Venture capital that originated in India very late is still in its infancy. It was the Bhatt Committee (Committee on Development of Small and Medium Entrepreneurs) in the year 1972, which recommended the creation of venture capital. The committee urged the need for providing such capital to help new entrepreneurs and technologists in settings up industries. A brief description of some of the venture capital funds of India is as follows:
Risk capital foundation: The Industrial Finance Corporation of India (IFCI) launched the first venture capital fund in the year 1975. The fund, ‘Risk Capital Foundation’ (RCF) aimed at supplementing promoters’ equity with a view to encouraging technologies and professionals to promote new industries.
Seed capital scheme: This venture capital fund was launched by IDBI in 1976, with the same objective in mind.
Venture capital schemes: Venture capital funding obtained official patronage with the announcement by the Central Government of the “Technology Policy Statement” in 1983. It prescribed guidelines for achieving technological self reliance through commercialization and exploitation of technologies. The ICICI, an all-India financial institution in the private sector set up a Venture Capital Scheme in 1986, to encourage new technocrats in the private sector to enter new fields of high technology with inherent high risk. The scheme aimed at allocating funds for providing assistance in the form of venture capital to economic activities having risk, but also high profit potential.
PACT: The ICICI undertook the administration of Program for Application of Commercial Technology (PACT) aided by USAID with an initial grant of US$ 10 million. The program aims at financing specific needs of the corporate sector industrial units along the lines of venture capital funding.
Government fund: IDBI, as nodal agency, administers the venture capital fund created by the Central Government with effect from April1, 1986. The government started imposing a Research and Development (R & D) levy on all payments made for the purchase of technology from abroad, including royalty payments, lump sum payments for foreign collaboration and payment for designs and drawings under the R & D Cess Act, 1986. The levy was used as a source of funding the venture capital fund.
TDICI: In 1988, an ICICI sponsored company, viz, Technology Development and Information Company of India Ltd. (TDICI) was founded, and venture capital operations of ICICI were taken over by it with effect from July 1, 1988.
RCTFC: The Risk Capital Foundation (RCF) sponsored by IFCI was converted into Risk Capital and Technology Finance Corporation Ltd. (RCTFC) in the year 1988. It took over the activities of RCF in addition to the management of other financing technology development schemes and venture capital fund.
VECAUS: VECAUS–I, the UTI sponsored “Venture Capital Unit Scheme” was launched in the year 1989. Technology Development and Information Company of India Ltd. (TDICI) was appointed as its managers. In the year 1990, the corporation was also entrusted with the responsibility of managing another UTI sponsored venture fund entitled “VECAUS-II”. In 1991, UTI launched VECAUS –III and RCTC was appointed as fund managers.
Other funds: The liberalized guidelines introduced by the government, in 1988 gave rise to the setting up of a number of venture capital funds, especially in the private sector.
Venture capital funding originated in Great Britain in the nineteenth century when European bankers and investors were helping the growth of industry in USA, and then in their dominions like South Africa, India and elsewhere. Building of railways in parts of America and India, construction of high risk projects like Suez Canal etc are examples where pooled resources were put at stake and turned into gold with enormous capital gains
In the 1980s, several new independent funds like Equity Capital for industry (ECI), Public Utility Pension Funds, National Enterprise Board, and several semi-State venture capital bodies like Scottish and Welsh Development Agencies were incorporated. The venture capital funds that are active at present in the UK may be grouped under the following:
1. Clearing bank captive funds
2. Funds sponsored by savings and investment institutions and merchant bankers
3. Business expansion scheme funds
4. Corporate academic and other private sector funds
5. Semi-State bodies (both Central and Local Government).