Venture Capital finance is a new type of financial intermediary which has emerged in India
during 1980s. It is a long-term financial assistance provided to projects, which are established
to introduce new products, inventions, idea and technology. Venture capital finance is more
suitable to risky oriented business which consists of huge investment and provides results
after 5 to 7 year.
Meaning of Venture Capital
The term Venture Capital fund is usually used to denote Mutual funds or Institutional
investors. They provide equity finance or risk capital to little known, unregistered, highly
risky, young and small private business, especially in technology oriented and knowledge
Venture Capital termed as long-term funds in equity or semi-equity form to finance hi-tech
projects involving high risk and yet having strong potential of high profitability.
Definition of Venture Capital
According to Jame Koloski Morries, venture capital is defined as providing seed, start up
and first stage financing and also funding expansion of companies that have already
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demonstrated their business potential but do not yet have access to the public securities
market or to credit oriented institutional funding sources. Venture Capital also provides
management in leveraged buy out financing.
1995 finance bill define Venture Capital as long-term equity investment in novel
technology based projects with display potential for significant growth and financial return.
Features of Venture Capital
Venture Capital consists of the following important features:
(1) Venture Capital consists of high risk and high return based financing.
(2) Venture Capital financing is equity and quasi equity financing instruments.
(3) Venture Capital provides moderate interest bearing instruments.
(4) Venture Capital reduces the financial burden of the business concern at the initial
(5) Venture Capital is suitable for risky oriented and high technology based industry.
Venture Capital in India
ICICI Venture Capital is the first Venture Capital Financing in India. It was started in 1988
by the joint venture of ICICI and UTI.
The UTI launched Venture Capital Unit Scheme (VECAUS-I) to raise finance in 1990.
Technology Development and Information Company (TDICI) is another major Venture
Capital financing institution in India.
Risk Capital and Technology Finance Corporation Ltd. (RCIFC) provides Venture
Capital finance to technology based industries.
ANZ Grindlays Bank has set up India’s first private sector Venture Capital fund.
SBI and Canara Bank are also involved in Venture Capital Finance. They provide
either equity capital or conditionals loans.