Study of the venture capital ecosystem in Bangalore

Abstract

Venture Capital is a way of developing new businesses. It can be defined as a “your ideas, my money” concept. Venture Capital partners are usually pooling money from persons, insurance firms or pension funds that they afterwards invest in high-risk venture companies that could not have found capital from traditional banks. These high-risks investments are paid through high return on the capital invested on average. More than money, Venture Capitalists also provide experiences and advices to the entrepreneurs. In a nutshell, Venture Capital is central to leverage technologies and innovation and to scale up newly created businesses. A Venture Capitalist’s main mission is to be able to identify new technologies with high potential that could generate high commercial return on a short term (five to seven years, on average). The risk inherent to these high returns on investments is the risk of losing all of one’s investment in a start-up. To spread this risk, Venture Capital funds usually invest under a “pooling format”, where “several investors combine their investments into one large fund that invests in many different startup companies”.