An Analysis of Modus Operandi of Venture Capitalists in India

Abstract

Venture capital is the buzzword in India nowadays. Although the VCs came into operation in 1958 in USA with ‘Small Business Investment Act’ to permit ‘Small Business Investment Companies’ to fund small entrepreneurs in USA, this activity has started in 2006 in India and gained momentum after 2009. There are n number of venture capitalists mushrooming in India with their different investment structures, preference areas, Return on Investment expectations, time taken to close a deal and exit periods. This study analyses all these factors depicting the modus operandi of major VC firms currently operating in India. As the start-up ecosystem is changing and growing at an accelerated pace, the variables determining the quantum and preference for VC investment are rapidly changing. An attempt has also been made to identify these variables and their past trends. By using Markov Chain Analysis, the forecasting for transition in preferential areas to invest has also been done to identify the forthcoming investment favourable areas.