Venture Capital Industry In India Going through Great Surge of Activity

In India, recent three years have seen a prominent expansion of the venture capital industry, as almost a dozen funds in the denomination of billions of dollars have been invest in local startups.

Changing Investment Perception

Many of these initiatives saw a great hike in the valuations of companies and big global venture capital companies are also stepping into the bandwagon to invest on fast-growing businesses in multiple industries like consumer internet to enterprise software, online retail and healthcare.

These activities are making venture capital firms in India the frontrunner in the Indian risk capital sector, which has been ruled by private equity used to trigger growth in more settled companies and industries.

All these activities have changed the perception of Indian venture capital companies in India. Whereas growth capital funds have failed to provide the returns similar to what peers in other Asian countries have.

A Win-Win Situation for Indian Startups

This increased venture capital activity will surely offer benefits to entrepreneurs, who can derive better value for their ventures, specifically in industries like consumer internet and mobile technology.

To provide minimum return of double or 3 times of capital invested would be the biggest challenge for all these funds.  With more business-driven regime in place, many investors hope that the best is yet to come in this industry or venture capital.

Synopsis

This sudden surge in venture capital investment and growing expectation by the small industry businesses and startups is surely going to help them expand their wings to new heights and they can prove to be a contributing partner in the Indian mainstream economy.

Versatile Role of Venture Capital Firms in Startups

New entrepreneurs often face lot of difficulties in obtaining funds. Some approach venture capital (VC) firms in India to get started. Before approaching any VC firm, it is advisable to understand what venture capital funds is all about and what to expect from it.

Are you New to Venture Capital

Venture capital funds in India, also termed as private capital or seed capital, comes to the rescue of startups that may not have sufficient operating background to qualify for conventional loans through a bank. In majority of cases, such companies end up having a deal of profit sharing with the VC firms by offering them equity in the company.

To obtain venture capital funds is not easy. Unless your business plan demonstrates high rates of return within a stipulated five year stretch, there are good chances that the request for venture capital funds will be turned down.

What to Expect

Some of the major services and offerings that you can expect from a venture capital companies in India may include:

Business Consultations – Several venture capital firms are teamed with a well qualified crew of business consultants well versed in specific market trends and future. Leveraging their experience, expertise and intelligence the start up firm may avoid several snags associated with start-up business ventures.

Management Advisors – Ironically, not all entrepreneurs make good business managers. As venture capital firms mostly claim a percentage of equity in the start-up firm, they often have a say in the way firm is managed. For startups with non-management expertise, this can be an added benefit.

Human Resources – To team up with the best talent in startup firms, venture capital firms mostly offer consultants specialists in hiring. It helps start up firm avoid the pitfalls of recruiting wrong people for their company.

Additional Resources – There are myriads of legal matters, tax and payroll matters that a startup has to struggle with. It is quite normal for a venture capital firm to take interest in offering such resources due to their vested interest in the success of the company.

Synopsis

Nonetheless, this type of funding is not accurate for every startup, several start up firms acquiring venture capital are able to thrive and turn into giants in their respective segments.  The companies having high growth potential like electronics manufacturers, agribusinesses, green technologies, and other high-tech ventures are mostly witnessed performing well with venture capital funding. Before deciding if venture capital is right for you, ensure considering what to expect out of it.

Contribution of Venture Capital Firms in Mainstream Economy of India

Venture Capital Companies are groups of investors that privately invest in companies, particularly startups. The preferred sections are generally in the technology or agriculture sector. In exchange of this investment they often demand some controlling equity or company functioning. They also contribute in the form of business management experience, networking etc. thus adding value to the companies they fund. Some of the specific roles of VC firms in the growth and development of a startup include:

Identifies Appropriate Firm for Investment

They are in search of innovative, industry-leading technologies and agribusinesses that have been developed under right management with potential for growth and return of investment. The VC fosters potential by offering financial backing for stirring new ideas, and also providing some flexibility to widen their research and explore multiple avenues of research, for increasing their possibilities of success.

Identifies Value Stimulators

Having experience in biotech and business development the VC firms enable startup companies to identify and formulate value drivers. They ascertain where to steer corporate development, and help prioritize and allocate resources, with an aim it will add value to the company.

Creates Benchmarks

VCs role is to coordinate with the company management for establishing operational milestones in the functioning of the company. This requires coordination between VC and management on defined objectives and priorities. For this the company founders "shop" for appropriate VC to find the right match for them.

Formulates a Strategic Plan

The VC wants ROI within a stipulated time frame and thus plans an exit strategy as per the milestones set out initially while funding the company. They help establishing a strategic plan for the company to reach their objective using the milestones as markers, which often stretch up to 5-7 years.

Ensures Company Professionalization

They help in hunting and recruiting competent resources and are involved in the overall corporate plan to ensure the day-to-day management of the company professionally by experienced and expert professionals.

Provides Networking Opportunities

The VC also helps the company by identifying the sources of later financing. They are well connected through networking with other investors. Using these connections they help promote their companies in the marketplace by introducing it to technology-collaboration partners.

Monitors the Competition

Venture capital firms in India are well aware of the competition and remain vigilant to make it to the marketplace ahead of the competition of business owner. Again it's also because they won't like to lose out on their investment in the company due to the competition.

Synopsis

Above said are the most important contributions of venture capital funds in India when it invest in any startup company and support them to compete and establish in the Indian marketplace.

Tips for Choosing the Right Venture Capital Funds in India

Identifying and prudently selecting your venture-capital firm in India is the core move you can make being a startup. In addition, having investors on board who can guide your venture towards right direction can make all the future difference in your business.

Let's have a closer look why the source of your VC is as vital as the investment.

Your VC Knows your Business
Every entrepreneur wishes to work with investors who not only have deep pockets to help your startup to go from concept to right execution, but also can inherently understand the specific business model.

They may not be experts in your sector, but they mustn't be lost about your sector either. They should have some contacts. You should share a common business language.

Respects your Startup Timeline
When your development department is engulfed in creating the strategy that can prove your new business work, the interruption of a various venture-capital meetings may undo important business momentum. You need adequate time to focus on what can boost your startup. Your venture capitalist should understand that shorter meetings are more fruitful and should be encouraged.

High-potential VC Pulls High-caliber Teammates
While your team is equipped with smarts, growing a start-up business also requires intelligent hot shots under one roof. Getting a well-established venture capitalist on board can increase the likelihood that your business will attract new, industry-recognized team members.

Understands your Equity Potential
When you're working with an investor who has the capital to fund your startup, they should also comprehend that you may hold back some of the shares to reinforce later phases of funding. A well-selected investor should see the benefit in your idea to have the chance and the resources to grow further.

The Right VC is a Doorway to New Investors
Right venture capital partners may work to create gateways for other investors who can view your startup as even more worthwhile due to the company you keep. It may encourage people to throw good money to your business.

Synopsis
The above said tips are very vital in selecting a right venture capital firm in India. It shows how sourcing your venture capital to the right faces and names can be something more prominent than just that initial cash infusion.