The VC Market in India

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An entrepreneur starts with an innovative idea with the goal of building a profitable business.  Many times a startup business will reach a point where it lacks adequate funding to grow further. Efraim Landa is a venture capitalist who offers funding options to a business to help them reach their goals. It is nothing like a loan that the business person must pay back. The VC firm offers the startup or emerging company the funds that they need to make the necessary changes for growth to occur in exchange for equity in the company. When the business grows to a profitable stature the VC firm will make their money back in the profits of the company.  They may also work closely with a company until it is successful enough to make an IPO at which time they will make their profit. VC funding is a great opportunity for a company who needs adequate money for growth. Many parts of the world are just discovering how beneficial the VC market can be for the future of the overall economic market.

History of VC in India

In the early 70’s the government of India created a committee to research how to provide conventional financing for early startup businesses. The problem was that companies which were based on some of the most innovative and modern technologies lacked funding and many startups simply failed. After the committee completed their research, their recommendations included building a venture capital market in India. By the middle of the 1980s, there were three major financial institutions in India providing VC investment funds into the equity of small technology companies. By the latter 80’s India’s government made a decision to institutionalize the VC industry and began to institute guidelines that ended up being very restrictive. Companies were required to invest in companies that were founded by a first generation entrepreneur and the company had to be involved in using innovative technology. These guidelines made investing much riskier and very unattractive to venture capitalists.

World Bank Steps In to India’s VC Market

In the mid 90s India’s government began to allow foreign finance companies to invest into India’s economy. By ’96 though the government announced more regulating guidelines for the venture capital industry which actually helped give the VC industry a very good starting point. By ’97 the IT industry began to skyrocket in India and the venture capitalists turned their focus to the IT industry that was rapidly growing. During the recession that lasted until 2001 the VC industry took quite a blow and many of the Indian based VC firms closed down. The ones which stayed began to change their focus to growing and expanding businesses which were still in existence. Venture capital made the turn to funding buyouts, restructuring and privatization. Presently there are only a few VC firms which continue to risk investment funds into startup technology based businesses.

The Future of VC in India

Over time the financial investment process has matured and evolved in India which enjoys both Indian investments and international investments which work to help sustain larger businesses. The foreign investments have been instrumental in developing the financial markets in India. There has been a substantial change in the structure which helps to ensure that the VC market in India will remain strong. Today there is more use of western philosophies regarding financing, tighter contracts, and focusing on profitable projects. These factors along with finances contributed by foreign VC investors offer a promising future for India’s market. Where there used to be only commercial banks offering VC funding, there are more VC institutions as India continues to grow. There is no doubt that the future of the Indian market looks promising.

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About Efraim Landa

My name is Efraim Landa I am an entrepreneur and an expert in venture capital. I am the co founder of Effi Enterprises, a venture capital firm as well as the co founder and CEO of Gluco Vista, a company that is in the process of developing a non invasive glucose meter for those with diabetes.

Posted on August 10, 2013, in Business Financing, Effi Enterprise, VC Firm, VC investments, Venture Capital, Venture Capital Markets and tagged , , . Bookmark the permalink. Leave a comment.

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