Securities and Exchange Board of India
finalised in the meeting of the Committee held on January 8, 2000.
2.1Venture Capital funding is different from traditional sources of financing. Venture capitalists finance innovation and ideas which have potential for high growth but with inherent uncertainties. This makes it a high-risk, high return investment. Apart from finance, venture capitalists provide networking, management and marketing support as well. In the broadest sense, therefore, venture capital connotes risk finance as well as managerial support. In the global venture capital industry, investors and investee firms work together closely in an enabling environment that allows entrepreneurs to focus on value creating ideas and venture capitalists to drive the industry through ownership of the levers of control in return for the provision of capital, skills, information and complementary resources. This very blend of risk financing and hand holding of entrepreneurs by venture capitalists creates an environment particularly suitable for knowledge and technology based enterprises.
2.2Scientific, technology and knowledge based ideas properly supported by venture capital can be propelled into a powerful engine of economic growth and wealth creation in a sustainable manner. In various developed and developing economies venture capital has played a significant developmental role. India, along with Israel, Taiwan and the United States, is recognized for its globally competitive high technology and human capital. The success India has achieved particularly in software and information technology of success against several odds such as inadequate infrastructure, expensive hardware, restricted access to foreign resources and limited domestic demand, is a pointer to the hidden potential it has in the field of knowledge and technology based industry. India has the second largest English speaking scientific and technical manpower in the world. Some of the management (IIMs) and technology institutes (IITs) are globally known as centres of excellence. Every year over 200,000 engineers graduate from Government and private-run engineering colleges. Many also specialise through diploma courses in computers and other technical areas. Management institutes produce 40000 management graduates annually. Given this quality and magnitude of human capital India’s potential to create enterprises is unlimited.
2.3In Silicon Valley, these very Indians have proved their potential and have carved out a prominent place in terms of wealth creation as well as credibility. There are success stories that are well known. They were backed by a venture capital environment in Silicon Valley and elsewhere in US which supports innovation and invention. This also has a powerful grip over the nation’s collective imagination. At least 30% of the start-up enterprises in Silicon Valley are started/backed by Indians. Back home also, as per NASSCOM data, the turnover of
Report of K B Chandrasekhar Committee on Venture Capital10