Since most of the ventures financed through this route are in new areas, the probability of their success is very low. The venture capitalist is however not worried because the deal, which succeeds, nets a very high return on his investments. The return generally comes in the form of selling the stocks when they get listed on the stock exchange. Venture capital funding may be by way of investment in the equity of the new enterprise or by way of debt or a combination of both, though equity is the most preferred route. To conclude, a venture financier is one who funds a start up company, in most cases promoted by a first generation technocrat promoter with equity.
Exit is preferably through listing on stock exchanges.
This method has been extremely successful in USA, and venture funds have been credited with the success of technology companies in Silicon Valley. The entire computer industry thrives on it. For any venture idea to succeed, there should be a product which has a growing market with a scalable business model. Products developed for Indian markets lack scale. Also, till early 90s, under the license raj regime, only commodity oriented businesses thrived in a deficit situation.