INTRODUCTION

A number of technocrats are seeking to set up shop on their own and capitalize on opportunities. In the highly dynamic economic climate that surrounds us today, few traditional business models may survive. Countries across the globe are realizing that it is not the conglomerates and the gigantic corporations that fuel economic growth any more. The essence of any economy today is the small and medium enterprises. For example, in the US, 50% of the exports are created by companies with less than 20 employees and only 7% are created by companies with 500 or more employees. This growing trend can be attributed to rapid advances in technology in the last decade. Knowledge driven industries like InfoTech, health-care, entertainment and services have become the cynosure of bourses worldwide. In these sectors, it is innovation and technical capability that are big business-drivers. This is a paradigm shift from the earlier physical production and economies of scale model. However, starting an enterprise is never easy. There are a number of parameters that contribute to its success or downfall. Experience, integrity, prudence and a clear understanding of the market are among the sought after qualities of a promoter. However, there are other factors, which lie beyond the control of the entrepreneur.

Prominent among these is the timely infusion of funds. This is where the venture capitalist comes in, with money, business sense and a lot more.

WHAT IS VENTURE CAPITAL?

The venture capital investment helps for the growth of innovative entrepreneurships in India. Venture capital has developed as a result of the need to provide non-conventional, risky finance to new ventures based on innovative entrepreneurship. Venture capital is an investment in the form of equity, quasi-equity and sometimes debt - straight or conditional, made in new or untried concepts, promoted by a technically or professionally qualified entrepreneur. Venture capital means risk capital. It refers to capital investment, both equity and debt, which carries substantial risk and uncertainties. The risk envisaged may be very high may be so high as to result in total loss or very less so as to result in high gains Venture capital means many things to many people. It is in fact nearly impossible to come across one single definition of the concept. Venture capital is money provided by professionals who invest alongside management in young, rapidly growing companies that have the potential to develop into significant economic contributors. Venture capital is an important source of equity for start-up companies. Professionally managed venture capital firms generally are private partnerships or closely-held corporations funded by private and public pension funds, endowment funds,

foundations, corporations, wealthy individuals, foreign investors, and the venture capitalists themselves Venture capitalists generally:

Finance new and rapidly growing companies Purchase equity securities Assist in the development of new products or services Add value to the company through active participation Take higher risks with the expectation of higher rewards Have a long-term orientation

When considering an investment, venture capitalists carefully screen the technical and business merits of the proposed company. Venture capitalists only invest in a small percentage of the businesses they review and have a long-term perspective. They also actively work with the company's management, especially with contacts and strategy formulation. .Venture capitalists mitigate the risk of investing by developing a portfolio of young companies in a single venture fund. Many times they co-invest with other professional venture capital firms. In addition, many venture partnerships manage multiple funds simultaneously. For decades, venture capitalists have nurtured the growth of America's high technology and entrepreneurial
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communities resulting in significant job creation, economic growth and international competitiveness. Companies such as Digital Equipment Corporation, Apple, Federal Express, Compaq, Sun Microsystems, Intel, Microsoft and Genetech are famous examples of companies that received venture capital early in their development.

ADVANTAGE OF VENTURE CAPITAL

It injects long term equity finance which provides a solid capital base for future growth. The venture capitalist is a business partner, sharing both the risks and rewards. Venture capitalists are rewarded by business success and the capital gain. The venture capitalist is able to provide practical advice and assistance to the company based on past experience with other companies which were in similar situations. The venture capitalist also has a network of contacts in many areas that can add value to the company, such as in recruiting key personnel, providing contacts in international markets, introductions to strategic partners, and if needed co-investments with other venture capital firms when additional rounds of financing are required.

TYPES OF VENTURE CAPITAL FIRMS Depending on the business type, the venture capital firm differs. For instance, if you're a startup internet company, funding requests from a more manufacturing -focused firm will not be effective. Doing some initial research on which firms to approach will save time and effort. When approaching a V enture Capital firm, consider their portfolio:

Business Cycle: Do they invest in budding or established businesses?

Industry: What is their industry focus? Investment: Is their typical investment sufficient for your needs?

Location: Are they regional, national or international? Return: What is their expected return on investment? Involvement: What is their involvement level?

Targeting specific types of firms will yield the best results when seeking Venture Capital financing. It is important to note that

many Venture Capital firms have diverse portfolios with a range of clients. If this is the case, finding gaps in their portfolio is one strategy that might succeed.

FACTOS TO BE COSIDERED BY VENTURE CAPITALIST IN SELECTION OF INVESTMENT PROPOSAL There are basically four key elements in financing of ventures which are studied in depth by the venture capitalists. These are: 1. Management-:The strength, expertise & unity of the key people on the board bring significant credibility to the company. The members are to be mature, experienced possessing working knowledge of business and capable of taking potentially high risks. 2. Potential for capital gain-: An above average rate of return of about 30 40% is required by venture capitalists. The rate of return also depends upon the stage of the business cycle where funds are being deployed. Earlier the stage, higher is the risk and hence the return. 3. Realistic Financial Requirement and Projections- The venture capitalist requires a realistic view about the present health of the organization as well as future projections regarding scope, nature and performance of the company in terms of scale of operations, operating profit and further costs related to product development through Research & Development.

4. Owners Financial Stake-: The financial resources owned & committed by the entrepreneur/ owner in the business including the funds invested by family, friends and relatives play a very important role in increasing the viability of the business. It is an important avenue where the venture capitalist keeps an open eye.

VENTURE CAPITAL- FINANCING STAGES Seed up Capital It is an idea or concept as opposed to a business. European Venture Capital Association defines seed capital as the

financing of the initial product development or capital provided to an entrepreneur to prove the feasibility of a project and to qualify for start up capital. The characteristics of the seed up capital may be enumerated as follows: Absence of ready product market Absence of complete management team Product/Process still in R&D stage Initial period/Licensing stage of technology transfer

Broadly speaking seed capital investment may take 7 to 10 years to achieve realization. It is the earliest and therefore riskiest stage of venture capital investment. The new technology and innovations being attempted have equal chance of success and failure. Such projects, particularly hi -tech, projects sink a lot of cash and need a strong financial support for their adaptation, commencement and eventual success. However, while the earliest
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stage of financing is fraught with risk, it also provides greater potential for realizing significant gains in long term. Typically seed enterprises lack asset base or track record to obtain finance from conventional sources and are largely dependent upon entrepreneurs personal resources. Seed capital is provided after being satisfied that the entrepreneur has used up his own resources and carried out his idea to a stage of acceptance and has initiated research. The asset underlying the seed capital is often technology or an idea as opposed to human assets (a good management team) so often sought by venture capitalists. Start up Capital It is stage 2 in venture capital cycle and is distinguishable from seed capital investments. An entrepreneur often needs finance when the business is just starting. The start up stage involves starting a new business. Here in the entrepreneur has moved closer towards establishment of a going concern. Here in the business concept has been fully investigated and the business risk now becomes that of turning the concept into product .

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Start up capital is defined as: capital needed to finance the product development, initial marketing and establishment of product facility. The characteristics of start-up capital are:i. Establishment of company or business - The company is either being organized or is established recently. New business activity could be based on experts, experience or a spin-off from R&D. ii. Establishment of most but not all the members of the team- The skills and fitness to the job and situation of the entrepreneurs team is an important factor for start up finance. iii. Development of business plan or idea - The business plan should be fully developed yet the acceptability of the product by the market is uncertain. The company has not yet started trading.

Early Stage Finance It is also called first stage capital is provided to entrepreneur who has a proven product, to start commercial production and marketing, not acquisition costs. covering market expansion, de -risking and

At this stage the company passed into early

success stage of its life cycle. A proven management team is put

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into this stage, a product is established and an identifiable market is being targeted. British Venture Capital Association

has vividly defined early stage finance as: Finance provided to companies that have completed the product development stage and require further funds to initiate commercial manufacturing and sales but may not be generating profits. The characteristics of early stage finance may be: Little or no sales revenue. Cash flow and profit still negative. A small but enthusiastic management team which consists of people with technical and specialist background and with little experience in the management of growing business. Short term prospective for dramatic growth in revenue and profits.

The early stage finance usually takes 4 to 6 years time horizon to realization. Early stage finance is the earliest in which two of the fundamentals of business are in place i.e. fully assembled management team and a marketable product. A company needs this round of finance because of any of the following reas ons: Project overruns on product development.
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 Initial loss after start up phase. The firm needs additional equity funds, which are not available from other sources thus prompting venture capitalist that, have financed the start up stage to provide fu rther financing. The management risk is shifted from factors internal to the firm (lack of management, lack of product etc.) to factors external to the firm (competitive pressures in sufficient will of financial institutions to provide adequate capital, ri sk of product

obsolescence etc.)

At this stage, capital needs, both fixed and

working capital needs are greatest. Further, since firms do not have foundation of a trading record, finance will be difficult to obtain and so Venture capital particularly equi ty investment without associated debt burden is key to survival of the business. The following risks are normally associated to firms at this stage: a) The early stage firms may have drawn the attention of and incurred the challenge of a larger c ompetition. b) There is a risk of product obsolescence. This is more so when the firm is involved in high -tech business like computer, information technology etc.

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Second Stage Finance It is the capital provided for marketing and meeting the growing working capital needs of an enterprise that has commenced the production but does not have positive cash flows sufficient to take care of its growing needs. Second stage finance, the second trench of Early State Finance is also referred to as follow on finance and can be defined as the provision of capital to the firm which has previously been in receipt of external capital but whose financial needs have subsequently exploded. This may be second or even third injection of capital. The characteristics of a second stage finance are: A developed product on the market A full management team in place Sales revenue being generated from one or more products There are losses in the firm or at best there may be a break even but the surplus generated is insuffi cient to meet the firms needs. Second round financing typically comes in after start up and early stage funding and so have shorter time to maturity, generally ranging from 3 to 7 years. This stage of financing has both positive and negative reasons.
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Negative reasons include: I. Cost overruns in market development. II. Failure of new product to live up to sales forecast. III. Need to re-position products through a new marketing campaign. IV. Need to re-define the product in the market place once the product deficiency is revealed Positive reasons include: I. Sales appear to be exceeding forecasts and the enterprise needs to acquire assets to gear up for production volumes greater than forecasts. II. High growth enterprises expand faster than their working capital permit, thus needing additional finance. Aim is to provide working to capital for of initial expansion of an and

enterprise receivables.

meet

needs

increasing

stocks

Later Stage Finance It is called third stage capital is provided to an enterprise that has established commercial production and basic marketing set up, typically for market expansion, acquisition, product

development etc. It is provided for market expansion of the

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enterprise. The enterprises eligible for this round of finance have following characteristics. I. Established business, having already passed the risky early stage. II. Expanding profitability. III. Reputed market position and an established formal high yield, capital growth and good

organization structure.

Funds are utilized for further plant expansion, marketing, working capital or development of improved products. Third stage financing is a mix of equity with debt or subordinate debt. As it is half way between equity and debt in US it is called mezzanine finance. It is also called last rou nd of finance in run up to the trade sale or public offer.

Venture capitalist s prefer later stage investment Vis a Vis early stage investments, as the rate of failure in later stage financing is low. It is because firms at this stage have a past perfor mance data, track record of management, established procedures of financial control. The time horizon for realization is shorter,
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ranging from 3 to 5 years. This helps the venture capitalists to balance their own portfolio of investment as it provides a running yield to venture capitalists. Further the loan component in third stage finance provides tax advantage and superior return to the investors.

There are four sub divisions of later stage finance. Expansion / Development Finance Replacement Finance Buyout Financing Turnaround Finance

Expansion / Development Finance An enterprise established in a given market increases its profits exponentially by achieving the economies of scale. This

expansion can be achieved either through an organic growth, t hat is by expanding production capacity and setting up proper distribution system or by way of acquisitions. Anyhow,

expansion needs finance and venture capitalists support both organic growth as well as acquisitions for expansion.

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At this stage the real market feedback is used to analyze competition. It may be found that the entrepreneur needs to develop his managerial team for handling growth and managing a larger business. Realization horizon for expansion / development investment is one to three years. It is favored by venture capitalist as it offers higher rewards in shorter period with lower risk. Funds are needed for new or larger factories and warehouses, production capacities, developing improved or new products, developing new markets or entering exports by enterprise with established business that has already achieved break even and has started making profits.

Replacement Finance It means substituting one shareholder for another, rather than raising new capital resulting in the change of own ership pattern. Venture capitalist purchase shares from the entrepreneurs and their associates enabling them to reduce their shareholding in unlisted companies. They also buy ordinary shares from non promoters and convert them to preference shares with fix ed dividend coupon. Later, on sale of the company or its listing on
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stock exchange, these are re-converted to ordinary shares. Thus Venture capitalist makes a capital gain in a period of 1 to 5 years.

Buy - out / Buy - in Financing It is a recent development and a new form of investment by venture capitalist. The funds provided to the current operating management to acquire or purchase a significant share holding in the business they manage are called management buyout. Management Buy-in refers to the funds provided to enable a manager or a group of managers from outside the company to buy into it. It is the most popular form of venture capital amongst later stage financing. It is less risky as venture capitalist in invests in solid, ongoing and more mature business. The funds are provided for acquiring and revitalizing an existing product line or division of a major business. MBO (Management buyout) has low risk as enterprise to be bought have existed for some time besides having positive cash flow to provide regular returns to the venture capitalist, who structure their investment by judicious combination of debt and equity. Of late there has been a gradual
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shift away from start up and early finance to wards MBO opportunities. This shift is because of lower risk than start up investments. Turnaround Finance It is rare form later stage finance which most of the venture capitalist avoid because of higher degree of risk. When an established enterprise becomes sick, it needs finance as well as management assistance foe a major restructuring to revitalize growth of profits. Unquoted company at an early stage of development often has higher debt than equity; its cash flows are slowing down due to lack of managerial skill and inability to exploit the market potential. The sick companies at the later stages of development do not normally have high debt burden but lack competent staff at various levels. Such enterprises are compelled to relinquish control to new management. The venture capitalist has to carry out the recovery process using hands on management in 2 to 5 years. The risk profile and anticipated rewards are akin to early stage investment.

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 Bridge Finance It is the pre-public offering or pre-merger/acquisition finance to a company. It is the last round of financing before the planned exit. Venture capitalist help in building a stable and experienced management team that will help the company in its initial public offer. Most of the time bridge finance helps improves the valuation of the company. Bridge finance often has a realization period of 6 months to one year and hence the risk involved is low. The bridge finance is paid back from the proceeds of the public issue.

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VENTURE CAPITAL IN INDIA Evolution of VC Industry in India The first major analysis on risk capital for India was reported in 1983. It indicated that new companies often confront serious barriers to entry into capital market for raising equity finance which undermines their future prospects of expansion and diversification. It also indicated that on the whole there is a need to revive the equity cult among the masses by ensuring competitive return on equity investment. This brought out the institutional inadequacies with respect to the evolution of venture capital. In India, the Industrial finance Corporation of India (IFCI) initiated the idea of VC when it established the Risk Capital Foundation in 1975 to provide seed capital to small and risky projects. However the concept of VC financing got statutory recognition for the first time in the fiscal budget for the year 1986-87. The Venture Capital companies operating at present can be divided into four groups: Promoted by All India Development Financial Institutions Promoted by State Level Financial Institutions Promoted by Commercial banks Private venture Capitalist

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 Promoted by all India development financial institutions The IDBI started a VC fund in 1987 as per the long term fiscal policy of government of India, with an initial capital of Rs. 10 cr which raised by imposing a cess of 5% on all payments made for the import of technology know- how projects requiring funds from rs.5 lacs to rs 2.5 cr were considered for financing. Promoters contribution ranged from this fund was available at a concessional interest rate of 9% (during gestation period) which could be increased at later stages. The ICICI provided the required impetus to VC activities in India, 1986; it started providing VC finance in 1998 it promoted, along with the Unit Trust of India (UTI) Technology Development and Information Company of India (TDICI) as the first VC Company registered under the companies act, 1956. The TDICI may provide financial assistance to venture capital undertakings which are set up by technocrat entrepreneurs, or technology information and guidance services. The risk capital foundation established by the industrial finance corporation of India (IFCI) in 1975, was converted in 1988 into the Risk Capital and Technology Finance company (RCTC) as a subsidiary company of the ifci

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the rctc provides assistance in the form of conventional loans, interest free conditional loans on profit and risk sharing basis or equity participation in extends financial support to high technology projects for technological up gradations. The RCTC has been renamed as IFCI Venture Capital Funds Ltd. (IVCF) Promoted by State Level Financial Institutions In India, the State Level financial institutions in some states such as Madhya Pradesh, Gujarat, Uttar Pradesh, etc., have done an excellent job and have provided VC to a small scale enterprises. Several successful entrepreneurs have been the beneficiaries of the liberal funding environment. In 1990, the Gujarat Industrial Investment Corporation, promoted the Gujarat Venture Financial Ltd. (GVFL) along with other promoters such as the IDBI, the World Bank, etc. The GVFL provides financial assistance to businesses in the form of equity, conditional loans or income notes for technologies development and innovative products. It also provides finance assistance to entrepreneurs. The government of Andhra Pradesh has also promoted the Andhra Pradesh Industrial Development Corporation (APIDC) venture capital ltd. To provide VC financing in Andhra Pradesh.

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 Promoted by commercial banks Canbank Venture Capital Fund, State Bank Venture Capital Fund and Grindlays bank Venture Capital Fund have been set up by the respective commercial banks to undertake venture capital activities. The State Bank Venture Capital Funds provides financial assistance for bought out deal as well as new companies in the form of equity which it disinvests after the commercialization of the project. Canbank Venture Capital Fund provides financial assistance for proven but yet to b commercially exploited technologies. It provides assistance both in the form of equity and conditional loans. Private Venture Capital Funds Several private sector venture capital funds have been established in India such as the 20th Century Venture Capital Company, Indus Venture Capital Fund, Infrastructure Leasing and Financial Services Ltd. Some of the

companies that have received funding through this route include: Mastek, on of the oldest software house in India Ruskan software, Pune based software consultancy

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 SQL Star, Hyderabad-based training and software development consultancy Satyam infoway, the first private ISP in India Hinditron, makers of embedded software Selectia, provider of interactive software selector Yantra, ITLInfosys US subsidiary, solution for supply chain management Rediff on the Net, Indian website featuring electronic shopping, news, chat etc.

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NEED FOR GROWTH OF VENTURE CAPITAL IN INDIA In India, a revolution is ushering in a new economy, wherein entrepreneurs mind set is taking a shift from risk adverse business to investment in new ideas which involve high risk. The conventional industrial finance in India is not of much help to these new emerging enterprises. Therefore there is a need of financing mechanism that will fit with the requirement of entrepreneurs and thus it needs venture capital industry to grow in India. Few reasons for which active Venture Capital Industry is important for India include: Innovation : needs risk capital in a largely regulated, conservative, legacy financial system Job creation: large pool of skilled graduates in the first and second tier cities Patient capital: Not flighty, unlike FIIs Creating new industry clusters: Media, Retail, Call Centers and back office processing, trickling down to organized effort of support services like office services, catering, transportation

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METHODS OF VENTURE FINANCING IN INDIA Venture capital is typically available in three forms in India, they are: Equity: All VCFs in India provide equity but generally their contribution does not exceed 49 percent of the total equity capital. Thus, the effective control and majority ownership of the firm remains with the entrepreneur. They buy shares of an enterprise with an intention to ultimately sell them off to make capital gains. Conditional Loan: It is repayable in the form of a royalty after the venture is able to generate sales. No interest is paid on such loans. In India, venture capital firms charge royalty ranging between 2 to 15 percent; actual rate depends on other factors of the venture such as gestation period, cost-flow patterns, riskiness and other factors of the enterprise. Income Note: It is a hybrid security which combines the features of both conventional loan and conditional loan. The entrepreneur has to pay both interest and royalty on sales, but at substantially low rates. Other Financing Methods: A few venture capitalists, particularly in the private sector, have started introducing innovative financial securities like participating debentures, introduced by TCFC is an example.

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If we are struggling to find success in our quest for venture capital, maybe we are looking in the wrong place. Venture capital is not for everybody. For starters, venture capitalists tend to be very picky about where they invest. They are looking for something to dump a lot of money into (usually no less than $1 million) that will pour even more money right back at them in a short amount of time (typically 3-7 years). We may be planning for a steady growth rate as opposed to the booming, overnight success that venture capitalists tend to gravitate toward. We may not be able to turn around as large of a profit as they are looking for in quick enough time. We may not need the amount of money that they offer or our business may simply not be big enough. Simply put, venture capital is not the right fit for our business and there are plenty of other options available when it comes to finding capital. Substitute in Early stage 1. Angels Most venture capital funds will not consider investing in anything under $1 million to $2 million. Angels, however, are wealthy individuals who will provide capital for a startup business. These investors have usually earned their money as entrepreneurs and business managers and can serve as a

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prime resource for advice on top of capital. On the other hand, due to typically limited resources, angels usually have a shorter investment horizon than venture capitalists and tend to have less tolerance for losses. 2. Private Placement An investment bank or agent may be able to raise equity for our company by placing our unregistered securities with accredited investors. However, you should be aware that the fees and expenses associated with this practice are generally higher than those that come with venture and angel investors. We will likely receive little or no business counsel from private investors who also tend to have little tolerance for losses and under-performance. 3. Initial Public Offering If we are somehow able to gain access to public equity markets than an initial public offering (IPO) can be an effective way to raise capital. Keep in mind that, while the public markets high valuations, abundant capital and liquidity characteristics make it attractive, the transaction costs are high and there are ongoing legal expenses associated with public disclosure requirements. Later Stage Financing

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1. Bootstrap Financing This method is intended to develop a foundation for your business from scratch. Financial management is essential to make this work. With bootstrap financing youre building a business from nothing, which means there is little to no margin for error in the finance department. Keep a rigid account of all transactions and dont stray from your budget. A few different methods of bootstrapping include: Factoring-which generates cash flow through the sale of your accounts receivable to a factor at a discounted price for cash. Trade Credit-is an option if you are able to find a vendor or supplier that will allow you to order goods on net 30, 60 or 90 day terms. If you can sell the goods before the bill comes due then you have generated cash flow without spending any money. Customers can pay you up front our services. Leasing your equipment instead of purchasing it outright. 2. Fund from Operations Look for ways to tweak your business in order to reduce the cash flowing out and increase the cash flowing in. Funding found in business operations come free of finance charges, can reduce future financing charges and can

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increase the value of your business. Month-by-month operating and cash projections will show how well we have planned, how you can optimize the elements of your business that generate cash and allow you to plan for new investments and contingencies. 3. Licensing Sell licenses to technology that is non-essential to our company or grant limited licensing to essential technology that can be shared. Through outlicensing we can generate revenue from up-front fees, access fees, royalties or milestone payments. 4. Vendor Financing Similar to the trade credit related to bootstrap financing, vendors can play a big role in financing your new business. Establish vendor relationships through our trade association and strike deals to offer their product and pay for it at a date in the near future. Selling the product in time is up to us. In hopes of keeping you as a customer, vendors may also be willing to work out an arrangement if we need to finance equipment or supplies. Just make sure to look for stability when you research a vendors credentials and reputation before you sign any kind of agreement. And keep in mind that

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many major suppliers (GE Small Business Solutions, IBM Global Financing) own financial companies that can help you. 5. Self Funding Search between the couch cushions and in old jacket pockets for whatever extra money you might have lying around and invest it into your business. Obviously loose change will not be enough for extra business funding, but take a look at your savings, investment portfolio, retirement funds and employee buyout options from your previous employer. You wont have to deal with any creditors or interest and the return on your investment could be much higher. However, make sure that you consider the risks involved with using your own resources. How competitive is the market that you are about to enter into? How long will it take to pay yourself back? Will you be able to pay yourself back? Can you afford to lose everything that you are investing if your business were to fail? Its important that your projected returns are more than enough to cover the risk that you will be taking. 6. SBIR and STTR Programs Coordinated by the SBA, SBIR (Small Business Innovation Research) and STTR (Small business Technology Transfer) programs offer competitive federal funding awards to stimulate technological innovation and provide

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opportunities for small businesses. You can learn more about these programs at SBIRworld.com. 7. State Funding If youre not having any luck finding funding from the federal government take a look at what your state has to offer. There is a list of links to state development agencies that offer an array of grants and financial assistance for small businessessonsAbout.com. . 8. Community Banks These smaller banks may have fewer products than their financial institution counterparts but they offer a great opportunity to build banking relationships and are generally more flexible with payment plans and interest rates. 9. Micro loans These types of loans can range from hundreds of dollars to low six-figure amounts. Although some lenders regard micro loans to be a waste of time because the amount is so low, these can be a real boon for a startup business or one that just needs to add some extra cash flow. 10. Finance Debt

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It may be more expensive in the long run than purchasing, but financing your equipment, facilities and receivables can free up cash in the short term or reduce the amount of money that you need to raise. 11. Friends Ask your friends if they have any extra money that they would like to invest. Assure them that you will pay them back with interest or offer them stock options or a share of the profits in return.

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CONCLUSION The study provides that the maturity if the still nascent Indian Venture Capital market is imminent. Venture Capitalists in Indian have notice of newer avenues and regions to expand. Venture Capitalists have moved beyond IT service but are cautious in exploring the right business model, for finding opportunities that generate better returns for their investors. In terms of impediments to expansion, few concerning factors to include; Venture Capitalists unfavorable political and regulatory environment compared to other countries, difficulty in achieving successful exists and administrative delays in documentation and approval. In spite of few non attracting factors, Indian opportunities are no doubt promising which is evident by the large number of new entrants in past years as well in coming days. Nonetheless the market is challenging for successful investment. Therefore Venture capitalists responses are upbeat about the attractiveness of the India as a place to do the business.

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BIBLIOGRAPHY WEBSITE: www.sebi.gov.in www.ivca.org www.nenonline.org. www.indiavca.org. www.vcindia.com www.ventureintelligence.in www.vccircle.com

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