The venture capital industry in India is expanding rapidly owing to the presence of huge amount of talent, a business-friendly environment and frequent innovations especially in the IT sector. The local and global venture capital firms in India are currently aiming to invest in a wide variety of sectors like software, enterprise software, technology, internet, e-commerce, healthcare, hospitality, advertising, infrastructure, real estate, etc. If you too are looking for an investor in India, the only thing you have to do is chase the right investor with the right idea.
The emergence of the venture capital industry in the country is definitely a great relief for entrepreneurs like you who have a high-potential business plan but not enough avenues to materialize the idea. Despite having a great idea, the reason you find it very difficult to raise fund from other sources (like private equity) is because of the huge amount of risk involved in the investment. However, it is not the case with venture capitalists; they themselves aim to invest in high-risk startups as they believe that some amount of risk is always needed to ensure a bigger profit.
Below are certain things that you can expect from the venture capital firms in India
- They Look For Some Amount Of Risk
No risk, no gain – this is what the typically believe. However, the interesting thing is while they will look for risk, you have to try your best to reduce the amount of risk so that the investors can gain confidence in your business. If your idea is unique and you can justify the potential of your target market, there is nothing like it.
- They Will Participate in Your Management Team
Once you enter into a partnership, the venture capitalists will prefer to become a part of your management team. They do this to ensure that the fund they have offered is being utilized in the best possible way so as to ensure great returns before their exit period. They usually share a percentage of your ownership in the company and take part in all major plannings and decisions.
- They Would Like To Help You Manage The Fund
Venture capitalists have a huge knowledge of finance and they are always ready to offer you any kind of guidance related to the fund management. You may or may not need it but you can remain assured that they are always there to help you spend each dollar in the right place at the right time. This is a reason why these investors usually invest in sectors they are more familiar with.
- They Offer Additional Guidance
They are many other value-added services that you can expect from your investor such as guidance and mentoring related to finance and managerial skills, improving your networking skills and exit planning. As a first-time entrepreneur, you will find these services extremely valuable.
- They Are Not Necessarily Always Rich
Venture capitalists are although the most powerful investors, as they are able to offer you maximum amount of fund for your startup, this doesn’t necessarily mean that they are always rich. Venture capital firms raise their funds from other sources like, wealthy individuals or group of individuals, pension funds, endowment funds, etc. Once they pool the money, they look for high potential start ups to invest it and gain much higher returns.
- They Have A Definite Exit Time
Venture capital firms usually prefer to exit ventures after a certain period which may range from 3 years to 7 years. The do the exit planning right at the beginning and so strive their best to help you reach a successful position before the exit period.
- They have A Diverse Portfolio
To reduce the amount of risk associated with venture capital investing, the VC firms make a portfolio of companies and invest separately. They make sure they never pour all the fund in a single company. Diverse portfolio gives them the assurance that even if one company fails, the revenues from the other will easily compensate the loss.
These are some of the vital things you must know about venture capital financing in India. You may not have the same set of requirements or preferences like other start ups such as, looking for guidance or sharing equity, but the overall benefit you will gain is just the same. Not only they will enhance the growth and expansion of your start up but will also enable you to emerge as a better businessman.
Meanwhile, you can try to become a part of an intelligent network, like Merger Alpha, that will make your search for right investors much easier and faster. For more information on venture capital in India, feel free to visit Merger Alpha http://mergeralpha.com/.