In India, venture capital has been around for some time now. The performance has been mixed. Let us understand what venture capital funding is all about and place them in an Indian context.
Venture capital is a booster for new entrepreneurs.
A venture capital fund is a fund, which in many ways is like mutual fund. It raises funds from several investors, who generally have a large appetite for risk and are looking out for greater returns. These funds are then invested in several fledging enterprises, which need funds, but are unable to access them through the conventional sources such as banks and financial institutions. Typically, such enterprises are started by first generation entrepreneurs. Because such enterprises generally do not have any major collateral to offer as security, banks and financial institutions are averse to funding them.