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Venture Capital
Venture Capital is a form of "risk capital". In other words, capital that is invested in a business where there is a substantial element of risk relating to the future creation of profits and cash flows. Risk capital is invested as shares (equity) rather than as a loan and the investor requires a higher "rate of return" to compensate him for his risk.
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In 1997, IT boom in India made VC industry more significant. Due to symbiotic relationship between VC and IT industry, VC got more prominence as a major source of funding for the rapidly growing IT industry. The recession during 1999 - 2001 took the wind out of VC industry. Most of the VC either closed down or wound-up their operations. Currently, just a few firms are taking the risk of investing into the start-up technology based companies.
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Investment conditions and restrictions The investment restrictions applicable to FVCI are similar to those applicable to VCFs under the VCF Regulations (as listed above) except for the following: no minimum corpus or capital commitment requirement for FVCIs; no minimum individual contribution prescribed under the FVCI Regulations; no mandatory exit clause in respect of investments by an FVCI in unlisted securities; and for determining the maximum investment in a single VCU (i.e. 25% of the corpus), the funds earmarked for India will be taken into consideration.
The concept of venture capital was formally introduced in India in 1987 by IDBI.
The government levied a 5 per cent cess on all know-how import payments to create the venture fund.
Conclusion
The ever growing Indian economy and the potential to grow further definitely makes India one of the most liked destination also strong fundamentals comprising of favorable demographic profile, human capital, trade openness, increasing urbanization and rising consumer spending has made India one of the fastest growing markets in the world. Almost all the sectors are open for FVCIs except few like apart from a few sectors like non-banking financial services, gold financing and activities not permitted under the industrial policy of the Government of India. Although lot have already been done yet the lot still requires to be done like clarification in taxation system of FVCI, rationalization in investment limits etc. As such the overall environment in India is conducive for venture capitalists and will get better in the coming years.