We have studied that the venture capital is required by the entrepreneurs right from the promotion of the Enterprise to develop expansion and Research. Hence, they should have known about their sources.
Following are the important sources of venture capital:
Primary Sources of Venture Capital
- The private person having wealth.
- Pension Fund, trust, Insurance Company, banks, etc.
Related: 10 Main Role and Importance of Venture Capital.
Institutional Sources of Venture Capital
Following are the institutional sources of venture capital:
1. All India Financial Institutions
- Venture Capital division of Industrial Development Bank of India.
- Venture capital and technological Finance Corporation, a subsidiary company of industrial Finance Corporation of India.
- Fund of 20 crores created jointly by industrial credit and Investment Corporation of India and Unit Trust of India.
2. By State Finance Corporation
- Venture capital Limited sponsored by Gujarat Finance Corporation (GVFL).
- Andhra Pradesh Industrial Development Corporation venture capital Limited (APIDC).
3. By Banks
- CAN Bank Venture Capital Fund sponsored by CAN FIN and Canara Bank.
- SBI venture capital fund.
- The investment fund of India sponsored by Grindlays Bank.
- Infrastructure leasing sponsored by the Central Bank of India.
Read More: 15 Essential Features of Venture Capital.
4. Private Sector Companies
- Indus venture capital fund sponsored by Mafat Lal and Hindustan Lever.
- 20th-century venture capital Corporation Limited.
- The venture capital fund is sponsored by V. V. Desai.
Other Sources of Venture Capital in India
In India, various other sources, in addition to the aforesaid sources also not only provide the venture capital but also provide several assistance and facilities, in the following forms:
1. Equality capital
This is the major source of venture capital.
In India, most of the venture capital funds provide assistance in equity shares.
But, the form of the type of assistance is not more than 49% of the total equity capital.
It is to be remembered here that the objective of purchasing equity shares of any enterprise by venture capital fund is to ultimately sell them for earning profits.
2. Conditional Debt
The salient characteristics of the Debt are as follows:
- Such debt is reimbursable in the form of royalty when the project reaches the stage of making sales.
- Interest is not paid on such debt.
- The royalty of about 2 to 15 percent is charged by venture capital funds.
- In such type of sources, the alternative of payment of high interest is offered to the entrepreneur in comparison to some fund royalty, when the project becomes commercially perfectly sound.
Related: 12 Key Characteristics of Ideal or Optimal Capital Structure.
3. Income Note
This is such a source of venture capital, in which the entrepreneur has to pay the royalty on sale also, along with interest.
The funds are provided as unsecured interest in various development stages at 9% interest.
4. Establishment of Shares in the Market
This facility is provided to those small entrepreneurs, who cannot have access to the public for finances, due to the high cost of issue of shares and not having developed infrastructure.
In India, such types of facilities provided by the State Bank of India.
These institutions purchase the shares of the Enterprises, after proper assessment, according to their laws, bye-laws, and guidelines of the Government of India, with the intention that when the company will reach the stage of profitability after 1-2 years, then it will have its own public issues.
5. Public Proposal in Phases
The government of India has provided this facility for companies running in profits.
For that, arrangements are made to issue the share of profit-bearing companies to the public, in phases, so that the capital of people may reach the market.
But, for such companies, it is compulsory to issue 60% shares at stock exchanges for listing.
6. Public Deposits
For last few years, the importance of public deposit is increasing in the corporate sector in India.
So the entrepreneurs may have financial arrangements for new projects.
But, the guidelines issued by the government will have to keep in view, so that the public may not be deceived.
Thus, now you know the sources of venture capital in India.
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Very informative post, Helped in my academics.