Impact of Venture Capital Financing on Human Resource Development – A Qualitative Analysis

Abstract

Venture capital financing is a significant innovation of the last quarter of twentieth century. It provides non-conventional, risky finance to new ventures based on innovative entrepre¬neurship. This mode of financing is different from traditional sources of financing as venture capitalists finance innovation and ideas which have potential for high growth but with inherent uncertainties. 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. To analyse the role of venture capital in human resource development in India, a qualitative survey has been done of the selected entrepreneurs. To further test the relevance of venture capital in HRD, cluster analysis has been performed on the interval data collected from the respondents on a 5-point scale. In the present paper, the cluster analysis has been used in both the stages i.e., Hierarchical stage and K-means stage to find out the most stable clusters.