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.