A study on exit strategies of venture capital firms in India

Abstract

For any country or economy to grow, the existence of a robust financial ecosystem is essential which is capable of creating new companies. Today, world has great demand for innovation and it has become imperative to create an ecosystem to promote and transform the entrepreneurial ideas into revenue generating companies. For many people, venture capital is the money for start-ups and great ideas. Generally, private investor or „angels‟ are known as principal source of funds for start-ups and great ideas. Many times, the venture capital companies also define venture capital as money for expansion of existing businesses too. It is also defined as money invested in small and medium enterprises which are giving minority shareholding in the business and irrevocable right to acquire it. Over a period of time the concept of venture capital has been shifted from technology oriented manufacturing organizations to being very close of „private equity class‟ for unlisted new companies. The young and new companies face challenges of equity gap (Wetzel, 1983; Barth, 1999). The complexities in the new business increase with the development of new idea in to a growing business (Klofsten, 1992; Greiner 1972). The venture capital firms provide both funding and competence to such young firms with great potential of capital growth.