Nurturing a Venture: A Venture Capitalist's Perspective

Abstract

The concept of venture capital originated in the US in 1946. A number of new technologies which could be commercially exploited had come up after the Second World War and funds given for such ventures were called venture capital investment. Though the venture capital movement has been in existence for more than three decades in India, it has only recently gained momentum. New ventures found it difficult to get funding from the banks as they did not have any collateral to offer. Hence, venture capital industry was started in India to fund such enterprises. Gujarat Venture Finance Limited (GVFL) was set up by the World Bank in 1990. Till date, it has funded 56 companies from all over the country. GVFL supports only technology-oriented companies. Funding is provided in stages. The money given at the seed or early stage is called angel funding. This paper documents how GVFL funded and nurtured a venture called Permionics which was involved in manufacturing an innovative water filter and helped it to grow into a commercially viable enterprise. This was not smooth sailing and the venture did not take off initially as the project required a lot of product innovation and market research for its feasibility. However, the venture capitalist persisted with the efforts in making the venture successful as he had faith in the product. Thus, he went beyond hand-holding and helped in the company's promotional effort, getting expert advice, solving internal disputes, coordinating strategic tie-ups, etc. After some trial and error, the product was finally relaunched and was a great success. The main conclusions emerging from this paper are: A venture capitalist's contribution is not just funding an enterprise but also seeing to its proper functioning. A venture capitalist provides necessary linkages to the entrepreneur for the growth of the enterprise. A venture capitalist not only provides moral support but also helps in forming the company. He is more of a partner than an outsider. A good venture capitalist sees the enterprise through its ups and downs until it becomes a commercially successful venture.