The Economics of Venture Capital Firm Operations in India

This study is the first of its kind in India based on a sample of about seventy venture capital firms that cover about 85% of the funded deals between 2010 and 2014. An in-depth review of the policies in the context of start-ups in general and venture capital and entrepreneurial ecosystem in particular is also provided.

This book studies diverse categories of venture capital (VC) firms in India based on their ownership type (domestic vs foreign), stage of investment (early vs growth stage) and VC investment team composition (entrepreneurial experience vs investing experience). For each category of VC firms, the nuances in their investment, portfolio involvement and exit strategies are separately analysed. Employing the framework of information asymmetry, the book studies how different categories of VC firms rely on distinct mechanisms such as deal syndication and domain specialization to address the ensuing adverse selection and agency risks. It also delves into the macro context by assessing whether the emergence of VC in India has been driven by ''pull'' or ''push'' factors. This is accomplished by analysing in depth the supply and demand of VC funds. Finally, it critically reviews the existing policies of entrepreneurial finance and arrives at recommendations for future directions of the same.