THE PROCESS OF DEVELOPING VENTURE CAPITAL IN INDIA

Abstract This study investigates the process of developing venture capital in a developing country — India. The discussion documents the experiences of the largest venture capital firm in India (TDICI) in initiating and developing the concept of venture capital as well as learning the venture capital business. The history of modern venture capital in India is of recent origin; it only goes back to the mid-eighties. In the initial years, venture capital firms (VCFs) in India encountered a number of problems in developing their businesses. From the in-depth case study of TDICI, it is found that the firm went through the initial constraint of not knowing the venture capital business well, and learnt through experience. It faced problems in raising funds and evaluating prospective ventures. It initially focussed its investment in the high-technology business, but gradually shifted the focus towards other potentially high-growth, high-profitable businesses, not just high-tech businesses. It is also noticed that TDICI undertook a number of business development initiatives to popularise the venture capital business in India. It introduced a simple organisational structure for facilitating quick decision-making, and developed innovative funding and financing mechanisms.