Venture Capital Financing and its impact on Indian Economy on Selected Sectors

Abstract

The term venture capital comprises two words venture and capital. Venture means chance or Trial hinting at speculation to try ones luck that is good or bad involving risk. The term capital denotes the resources needed to start the enterprises. Therefore venture capital is understood as capital that is available for financing a new business venture. It is also often thought of as the early stage financing of new and young enterprises seeking to grow rapidly. Venture capitalists are driven by the profit motive. Venture capital funds invest in the company with a view to build and facilitate growth. At the time of exit leaving behind an ongoing concern painstakingly built over 3 to 4 years is a matter of pride for a venture capital fund. Venture capital is providing seed start up and first stage financing and also funding the expansion of companies that have already demonstrated their business potential but do not yet have access to the public securities market. Venture capital is an important source of finance for those small and medium sized firms which have very few avenues for raising funds. Although such a business firm may possess a huge potential for earning large profits in the future and establish itself into a large enterprise. But the common investors are generally unwilling to invest their funds in them due to risk involved in this type of investment. Venture capital is equity support to fund new concepts that involve a higher risk and at the same time have high growth and profit potential. Venture capital is thus linked with innovation high growth and profit. It provides the necessary feeling to convert the business ideas into the commercial venture. The very fact that the study comes up with a new relatively less cumbersome scale for measuring the effect of venture capital financing on few selected sectors of Indian economy is an important contribution from the study. Also the study assessed the role of venture capital financing in various sectors such as Healthcare IT and ITES Banking