with an average score of 2.06 and . The

292

entrepreneurs viewed poor inventory control as the second weakness with an

average score of 1.99. The lack of working capital was accorded last place.

The entrepreneurs of IFCI observed poor inventory control as the first

weakness with an average score of 2.19, technological of obsolescence was

ranked second with an average score of 2.14. The limited product life was

accorded the last rank by IFCI entrepreneurs.

6.1.3. Opportunities

An opportunity is a major favourable situation in the firm’s environment.

Opportunities are the benefits that are likely to occur from external environment.

The various opportunities that promoted their undertakings were listed and the

entrepreneurs were asked to rank them in the order of importance.

The average score of each opportunity of ICICI and IFCI venture capital

companies’ entrepreneurs is presented in table 6.3.

Table 6.3 presents the major opportunities for venture capital undertakings.

ICICI entrepreneurs accorded easy liquidity with low interest rates as the first

opportunity with a score of 2.67. The technological changes was ranked second

with an average score of 2.63. Leading to increased demand was viewed as the

least ranked opportunity for ICICI venture capital undertakings.

The IFCI entrepreneurs perceived technological changes as the first opportunity

with an average score of 2.62 and easy liquidity with low interest rates was

293

accorded with second rank. High entry barriers for new entrants were considered

to be the third opportunity for the entrepreneurs with an average score of 2.49.

Leading to increased demand was considered as the last opportunity by both the

ICICI and IFCI entrepreneurs.

TABLE 6.3

OPPORTUNITY OF VENTURE CAPITAL UNDERTAKINGS

Sl.

No. Items of Opportunity

ICICI

Entrepreneurs

IFCI

Entrepreneurs

Average

Score Rank

Average

Score Rank

1. Easy liquidity with low interest rates

2.67 1 2.52 2

2. Technological changes 2.63 2 2.62 1

3. Rapidly growing target markets 2.61 3 2.32 4

4. High entry barriers for new Entrants

2.53 4 2.49 3

5. Scarcity of product in the locality

2.42 5 1.99 6

6. Existence of only few 2.13 6 1.79 8

7. Social and cultural changes 1.99 7 2.02 5

8. Tax incentives and grants 1.78 8 1.98 7

9. Favorable government policies 1.75 9 1.62 9

10. Leading to increased demand 1.54 10 1.42 10

Source: Primary data.

294

6.1.4. Threats

Threats arise when conditions in external environment pose a danger to the

reliability and profitability of the organization’s business. Threats are

uncontrollable. When a threat comes, the stability and survival can be at stake.

The variations and possible exceptions put off the energetic functioning of

the organisation. Venture capital entrepreneurs faced many problems like

changing Government policies, fluctuations in currency value, shipment cost,

changing demand and so on.

The average score of threats given by the ICICI and IFCI entrepreneurs are

given in Table 6.4.

295

TABLE 6.4

THREAT OF VENTURE CAPITAL UNDERTAKINGS

Sl.

No

.

Items of Threat

ICICI

Entrepreneurs

IFCI

Entrepreneurs

Average

Score Rank

Average

Score Rank

1. High tax rates 1.94 1 1.28 3

2. Confusing and unstable government regulations and procedures

1.65 2 1.33 2

3. Poor quality of labour force 1.59 3 0.69 6

4. Poor law and order 1.53 4 0.99 5

5. Corruption 1.42 5 0.53 7

6. Low entry barriers 1.22 6 1.62 1

7. Too much of corruption 1.04 7 0.29 10

8. Inequitable and harsh legal framework

0.91 8 1.14 4

9. High cost and shortage of raw materials

0.71 9 0.49 8

10. Poor infrastructure 0.61 10 0.33 9

Source: Primary data.

It is inferred from table 6.4 that the entrepreneurs have ranked the threats

according to their perception of the threats prevailing in the global market.

ICICI entrepreneurs considered high tax rates and confusing and unstable

296

government regulations and procedures as their first and second threats,

respectively. Poor infrastructure is ranked as the tenth threat.

In case of IFCI entrepreneurs ranked low entry barriers as their first and

foremost threat with an average score of 1.62. Confusing and unstable

government regulations and procedures and high tax rates were ranked second

and third respectively by the IFCI entrepreneurs. They considered too much of

corruption as the tenth threat.

6.2 DISTRIBUTION OF VENTURE CAPITAL ENTREPRENEURS

BASED ON SWOT

Frequency distribution is used to evaluate the relative weightage between

overall strengths, weaknesses, opportunities and threats of venture capital

undertakings. Weighted score based on the rank is given to each of the

statements.

The weightage given were 5, 4, 3, 2 and 1 for strongly agree, agree,

neutral, disagree and strongly disagree respectively. The weighted score thus

arrived at was converted into % of maximum possible score, that is, for example

for ten strengths identified the maximum possible score was 750. Thus, %score

of all items of strengths, weaknesses, opportunities and threats for each of the

entrepreneurs was calculated.

The individual score % of each entrepreneurs was analysed and to draw

further inference a frequency distribution of entrepreneurs with score % in the

297

class intervals of 0 – 10 %, 10-20 %, 20-30 %, 30-40 %, 40-50 %, 50-60 %, 60-70

%, 70-80 %, 80-90 % and 90-100 % was made for strength, weakness,

opportunities and threats separately having obtained the number of entrepreneurs

in each class intervals, the % of entrepreneurs was calculated to draw appropriate

conclusions on differences in the relative scores of strengths, weaknesses,

opportunities and threats and is presented in Table 6.5

TABLE 6.5

SWOT ANALYSIS OF VENTURE CAPITAL UNDERTAKINGS

Score percentage

percentage of Entrepreneurs

Strength Weakness Opportunity Threat

0 – 10 17 0 21 0

11 – 20 21 1 32 0

21 – 30 28 5 20 3

31 – 40 15 4 12 6

41 – 50 10 12 9 12

51 – 60 4 24 3 14

61 – 70 3 25 2 22

71 – 80 2 19 1 24

81 – 90 0 8 0 12

91 – 100 0 2 0 7

Total 100 100 100 100

Source: Primary data

Skewness is used to analyse the distribution of strengths, weaknesses,

opportunities and threats of the venture capital undertakings. According to

298

Garrett, “A distribution is said to be skewed, when the mean and the median fall

at the different points in the distribution, and the balance is shifted to one side or

the other-to left or right”96. Skewness is calculated with the help of Karl Pearson’s

coefficient of Skewness formula:

Mean - Mode Skp = ------------------------- Standard Deviation

Skp = Karl Pearson’s coefficient of Skewness.

The Skewness for SWOT analysis of venture capital undertaking

entrepreneurs is calculated with the data in Table 6.5 and the calculated Mean,

Mode, Standard Deviation and Skp value are presented in Table 6.6.

96 S.P.Gupta, Statistical Methods, Sultan Chand & Sons, New Delhi, 32nd

Revised Edition 2004, pp 330-334

299

TABLE 6.6

KARL PEARSON’S CO-EFFICIENT OF SKEWNESS

SWOT Variables Mean Mode Standard

Deviation

Skp

Strengths 26.4 23.5 16.7 0.17

Weaknesses 60.6 61.43 16.87 -2.57

Opportunities 22.8 14.78 15.59 0.51

Threats 65.1 68.5 16.58 -0.2

Source: Primary data

Table 6.6 depicts positive Skewness in the case of strength and

opportunities whereas negative Skewness in the distribution of weakness and

threats. This means that Skp value is relatively less skewed in case of strength

and opportunities and more skewed for threats and weaknesses.

The entrepreneurs gave more score %age of distribution to strength and

opportunity as they consider it as more important and posses it in their

undertakings in Tamil Nadu.

The following figure 6.1 shows the distribution of strength, weakness,

opportunities and threats of venture capital undertakings in Tami Nadu.

300

FIG 6.1 SWOT ANALYSIS OF VENTURE CAPITAL UNDERTAKINGS

It is clear from the figure 6.1 that the strength and opportunity curve have

longer tail towards the right and it is said to be positively skewed. Whereas the

weaknesses and threats curve have longer tail towards the left, so it is said to be

negatively skewed. Thus, the positive factors such as strength and opportunity

were considered more important for venture capital undertakings than the negative

factors threats and weakness. This is a very significant pointer to the positive

attitude of entrepreneurs and their confidence in their enterprises’ ability to

survive and prosper.

301

Among the positive factors of strength and opportunities, the Skp value of

strength is close to central point of tendency and the Skp value of opportunities is

away from the central point. It shows that entrepreneurs consider the individual

qualities of strength that they possess inside the organisation as more important

than opportunity.

Similarly, among the negative factors of threats and weakness, threats from

external environment were considered even less important than the weakness of

the individual.

6.3 FACTORS INFLUENCING THE PROBLEMS FACED BY THE

VENTURE CAPITAL UNDERTAKINGS

In order to study the factors influencing the problems faced by the

entrepreneurs of venture capital undertakings, the researcher has found

the following twenty problems and they are qualified by using Likert’s five point

scale.

1. Lack of Raw Material

2. Lack of Skilled Labour

3. Lack of Unskilled labour

4. Lack of Research & development

5. Lack of Technical assistance

6. Lack of Managerial assistance

302

7. Lack of Financial assistance

8. Limited demand

9. Severe competition

10. Global recession

11. Poor Infrastructural facilities

12. Poor Legal System

13. Stringent Labour Laws

14. Corruption

15. Lack of readily available information

16. Licences

17. Multiple and high taxes

18. Red tapism and procedural Hazzles

19. Poor awareness as to venture Capital

20. Lack of quick exit routes

The five point scale consists of very high, high, moderate, little and very

little. The score of each statement in the five point scale is five, four three, two

and one respectively. In the present study, the principal factor analysis method

with the Orthogonal Varimax Rotation is used to identify the factors influencing

the problems faced by entrepreneurs of venture capital undertakings.

303

The principal component factor analysis method was applied to the inter

correlation matrix of the twenty dimensions of the problems and the results were

rotated using the Kaiser Varimax criteria. The data validity for factor analysis has

been examined with the help of the Kaiser-Meyer-Olkin (KMO) measures of

sampling adequacy and the Bartlett test of Sphericity. The KMO measure of

0.6037 at the zero level significance of chi-square satisfies the validity of data for

factor analysis. The factor analysis results in seven factors. The factor loading of

the variables in seven factors, its communality, Eigen value and %age of variable

explained are shown in Table 6.7.

Table 6.7 gives the loadings received by the factors under F1, F2, F3, F4 and F5

for venture capital undertakings. Table reveals the rotated factor loadings for the

twenty problems faced by the venture capital undertaking entrepreneurs in Tamil

Nadu. It is clear from Table 6.7 that all the twenty problems have been extracted

into five major factors namely F1, F2, F3, F4 and F5. The factors with identified

the new names which influence the problems faced by the entrepreneurs.

304

TABLE 6.7

ROTATED FACTOR MATRIX FOR PROBLEMS FACED BY THE

RESPONDENTS

Sl.

No

.

Variables Facto

r 1

Facto

r 2

Facto

r 3

Factor

4

Facto

r 5 h

2

1. Lack of Managerial assistance 0.8346 0.1396 0.0352 0.2696 0.0085 0.7900

2. Lack of Unskilled labour 0.7675 0.1167 0.1325 0.2495 0.1199 0.6968

3. Lack of Skilled Labour 0.7031 0.0907 0.3063 0.0815 0.1616 0.6291

4. Lack of Technical assistance 0.6933 0.1737 0.2943 0.1131 0.1662 0.6378

5. Stringent Labour Laws 0.6631 0.1589 0.3714 -0.0056 0.0995 0.6127

6. Lack of Raw Material 0.1779 0.8180 0.0074 0.1621 0.0920 0.7355

7. Limited demand 0.0888 0.7922 0.1091 0.1724 0.0496 0.6795

8. Severe competition 0.0190 0.7747 0.1796 -0.0894 0.3100 0.7368

9. Lack of Financial assistance 0.2987 0.6845 0.0768 0.0845 0.1676 0.5989

10. Poor Infrastructural facilities 0.2597 0.1797 0.7588 0.2163 -0.0299 0.7232

11. Poor Legal System 0.1963 -0.0531 0.7333 0.3293 0.1655 0.7148

12. Global recession 0.4114 0.2256 0.7218 0.0444 0.1374 0.7619

13. Corruption 0.2135 0.1079 0.6660 0.4672 0.1071 0.7304

14. Lack of Research & development 0.2668 0.1450 0.1257 0.8248 0.0881 0.7961

15. Lack of readily available information

0.1523 0.1333 0.2050 0.8158 0.2001 0.7885

16. Licences 0.1056 0.0598 0.3440 0.7513 0.1412 0.7174

17. Poor awareness as to venture Capital

0.1056 0.1329 0.0857 0.1802 0.8487 0.7889

18. Lack of quick exit routes 0.1721 0.1035 0.0623 0.0773 0.8199 0.7223

19. Multiple and high taxes 0.0975 0.2826 0.1028 0.1446 0.7985 0.7885

20. Red tapism and procedural Hazzles

0.1752 0.1260 0.2081 0.0469 0.6859 0.7546

Eigen Value 7.2711 2.2261 1.6759 1.3720 1.0747

%age Variance 38.30 11.70 8.80 7.20 5.70

Cumulative %age 38.30 50.00 58.80 66.00 71.70

The first factor is designed as “Lack of Human Resource Management”

on the basis of the loaded variables. Five variables in this category are important

with high factor loading. It indicates that among the various performance scale,

‘Lack of Managerial assistance (0.8346)’, ‘Lack of Unskilled labour (0.7675)’,

‘Lack of Skilled Labour (0.7031)’, ‘Lack of Technical assistance (0.6933)’ and ‘

305

Stringent Labour Laws (0.6631)’ are important attributes in this category. Thus,

the lack of human resource management is identifying an important factor to

influence the problems of venture capital undertakings entrepreneurs in

Tamil Nadu.

The second factor is narrated as “Lack of raw material and finance” on

the basis of the loaded variables. Four variables in this category are important

with high factor loading. It indicates that among the various performance scale,

‘Lack of Raw Material (0.8180)’, ‘Limited demand (0.7922)’, ‘Severe

competition (0.7747)’ and ‘Lack of Financial assistance (0.6845)’ are important

attributes in this category. Thus, the lack of raw material and financial assistance

is identifying an important factor to influence the problems faced by the

entrepreneurs of venture capital undertakings.

The third factor is prescribed as “Poor Infrastructural facilities” on the

basis of the loaded variables. Four variables in this category are important with

high factor loading. It indicates that among the various performance scale, ‘Poor

Infrastructural facilities (0.7588)’, ‘Poor Legal System (0.7333)’, ‘Global

recession (0.7218)’ and ‘Corruption (0.6660)’ are important attributes in this

category. Thus, the poor infrastructural facilities are identifying an important

factor to influence the problems faced by the entrepreneurs of venture capital

undertakings.

306

The fourth factor is highlighted as “Lack of Research and Development”

on the basis of the loaded variables. Three variables in this category are important

with high factor loading. It indicates that among the various performance scale,

‘Lack of Research & development (0.8248)’, ‘Lack of readily available

information (0.8158)’ and ‘Licences (0.7513)’ are important attributes in this

category. Thus, the lack of research and development are identifying an important

factor to influence the problems faced by the entrepreneurs of venture capital

undertakings in Tamil Nadu.

The fifth factor is designed as “Lack of awareness on venture capital” on

the basis of the loaded variables. Four variables in this category is important with

high factor loading. It indicates that among the various performance scale, ‘Poor

awareness as to venture Capital (0.84870’, ‘Lack of quick exit routes (0.8199)’,

‘Multiple and high taxes (0.79850’ and ‘Red tapism and procedural Hazzles

(0.6859)’ are important attributes in this category. Thus, the lack of awareness on

venture capital is identifying an important factor to influence the problems faced

by the entrepreneurs of venture capital undertakings in Tamil Nadu.

6.4. FACTORS INFLUENCING THE PROMOTIONAL MEASURES FOR

PROMOTION OF VENTURE CAPITAL BUSINESS The analysis on factors influencing the entrepreneurs to promote the

venture capital fund for their undertaking are Create of awareness on venture

307

capital activities through informed websites/ Seminar /Conferences, Vigorous

promotional measures such as venture fairs / Venture Clubs Venture networks,

Establishment of business incubators, Fiscal and tax incentives, Corporate sectors

encouraged to participate in venture capital, FIs and high net worth individuals

encouraged to invest in venture funds, Encouragement to One Person Company

/Limited Liability Partnership, Establishing single window clearance for venture

capital undertaking, Moderate and make transparent and accessible IPR

infrastructure, Special commercial courts to deal with commercial disputes,

Simplifying bankruptcy loss, Strengthening secondary market for small

Companies, Creating new instruments like venture debt instruments, Development

of systematic risk management system like SMERA credit rating etc. and

Developing recognition and rewards system for venture capital undertakings.

In order to find out the significant relationship among venture capital fund

companies regarding the factors influencing to promote the venture capital fund,

t-test was applied. The importance of the variables that influence to promote the

venture capital fund has been furnished with the help of its mean score and the

computed results of t-test in Table 6.8.

308

TABLE 6.8

FACTORS INFLUENCING TO PROMOTE THE

VENTURE CAPITAL FUND

Sl.

No Variables

Mean Scores among

t-Values ICICI

Entrepreneurs

IFCI

Entrepreneurs

1. Create of awareness on venture capital activities through informed websites/ Seminar /Conferences

2.6007 3.5592 3.2463*

2. Vigorous promotional measures such as venture fairs / Venture Clubs Venture networks

2.8906 3.9138 1.2041

3. Establishment of business incubators 2.5672 3.8241 3.8189*

4. Fiscal and tax incentives 2.4565 3.4147 3.3039*

5. Corporate sectors encouraged to participate in venture capital

3.8911 2.8618 3.1091*

6. FIs and high net worth individuals encouraged to invest in venture funds

2.6167 3.3932 3.0863*

7. Encouragement to One Person Company /Limited Liability Partnership

2.9798 2.3457 3.1142*

8. Establishing single window clearance for venture capital undertaking

3.0234 3.3432 0.9891

9. Moderate and make transparent and accessible IPR infrastructure

3.8981 3.0139 1.2664

10. Special commercial courts to deal with commercial disputes

3.7172 3.7079 1.7339

11. Simplifying bankruptcy loss 3.6108 2.9102 2.9994*

12. Strengthening secondary market for small Companies

3.8182 2.4516 3.0962*

13. Creating new instruments like venture debt instruments

3.5626 2.3472 3.1143*

14. Development of systematic risk management system like SMERA credit rating etc.

3.0471 2.1868 3.0929*

15. Developing recognition and rewards system for venture capital undertakings

3.5641 2.3142 3.2774*

Source: Computed data.

* Significant at 5 % level.

309

It is found from Table 6.9 that the important variables that influence the

entrepreneurs to promote the venture capital fund through ICICI are Moderate and

make transparent and accessible IPR infrastructure, Corporate sectors encouraged

to participate in venture capital and Strengthening secondary market for small

Companies since the mean scores are 3.8981, 3.8911 and 3.8182 respectively.

Among the entrepreneurs belonging to the IFCI, Vigorous promotional measures

such as venture fairs / Venture Clubs Venture networks, Establishment of business

incubators and Special commercial courts to deal with commercial disputes, since

the mean scores are 3.9138, 3.8241 and 3.7079. Regarding the perception on the

factors influencing the entrepreneurs to promote venture capital fund, the

significant difference among the two group of entrepreneurs has been identified in

the perception experience and competency of the entrepreneur, Create of

awareness on venture capital activities through informed websites/ Seminar

/Conferences, Establishment of business incubators, Fiscal and tax incentives,

Corporate sectors encouraged to participate in venture capital, FIs and high

networth individuals encouraged to invest in venture funds, Encouragement to

One Person Company /Limited Liability Partnership, Simplifying bankruptcy

loss, Strengthening secondary market for small Companies, Creating new

instruments like venture debt instruments, Development of systematic risk

management system like SMERA credit rating etc., and Developing recognition

310

and rewards system for venture capital undertakings since the respective ‘t’

statistics are significant at 5 % level.

6.5. FACTORS INFLUENCING THE PREFERENCE LEVEL FOR EXIT

OPTIONS

The analysis on factors influencing the entrepreneurs to exit their venture

capital undertaking are Selling of the stake to strategic buyer, Initial Public

offering in India or overseas, Sale to any other venture capital fund or private

equity fund, Secondary sale in stock market, Merger with an existing listed

company and Management / Company buy-back.

In order to find out the significant relationship among venture capital fund

companies regarding the factors influencing to exit their venture capital

undertakings, t-test was applied. The importance exit options that influence to

exit from their venture capital undertakings has been presented with the help of its

mean score and the computed results of t-test in Table 6.9.

311

TABLE 6.9

FACTORS INFLUENCING TO EXIT THEIR

VENTURE CAPITAL UNDERTAKINGS

Sl.

No Variables

Mean Scores among

t-

Values ICICI

Entrepreneur

s

IFCI

Entrepreneu

rs

1. Selling of the stake to strategic buyer

2.5964 3.8814 3.1109*

2. Initial Public offering in India or overseas.

2.3132 3.7273 3.4963*

3. Sale to any other venture capital fund or private equity fund.

2.4043 2.5673 0.9161

4. Secondary sale in stock market 3.6973 2.4092 3.2191*

5. Merger with an existing listed company

3.9104 2.6017 3.1087*

6. Management / Company buy-back 2.4146 3.9794 3.2344*

Source: Computed data.

* Significant at 5 % level.

312

ICICI entrepreneurs

t-values0

2

4

ICICI entrepreneurs

IFCI entrepreneurs

t-values

It is inferred from Table 6.9 that the important exit options that

influence the entrepreneurs to exit their venture capital fund through ICICI

are Merger with an existing listed company, Secondary sale in stock

market and Selling of the stake to strategic buyer since the mean scores are

3.9104, 3.6973 and 2.5964 respectively. Among the entrepreneurs

belonging to the IFCI, Management / Company buy-back, Selling of the

stake to strategic buyer and Initial Public offering in India or overseas,

since the mean scores are 3.9794, 3.8814 and 3.7273. Regarding the

perception on the options to influence the entrepreneurs to exit from their

venture capital undertakings, the significant difference among the two

group of entrepreneurs has been identified in the perception experience and

313

competency of the entrepreneur, Selling of the stake to strategic buyer,

Initial Public offering in India or overseas, Secondary sale in stock market,

Merger with an existing listed company and Management / Company buy-

back, since the respective ‘t’ statistics are significant at 5% level.