CHAPTER VII
SUMMARY OF FINDINGS, SUGGESTIONS AND CONCLUSION
INTRODUCTION
Venture Capital is the capital committed, as shareholdings, for the
formation and setting up of firms specializing in new ideas, or new technologies,
with a large element of risk for the shareholders, but with a potential for rapid
development. A venture capital firm serves as an intermediary between investors
looking for high returns for their money and entrepreneurs in search of needed
capital for their start-ups.
Venture capital is a post-war phenomenon in the business world. It
originated and got popularized in the USA in the sixties. In the late 1960s, a new
breed of professional investors called venture capitalists emerged in the US whose
specialty was to combine risk capital with entrepreneurial management and to use
advanced technology to launch new products and companies in the market place.
Undoubtedly it was the venture capitalists’ astute ability to access and manage
enormous risks and export from them tremendous returns that changed the face of
America.
This surge in enthusiasm for venture capital gathered pace and it has been
developing spectacularly world-wide since the second half of the seventies. Many
governments are experimenting with this US inspired investment discipline as a
314
means to stimulate the fledgling enterprises, which they see as vital to their
nation’s economic growth. The United Kingdom occupies the second place after
the US in terms of investment in venture capital. Several Organization of
Economic Co-operation and Development (OECD) countries also have designed
and implemented measures to promote venture capitalism. The growth of venture
capital in the USA, the UK and other developing countries is primarily due to the
rapidly developing potential and commercialization of science and technology.
The emergence of unlisted securities market in these countries has further
enhanced the scope of venture capital. These opportunities lured the venture
capital institutions to invest in high-tech projects under conditions of extreme
uncertainty, as those projects were otherwise neglected by the traditional
financing institutions.
Arrival of venture capital in Indian capital market, though belated, is a
welcome development. The concept was adopted in India, after realizing the
difficulties faced by new entrepreneurs with viable projects, to raise funds from
the capital market. India, Asia’s fourth largest economy, is a new market in which
everyone is learning. With steady growth between five per cent and seven per cent
in the past several years, a pace that would likely continue, India offers
tremendous opportunities for financial services even as it transforms itself slowly
from a planned economy to a free-market one. It has already witnessed the
315
emergence of several innovative financial instruments and services, and venture
capital is the latest entrant in this field.
The development of venture capital is a recent phenomenon in India. It is
still in the infancy stage and requires proper framework and promotional efforts
for its fast growth. Unlike the USA, where it is normal for an entrepreneur to set
up a company or introduce a new product in the market by obtaining finance from
the venture capital funds with willingness to share the risk in returns of future
gains, in India risk financing is yet to pick up in a significant way. It can be said
that the conventional industrial finance in India is not of much help t the new
emerging enterprises. There is a need of finance for the entire duration to enable
the companies to recover from the negative cash flows in the early years. In other
words, finance is required to enable them to move from the start-up phase to the
expansion phase. Venture capital is the financing mechanism that fits with the
requirement of the new enterprise, which introduces a new product having greater
risks in returns and financial performances.
In broad terms, venture capital is the investment of long-term equity
finance where the venture capitalist earns primarily in the form of capital gain.
The underlying assumption is that the entrepreneur and the venture capitalist
would act as ‘partners’. True venture capital does not remain confined to hi-tech;
316
any risky idea could be financed by the venture capitalist. Venture capital can
prove to be a powerful mechanism to institutionalize innovative entrepreneurship.
A venture capitalist’s management approach differs significantly from that of a
conventional banker, lender or a stock market investor. In fact, a venture capitalist
combines the qualities of banker, stock-market investor and entrepreneur in one.
Traditionally, the role of venture capital is an extension of the development
financial institutions (PARA BANKING). The origin of modern Venture Capital
in India can be traced to the setting up of a Technology Development Fund (TDF)
in the year 1987-88, through the levy of a cess on all technology import payment.
TDF was meant to provide financial assistance to innovative and high-risk
technological programmes through the Industrial Development Banks of India.
This measure was followed up in November 1988, by the issue of guidelines by
the (then) Controller of Capital Issues (CCI). These stipulated the framework for
the establishment and operation of funds companies that could avail of the fiscal
benefits extended to them.
Venture Capital has been a new type of financing for the past three decades
in India, they have been contributing to the development of economy by financing
the entrepreneurial capital requirements. The researcher wishes to study the
opportunities and prospects of the venture capital companies in India, by studying,
317
how far they have been contributing capital to the entrepreneurs, what is the
method of project evaluation, criteria for selecting the projects, types of industries
in which they have invested, state-wise investment and performance evaluation of
the venture capital companies, for this study ICICI Venture Fund Management
Company Limited and IFCI Indian Venture Funds Limited have been taken up for
the study.
OBJECTIVES OF THE STUDY
The specific objectives are:
1 To study the conceptual and legal framework of venture capital
investment in India .
2 Evaluation and growth of venture capital in India and abroad.
3 To describe the profile of the selected Venture Capital fund Companies.
4 To identify the factors influencing venture capital undertakings in Tamil
Nadu.
5 To make SWOT analyses of venture capital undertakings in Tamilnadu.
6 To make concrete suggestions based on the analysis.
This part of the study described the methodology which includes collection
of data, sampling design, period of study, operational definition of concept,
318
construction of questionnaire, tools of analysis, data processing and framework of
analysis.
The second Chapter , described the concepts of venture capital and legal
framework of venture capital investment.
The third Chapter
, presented the origin, growth and development of
venture capital financing in India, the various phases of development and the
major players of the Indian venture capital industries. Further, it highlighted the
performance of venture capitalists globally.
The fourth Chapter , described the profile of the venture capital companies
namely ICICI Venture Fund Management Company Limited and IFCI India
Venture Funds Limited.
The fifth and sixth chapter covers the major findings of the study
7.1 SUMMARY OF FINDINGS
The present study mainly covers the venture capitalists choice of
investments and the perception of entrepreneurs on the venture capital
financing in Tamil Nadu. The important findings recorded in the preceding
chapters of the present research report with the suitable suggestions,
incorporated in this chapter, are as follows:
319
It is found that out of the 150 entrepreneurs, 98 (65.33 per cent) are males
whereas the remaining 52 respondents (34.67 per cent) are females. It can be
concluded that the males are interested in the activities of venture capital market
than females.
It is observed that the important age groups of the respondents are 41 to 50
years and 31 to 40 years. They constitute 23.33 and 22.00 per cent to the total
respectively. The respondents who are below 31 years constitute 21.33 per cent.
It is followed by the age group of 51-60 years and above 60 years.
It is shown that the majority of the respondents are married.
They
constitute 63.34 per cent to the total respondents. It is followed by unmarried
respondents and widowers/divorced, which constitute 26.33 per cent and 10.33
per cent respectively.
It is illustrated that the level of education among the respondents. The
important levels of education among them are graduation and post-graduation
which constitute 22.67 per cent and 21.33 per cent respectively. It is followed by
diploma, SSLC/+2 and professional/technical education which constitute 20.00
per cent, 19.33 per cent and 16.67 per cent respectively.
320
It is inferred that the important occupational pattern of the respondents
belongs to agricultural family, who constitute 34.67 per cent. The business family
constitutes 31.33 per cent to the total respondents. 25.33 per cent of them are
government employment family and only 8.67 per cent are private employment
family.
It is found that the important monthly income groups among the
respondents in the present study are Rs. 10,000 to 20,000 and Rs. 20,000 to
30,000, which constitute 26.67 and 24.00 per cent to the total, respectively.
It is portrayed that out of 150 entrepreneurs, 107(71.33) per cent of them
belong to the nuclear family system, and the remaining 28.67 per cent of the
respondents belong to the joint family system. The analysis concluded that the
nuclear family system is the dominant system among the respondents in the study
area.
It is understood that the majority of the respondents’ households has the
family size of 3-6 members. It constitutes 51.33 per cent and it was followed by
below 3 members and above 6 members respectively which constitute 24.67 per
cent and 24.00 per cent respectively.
321
It has been observed that nearly 120 (80.00 per cent) of the members
belong to Hinduism, 21 (14.00 per cent) belong to Christianity and 9 (6.00 per
cent) of them belong to Islam. Thus, it is clearly understood that the majority of
the members are Hindus in the study area.
It is shown that majority of the members belong to the Backward Class
which constitutes 55 (36.67 per cent) followed by Most Backward Class, Forward
Class and Scheduled Caste/Scheduled Tribe which constitutes 32.00 per cent,
23.33 per cent and 8 per cent) respectively.
It is understood that out of 150 sample respondents, the majority of them
(65.33 per cent) fall under the category of urban area and the remaining 34.67 per
cent fall under the category of rural area.
It has been inferred that families with two earning members constitute 64
(42.67 per cent) followed by 55 (36.67 per cent) with only one earning member in
the family and 20 (13.33 per cent) with three members in the family. The families
with four and above four earning members together constitute only 11 (7.33 per
cent) of the total.
The majority of the respondents’ income from other source is house
property. They constitute 33.33 per cent and they were followed by respondents
322
whose income from other sources are investment, business and agriculture which
constitute 26.67 per cent, 26.00 per cent and 18.00 per cent respectively.
It is shown that the important total family income groups among the
entrepreneurs in the present study are Rs. 20,000 to 40,000 and Rs. 40,000 to
60,000, which constitute 32.67 and 20.67 per cent to the total, respectively.
It is found that out of 150 entrepreneurs, 42 (28.00 per cent) contribute
their share for family is upto 25 per cent and it is followed by 75 to 100 per cent,
25 to 50 per cent and 50 to 75 per cent respectively.
It is understood that out of the 150 entrepreneurs, 82 (54.67 per cent)
belong to the category of hereditary and 68 (45.33 per cent) of them are coming
under the category of first generation.
It is shown that a majority (44.67 per cent) of the entrepreneurs is doing
business for 10 to 15 years and it is followed by 15-20 years, more than 20 years,
5 to 10 years and less than 5 years which constitute 18.66 per cent, 13.33 per cent,
12.67 per cent and 10.67 per cent respectively.
323
It is portrayed that out of 150 venture capitalists, 65 (43.33 per cent) of
them come under the category of small enterprises followed by medium, micro
and big enterprises which constitute 26.00 per cent, 20.00 per cent and 10.67 per
cent respectively.
It is understood that out of the 150 entrepreneurs, 32 (21.33 per cent) come
under the category of expansion stage and it is followed by early growth stage,
matured stage, start up stage, turn around stage and seed stage which constitute
19.33 per cent, 17.33 per cent, 14.67 per cent, 14.67 per cent and 12.67 per cent
respectively.
It is inferred that out of the 150 entrepreneurs, 30 (20.00 per cent) come
under the category of health care and life sciences industries and it is followed by
media and entertainment, manufacturing, banking and financial services,
engineering and communication, IT & ITES, shipping and logistics, telecom and
energy.
It is observed that out of the 150 entrepreneurs, 46 (30.67 per cent) come
under the category of proprietary concern and it is followed by private limited
company, partnership/LLP, co-operative society/trust, self-help group and public
324
limited company which constitute 26.66 per cent, 22.67 per cent, 12.00 per cent,
4.67 per cent and 3.33 per cent respectively.
It is found that the important variables that influence the entrepreneurs
starting the venture capital undertaking through ICICI are independence, family
background and passion for innovation since the mean scores are 3.8036, 3.8027
and 3.7182 respectively. Among the entrepreneurs belonging to the IFCI, these
are family background, long cherished dream to become an entrepreneur and
passion for innovation since the respective mean scores are 3.8186, 3.8617 and
3.7241.
It is inferred that the important variables that influence the entrepreneurs to
attract the venture capital fund through ICICI are differentiation with competition,
innovation and creativity and marketing strategy since the mean scores are
3.8681, 3.8181 and 3.7976 respectively. Among the entrepreneurs belonging to
the IFCI, these are experience and competency of the entrepreneur, integrity and
ethical behaviour and tax benefit mean scores are 3.8625, 3.8186 and 3.8086.
Regarding the level of satisfaction of the entrepreneurs towards the
performance of venture capital fund companies, it is depicted that out of the 150
entrepreneurs, 39 (26.00 per cent) fall under the high level satisfaction group, 79
325
(52.67 per cent) come under the category of medium level satisfaction and 32
(21.33 per cent) fall under the low level satisfaction group
In order to test the relationship between the level of satisfaction and the
profile variables, the Null Hypotheses (H0) were framed and tested with the help
of the Chi-Square test.
It is found from the Chi-Square test that out of eight profile variables,
marital status, education, family size, nature of family, occupation and monthly
income were significant association with level of satisfaction towards the
performance of venture capital companies.
Hence, the null hypotheses were
rejected for the above six profile factors. In case of other two variables such as
gender and age are not significant. Hence, the null hypotheses were accepted for
the variables such as gender and age.
Regarding the factor analysis, the following factors are influencing the
satisfaction level of the entrepreneurs towards the performance of venture capital
companies in Tamil Nadu:
Ownership Status
Information Rights
326
Management Activities
Confidentiality
Fees levied by the VCFC
Individuality Status
Employment agreements
It is found that the important variables that influence the entrepreneurs for
their success through venture capital undertakings for ICICI entrepreneurs are
VC’s vast network enables the recruitment of talented people, VC’s vast network
facilitating mobilization of finance at favourable terms and Creativity and
innovation since the mean scores are 3.8489, 3.0866 and 3.6923 respectively.
Among the entrepreneurs belonging to the IFCI, these are Overall improvement in
corporate governance, Process-driven undertaking not impacted by management
Shake-ups and VC’s vast network enables the recruitment of talented people mean
scores are 3.8386, 3.6824 and 3.6814.
Regarding the SWOT analysis, it is observed that the statement namely
profitable business with positive cash flows ranked first by both the category of
entrepreneurs among ICICI and IFCI venture capital companies. The vast net
work is the next strength for both types of entrepreneurs. Ranking differs for other
strengths and the big growing market share is considered as the least strength by
both category of entrepreneurs.
327
It is shown that ICICI entrepreneurs accorded first place to technological of
obsolescence with an average score of 2.06 and . The entrepreneurs viewed
poor inventory control as the second weakness with an average score of 1.99.
The lack of working capital was accorded last place. The entrepreneurs of IFCI
observed poor inventory control as the first weakness with an average score of
2.19, technological of obsolescence was ranked second with an average score
of 2.14. The limited product life was accorded the last rank by IFCI
entrepreneurs.
It is found that the major opportunities for venture capital undertakings.
ICICI entrepreneurs accorded easy liquidity with low interest rates as the first
opportunity with a score of 2.67. The technological changes was ranked second
with an average score of 2.63. Leading to increased demand was viewed as the
least ranked opportunity for ICICI venture capital undertakings.
The IFCI entrepreneurs perceived technological changes as the first
opportunity with an average score of 2.62 and easy liquidity with low interest
rates was accorded with second rank. High entry barriers for new entrants were
considered to be the third opportunity for the entrepreneurs with an average
score of 2.49. Leading to increased demand was considered as the last
opportunity by both the ICICI and IFCI entrepreneurs.
328
It is inferred that the entrepreneurs have ranked the threats according to
their perception of the threats prevailing in the global market. ICICI
entrepreneurs considered high tax rates and confusing and unstable government
regulations and procedures as their first and second threats, respectively. Poor
infrastructure is ranked as the tenth threat.
In case of IFCI entrepreneurs ranked low entry barriers as their first and
foremost threat with an average score of 1.62. Confusing and unstable
government regulations and procedures and high tax rates were ranked second
and third respectively by the IFCI entrepreneurs. They considered too much of
corruption as the tenth threat.
It is depicted that positive Skewness in the case of strength and
opportunities whereas negative Skewness in the distribution of weakness and
threats. This means that Skp value is relatively less skewed in case of strength
and opportunities and more skewed for threats and weaknesses.
Regarding the factor analysis, the following factors are influencing the
problems faced by the entrepreneurs of venture capital undertakings in Tamil
Nadu:
Lack of Human Resource Management
Lack of raw material and finance
Poor Infrastructural facilities
329
Lack of Research and Development
Lack of awareness on venture capital
Regarding the perception on the factors influencing the entrepreneurs to
promote venture capital fund, the significant difference among the two group of
entrepreneurs has been identified in the perception experience and competency of
the entrepreneur, Create of awareness on venture capital activities through
informed websites/ Seminar /Conferences, Establishment of business incubators,
Fiscal and tax incentives, Corporate sectors encouraged to participate in venture
capital, FIs and high net worth individuals encouraged to invest in venture funds,
Encouragement to One Person Company /Limited Liability Partnership,
Simplifying bankruptcy loss, Strengthening
Companies,
secondary market for small
Creating new instruments like venture debt instruments,
Development of systematic risk management system like SMERA credit rating
etc., and Developing recognition and rewards system for venture capital
undertakings since the respective ‘t’ statistics are significant at five per cent level.
Regarding the perception on the options to influence the entrepreneurs to
exit from their venture capital undertakings, the significant difference among the
two group of entrepreneurs has been identified in the perception experience and
competency of the entrepreneur, Selling of the stake to strategic buyer, Initial
330
Public offering in India or overseas, Secondary sale in stock market, Merger with
an existing listed company and Management / Company buy-back, since the
respective ‘t’ statistics are significant at five per cent level.
7.2 SUGGESTIONS
1.Venture investing is by definition risky.
Increased risks due to the
environment correspondingly decrease the likelihood of success. In nations with
unpredictable regulations, corrupt governments and unstable currencies, the
probability of success is decreased. and such situations are beyond the control of
both the entrepreneur and the venture capitalist.
These environmental risks
discourage the practice of venture capital.
2.The task of offering suggestions for improving the infrastructure of the
venture capital industry, and its role in industrial development of the country, is
rendered difficult on account of the infancy of the industry and the vast problems
it faces.
3.From the experience of venture capital activities in the developed
countries and discussion with the officials of venture capital funds and venture
capital entrepreneurs and detailed survey of venture capital undertakings in Tamil
Nadu, the following suggestions are made to boost venture capital industry in
Tamil Nadu.
331
4. Proper awareness of venture capital activity is important for its
development.
Lack of social awareness of the existence of venture capital
industry has been observed. Hardly a few know about the principal objectives and
functions of the existing venture capital funds in the country and thus backing of
the media is required to bridge the gulf between the society and the existing
venture capital funds.
One immediate measure could be the creation of an
informed website which could have sufficient and useful data on venture capital
activity. There is poor awareness about the availability of venture capital finance
from private and public sector institutions. There is no direct advertisement or
publicity. This should be corrected.
5. An entrepreneurial tradition must be broad-based and less family based.
This calls for imparting education and training in entrepreneurship.
6. Up-to-date information source for startup entrepreneurs in the form of
source books web portals and one stop shops and widen dissemination of all
relevant information should be created.
7. The government, SEBI and other institutions should strive to create a
conductive business environment to ensure simplified start up processes, improve
delivery time reduce corruption, collate informational needs and start up, improve
corporate governance norms, create an environment that will reduce risk and
encourage more seed funds and corporate players to provide start up funding.
332
8. A vigorous marketing thrust, promotional efforts and development
strategy, employing new concepts such as venture fairs, venture clubs, venture
networks and business incubators, shall further accelerate the growth of venture
capital in Tamil Nadu.
9. The venture capital pool should be opened to pension and provident
funds in Tamil Nadu. If such funds are allowed to invest even a small per cent of
their corpus in registered venture funds with due safeguards, it will not only give
an impetus to venture capital industry in Tamil Nadu but also increase the yield of
pension funds.
10. There is a need for a larger amount of fiscal incentives for investment in
the high-risk and perceived high technology sectors.
This will encourage
industries as well as venture capital agencies to search for innovative investment
opportunities in high-tech area for translating ideas into ventures.
11. At present there is no distinction between the tax liability on the
income from risky investment and risk-free investment. On the face of it this is
not fair. Suitable provisions may be incorporated in the Income Tax Act, to make
risky investments attractive.
12. Losses of venture capital companies may be treated as business losses
and allowed to be carried forward under the existing rules, since a venture capital
company (by virtue of its holding the shares of the assisted company for a period
of at least one year) will incur only capital loss and not business loss, this amount
333
can be set off only against capital gains, but not other income. It is suggested that
in view of the unique risky business undertaken by venture capital companies, this
provision may be relaxed in their case.
13. There is always a gestation period between making the venture capital
investment, and the investee company coming of age. It is suggested that during
the interim period, the venture capitalist may be compensated in some form of a
tax break.
14. The corporate sector should be encouraged to participate in the venture
capital by providing suitable tax incentives. Allowing the venture capital firms to
list their shares/units will also encourage the corporate sector to invest their
surplus funds in venture capital funds.
15. To encourage private participation in the venture capital activity, tax
incentives/breaks shall be provided to banks, institutions, and high net-worth
individuals to invest in venture funds.
16. In order to create sufficiently large pool of venture capital through
domestic investments, Government may consider providing tax incentive to the
investors contributing to the venture capital funds for a period of three years. This
incentive is already available in case of mutual funds where the investors in the
mutual funds are exempt from tax on dividends received from mutual funds.
334
17. Dept/equity gearing of 1:5:1 is unrealistic and it is difficult for the
promoters to meet this requirement of the venture capital companies. It should be
brought down to at least 3:1.
18. Orderly and efficient mechanism must be evolved to facilitate
liquidation of investments of venture capital funds.
19. Develop recognition and reward systems for venture capital
undertakings, at the local state as well as national levels.
20. Development of systematic risk management systems (SMERA - credit
ratings, CIBIL - information disclosers, CART - credit appraisal tools, RAM - risk
assessment models etc) as ways to increase risk appetite.
21. It is pertinent, to note that only 5% of India’s existing workers has
received skill trainings as against 96% in Korea, 75% in Germany, 80% in Japan
and 68% in United kingdom. Vocational education and training (VET) needs to be
given high priority in India. Skill development is crucial to reap the demographic
dividend in India.
22. Encourage the setting up of special industrial and management
consultancy departments in banks to address functional inadequacies and market
gaps, as well as develop multi dimensional skills and increased information flows
to encourage venture capital funding. Actively assist entrepreneurs to develop
multiple skills necessary for scaling up.
335
23. Explore venture debt instruments and other innovative financial
instruments with the help of PPP mechanisms, through SIDBI and similar
institutions
24. Strengthen MSME stock exchange. Modernize and make transparent
accessible IPR infrastructure
25. Explore the possibility of innovative social security for entrepreneurs to
encourage ability to take risks.
26. The process of business incubation for venture capital undertakings is a
critical organizational support mechanism for fledgling entrepreneurs at the initial
stage.
27. Development of clusters, including provision of common facility
centres, developed sites for news venture capital undertakings, up gradation of
existing industrial infrastructure and provision of exhibition grounds/halls and
also for creation and management of infrastructure-related assets in the public
private partnership mode.
28. Venture capital undertakings needs guidance regarding marketing,
scaling up decisions involving professionalizing, teamwork, corporate structuring
etc., venture capitalists should assist them in this regard.
29. Specialized commercial courts should be established to deal with all
types of commercial disputes. A new bankruptcy code should be created to deal
336
more quickly with liquidations. One person company and limited liability
partnership concepts should be strengthened.
30. It is suggested that the definition of ‘venture capital undertaking’ under
clause (c) of explanation I of section 10(23B) Income Tax Act may be aligned
with definition of ‘venture capital undertaking’ as defined under SEBI
regulations. Thus the anomaly between SEBI regulations and CBDT rules
regarding the very definition of investee companies shall be removed.
31. Government should promote a program similar to Small Business
Investment Programme of USA. The basic objective of such program should be
induce private sector to invest in small companies that may not otherwise be able
to raise capital.
For a vibrant venture capital industry the participation and
management of private sector in such funds needs to be supported and
encouraged. The state-sponsored venture capital funds should follow the tested
model of US small business investment companies to promote entrepreneurship in
their respective states.
32. For the success of venture capital fund, be it privately owned or public
sector financial institutions, strategies need to be found to promote
entrepreneurship.
For this, venture capital funds need professionals with
initiative, drive and vision to identify such entrepreneurs who have sound ideas
and innovative vision. Unfortunately, such professionals are not easily available
particularly in developing countries like India. Therefore management schools
337
need to develop social training programmes to train venture capital managers in
which risk taking and entrepreneurial attitude need to be incubated.
33. The venture capital companies should work in close collaboration with
the research and development institutions to identify possible ideas/areas for hightech projects. In order to arrive at a decision whether a project is high-tech or
otherwise, a panel of scientists and experts should be set up and its suggestions
should be considered. This will go a long way in making the venture capital
sector stronger, which, in turn, will help in strengthening the industrial and
economic base of the country.
34. In Tamil Nadu there is no dearth of creativity, though it is little used.
Venture capitalists should provide the entrepreneur moral support in forming the
company besides financial and technical support. Finally, they should play the
role of a partner and manager rather than just a financier. Hence, the Government
of Tamil Nadu and venture capital firms/funds are required to strive hard to create
the favorable environment for venture capital undertakings to faster the speedy
economic growth of the state.
7.3 SCOPE FOR FURTHER RESEARCH
Further research could focus on investment preferences and their
relationship with performance of funding units. Also it would be pertinent to
338
enquire if investment preferences have any bearing on reducing risk. Unlike stock
market investments where the investors try to diversity the market risk, here
venture capitalists will have to diversity the risks involved in the venture due to
individual failures. This aspect may be investigated in future research.
It would be highly contributing to venture capital literature if additional
light is shed on the relationship between experience of the managers and
performance of the fund by collecting data on the general partners’ aggregate
experience in private equity industry.
Industry experience is a fundamental
component, which determines the ability of a venture capitalists behaviour in
total risk management, which can be further investigated.
Financial Performance of venture capital companies in India can be
analyzed.
Research on financial performance of venture capital undertakings can be
done.
7.4
CONCLUSION
In this era of globalization, where change plays a dominant role in influencing
the fate of the industry, the success of any country or organization depends on
its strength in creativity and innovation. Venture capitalists can create the right
339
enabling environment for such innovation and nurture it with care so that it
powers change and dramatic growth in industry.
In Tamil Nadu, institutionalization of finance for new opportunities and
ventures in the form of venture capital has no doubt accelerated the investment
process. However, there are bottlenecks that have to be overcome before venture
financing can be set on a firm footing in Tamil Nadu. The present constraints are
mostly environmental, and could be eliminated through policy measures. It is
now essential for government and venture capital companies to review and
resolve the issues that could come in the way of growth of this industry, on sound
professional lines.
If the operational hurdles that at present hinder progress of the industry are
removed, venture capital could become more than a mere buzz-word.
The
suggestions outlined above are indicative and not exhaustive in nature. They
could, if implemented, help venture financing schemes to become attractive
propositions and also enthuse private sector venture capital companies to catalyze
innovative schemes and technologies, and translate them into viable projects. All
this can go a long way in harnessing the entrepreneurial skill of Tamil Nadu,
pushing it in the right direction and raising it to new technological heights.
340