‘Management competencies with growth prospects’, Finance and entrepreneurs’

background’, ‘Competitive opportunities and threat’, ‘Strategy formulation &

execution concerned with Product-Consumer- Market’, ‘Innovative growth for
change’, ‘Strengths of entrepreneurial firm’, ‘Industry’, ‘Ability of entrepreneurs to
create open and new market space’, ‘Current market share’ and ‘Tax benefit &
market size’ don’t affect the value of the firm/company significantly.

Thus, the study found the relationship of investment criteria and variables with six
parameters indicating success of those variables & investment criteria which were
used by venture capital providers in India. The study demonstrated that as whole,
investment criteria & variables contributed for providing benefits to some extent to
the entrepreneurial firm and hence, give some reasons to be successful investment
criteria & variables.

6.2 CONCLUSION

In the light of the objectives of the study, it is concluded that venture capital
providers in India uses all the investment criteria that are found in prior studies but
the importance of these criteria varies significantly. The study also indicates that in
totality, venture capital providers use ‘valuation of companies to earn high rate of
return’, ‘flexibility, creativeness and trustworthiness in the senior management’,
‘Superior knowledge regarding its’ sector’, ‘senior management’s ability to work
together as a team’, ‘industry characteristic of growth and expansion’, ‘high
internal rate of return (IRR)’,‘superior venture’s business concept than its
incumbent competitors’, ‘patentability of the product’, ‘market capitalisation
growth’ and ‘leadership qualities in management’ as top ten investment criteria in
their investment decision making process. Therefore it is concluded that most of the
investment criteria are related to management, finance and growth prospects of
company. Further, the study also observed five least important investment criteria
for venture capital providers in the investment decision making process. These are:
‘labour market rigidity’ ‘collaborations with competitors’, ‘geographic location’,
‘time taken to market the products or services’ and last ‘source of reference of
entrepreneur’. Next, the study found relative importance of various investment
criteria under variables concerned with these investment criteria as well as relative

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importance of variables according to venture capital providers in India. As regard
variables of the investment decision making process, venture capital providers in
India consider the following hierarchy: (1) ‘business plan’ (2) ‘management’ (3)
‘finance’ (4) ‘market’ (5) ‘competition’ (6) ‘product/service’ (7) ‘customer’
and, (8) ‘industry’ is considered by Indian VCs after all the variables. Hierarchy of
various investment criteria under variables are: Business Plan (‘superior business
model’, ‘sector dominance’, Winning product-market strategy), Management
(‘superior knowledge of management/entrepreneur’, ‘superior management team’,
flexibility, creativity & trustworthiness qualities in management’, ‘leadership
quality’, ‘good track record of entrepreneur’, ‘ reputation of entrepreneur’ and
‘referred by reliable source’), Finance (‘valuation of company with respect to earn
high rate of return’, ‘potentiality of company to earn high internal rate of return’,
‘investment range’, ‘Profit margin projection’, ‘exit strategy’ ‘transportation/
marketing/ production costs’, ‘ Tax benefit in financing the venture’), Market
(‘market capitalization growth’, ‘existed market share’, ‘familiarization of venture
capitalists with the market’, ‘access to skilled labour market technology’, ‘existed
market share’, ‘new market’ and ‘labour market rigidity’), Competition (‘level of
competitive rivalry’, ‘entrepreneurial competency to have a significant lead over
their competitors’, ‘threat posed by competitors facing problems operating in same
sector’, ‘expectancy of collaboration in near future’ and ‘delayed response of
competitors’) Product/service (‘uniqueness/innovative product’, stage of product
life cycle,’ market acceptance’, ‘globally accepted potentiality of the
product/service’ and ‘patentability of the product’) , Customer (‘customer
relationship’, ‘Preference of customer regarding ventures’ product’and ‘customer’s
power to make product adoption decisions’) and Industry (‘industries
characteristics of growth and expansion’, ‘competition level in the industry’, type of
industry’, ‘barrier to new entrants’ and ‘geographical location of portfolio
company’). In addition to it, the study found relationship among investment criteria
and grouped them under ten variables/factors that are used by Indian venture capital
providers. These ten factors are:‘Management competencies with growth
prospects’, Finance and entrepreneurs’ background’, ‘Competitive opportunities
and threat’, ‘Strategy formulation & execution concerned with Product-Consumer-

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 Market’, ‘Innovative growth for change’, ‘Strengths of entrepreneurial firm’,
‘Industry’, ‘Ability of entrepreneurs to create open and new market space’,
‘Current market share’ and ‘Tax benefit & market size’. Lastly, the study
investigated the success of venture capital investment criteria & variables used by
venture capital providers in India. It is found that investment criteria & variables
proved to be success to some extent because as whole it shows significant
relationship with success parameters except one parameter under study.

6.3 SUGGESTIONS AND IMPLICATIONS

On the basis of the results extracted from study “Investment Decisions of Venture
Capital Providers in India” Some suggestions are described as under:

The present research mainly focused on investment criteria and variables used by
venture capital providers registered under ‘Securities & Exchange Board of India’
as Domestic Venture Capital Funds (VCF). It dealt with different aspects of
investment criteria and variables such as (1) to what extent venture capital
investment criteria are important for Indian venture capital providers (2) what are
the hierarchy of investment criteria & variables used by venture capital providers
(3) to study the investment criteria and variables and (4) to study the success of
investment criteria and variables on the basis of which venture capital generally
decide to make investment in a particular firm.

1. As the study has found the relatively important criteria from forty two investment
criteria used by venture capital providers under study, it has found top ten
investment criteria and top five least used criteria by venture capital providers.
Therefore, it is suggested that entrepreneurs can focus overall on these criteria and
prepare their business plans accordingly to approach venture capital providers for
funding their business.

2. In a deep sense, the study further suggests to the entrepreneurs to use investment
criteria and variables according to relative importance of variables/factors of
venture capital investment decision process as well as relative importance of criteria
under the variables.

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3. The study extracted ten variables by grouping different correlated investment
criteria under it. These variables/factors are not exactly same to the variables of
investment due diligence process generally used. Thus, the study provides a
different model in which ten variables and thirty five criteria are incorporated.

4. Next, it is evident that venture capital providers make their own investment criteria
because they invest in high risky projects/companies in order to gain high rate of
return. This study suggests that critically analysed investment criteria and variables
of venture capital providers may lead to earn those advantages for which they made
their own investment criteria. However, ultimate success of business is affected by
so many factors which may have not been incorporated in the present study. But, to
some extent venture capital providers’ investment decision criteria and variable
contribute to be success, as the study has suggested.

Therefore, it is recommended to the entrepreneurs to keep keen observations on

investment criteria and variables used by venture capital providers in India so that
they incorporate various aspects discussed under study in their business plan and
hence improve the chances to be selected by desired venture capital providers for
funding and support in technical know-how.

After suggestions, it can be said that the present study is useful for mainly
entrepreneurs who have faced the problems to get finance and technical and
managerial support from venture capital providers in India. It also has implications
for venture capital providers with respect to get access desired business plan from
entrepreneurs in which they will focus on the investment criteria and variables used
by majority of the venture capital providers.

6.4 SCOPE FOR FURTHER RESEARCH

 The present study touches the aspects of venture capital investment decisions of all
type of venture capital providers. Thus, there is a scope for conducting comparative
study of venture capital investment criteria and variables used by different types of
venture capital providers.

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 The study may be conducted on the foreign venture capital providers/investors
(FVCI) registered under ‘Securities & Exchange Board of India’ as well as on the
venture capital providers who are the member of Indian Venture Capital
Organisation (IVCA).

 Next, there is also scope for further research concerned with entrepreneurs of India
who had received finance from venture capital providers.

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