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Venture Capital inflow on the rise - Views on News from Equitymaster
 
 
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  • Feb 5, 2000

    Venture Capital inflow on the rise

    They see India to be among the top five global locations for the creation of technology ventures. India has attracted many venture capital funds due to its competitive strengths in IT technology. In 1999 alone 11 new venture capital funds registered themselves with SEBI taking the total number to 19.The venture capital investments in high-tech firms has grown by over 2000% from Rs 0.7 bn to Rs 14 bn from 1996 to 1999.

    A vibrant venture capital sector is a must for a developing economy as it encourages entrepreneurs to translate their ideas into reality. NASSCOM aims to play the role of a catalyst in 2000 and expects that 50 new start up companies are expected to be launched in value added IT services, IT enabled services, software businesses and e-businesses.

    The recent moves by the government of allowing venture capital funds to invest on the same terms as foreign investors and permitting them to invest more than 40% of their paid up capital in a single company has given a fillip to the setting up of venture capital funds in India. The recent decision to eliminate double taxation on VCF's was taken and the fact that they have to register themselves with only SEBI provides a single window clearance for them. This move will provide more flexibility, speed up the process to set up an VCF, and eliminate procedural hassles and delays for companies planning on setting up venture capital funds. This will lead to the setting up of more venture capital funds by eliminating bureaucratic delays. Venture capital is essential for a developing economy like India especially for high risk and high return type of technology companies which find it difficult to raise funds from other traditional channels.

    However for technology firms and venture capitalists who fund these, for them to flourish it is essential that the infrastructure in terms of better telecom facilities and educational institutes is essential. A well developing capital market including the primary market is also essential for venture capitalists to eventually sell off their interests in startups.

     

     

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