Abstract
Venture capitalists (VCs) áourish on the ability to add funds to their kitty across nations. Consequently, VCsíability to convince Limited Partners (LP), who are their primary source of Önancing, plays a critical role in the venture capital investment growth in any economy. However, it is not easy to rake in capital from an investor. LPs assess the market conditions carefully before making their capital available to the VCs. This paper examines the macro-economic variables that ináuence the supply of money to venture capital funds in emerging economies such as India from an LPs perspective. The empirical analysis using Autoregressive-Distributed Lag (ARDL) approach reveals that supply of capital to the VC funds in India is ináuenced by macro variables as well as past investment behaviours. Macro-variables such as GDP growth, interest rate spread, global liquidity, and ináation rate signiÖcantly ináuence the supply of capital to the VC funds in India. However, stock market liquidity does not ináuence the supply side of the venture capital investment. Our analysis reveals that VCsífund raising in India is highly ináuenced by their past investment relation with the LPs.
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