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VENTURECAPITAL

VENTURE CAPITAL is the long-term financial

assistance given to introduce new

products/inventions/innovations or to employ or

commercialize new technologies .

It involves great risk but promises attractive returns.

It is otherwise known as RISK CAPITAL.

The role of venture capital institutions is important

for the economic growth of a country. It helps the

new entrepreneurs & businesses to spring up and

contribute to the wealth of the nation.

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EXAMPLES:

In India many venture capital institutions

have been set up for example :

Technology Development and

information company (TDIC).

Risk capital and technology finance

corporation ltd. (RCTFC)

Gujarat venture finance ltd (GFVL).

Canara bank venture capital fund. IDBI venture capital fund.

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DEFINITION

In a narrow sense , the concept of venture capital

may be referred to Investments in young firms

which lack funds

In a broad sense , it refers to the contribution of

share capital for the formulation and setting up of

small firms that are specializing in new ideas /new

technologies.

Venture capital is a long term risk capital for

financing high technology projects that involve riskbut at the same time has strong potential for

growth.

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FEATURESOFVENTURECAPITAL

Venture capital is normally contributed in the form

of equity capital. However it may be also given in

the form of long term loan or debt capital.

It is a high risk venture. However it also high growth

potentials.

Venture capital is provided only for setting up of

new firms with new ideas or new technologies. The

enterprises , which are engaged in trading, booking,

financial services ,agency or R&D are notconsidered for investment by venture capitalists.

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The gestation period is long . The benefit or profit

from the venture capital investment will start

accruing only after an average period of 4-5 years.

It is a long term investment and returns are in the

form of capital gains.

It is an active form of investment with a higher

degree o involvement in the management of a

venture .

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ADVANTAGESOFVENTURECAPITAL

In todays world , venture capital is of great practical

value to many business concerns.

Its advantages can be studied under three heads:

A. ADVANTAGES TO INVESTORS

B. ADVANTAGES TO PROMOTERS

C. GENERAL ADVANTAGES

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ADVANTAGESTOINVESTORS

The various advantages , which the investors enjoy

out of venture capital are :

Reduced risk

Scope for analyzing the prospects of the business.

Provides means to ensure the conduct of the affairsof the company.

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ADVANTAGESTOPROMOTERS

Promoters enjoy free and continued finance through

venture capital. The various benefits that promoters

enjoy from venture capital are listed below :

Easy way of obtaining funds

Enables concentration on business activities.

Reduces cost of obtaining finance.

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GENERALADVANTAGES

Reduces the time gap between technological

innovation and commercial exploitation

Helps in exploitation of full potential

Generates employment Fosters entrepreneurship in the country

Helps in the industrialization and technological

development of the country

Serves as an intermediary between investors andentrepreneurs.