Indian early start-up firms fail to attract venture capital:Study

Mumbai, Jan 7 (UNI) Innovative early stage start up firms in India are lagging behind in gathering investment from venture funds as compared to their counterparts in other countries, with figures indicating that India accounts for a dismal 12 per cent of the venture capital in the early-stage innovative start up firms as compared to 29 per cent in European Union, 41 per cent in China and 50 per cent in Israel, according to a study conducted by TiE Stanford.

The study was conducted by Dr Rafiq Dossani, Senior Research Scholar, Stanford University and Asawari Desai, Director TiE Global.

It was made public during the TiE Entrepreneurial Summit 2006, held recently in Mumbai.

A number of measures have been suggested by the study to overcome this hurdle, some of which includes removal of 25 per cent limit on corpus investible in a single firm by DVCF (Domestic Ventures Capital Fund) and increasing the tenure of convertible securities of listed companies beyond 18 months.

''The motive of the study was the shortage of capital for early-stage ideas which is leading to dearth of early stage investments in India.

This could have a negative ripple effect on the quality of late stage opportunities in later years. The study was based on interaction with over 175 capital providers, firms, regulators and policymakers across major geographies including US, UK and Singapore.'' Mr Desai said.

The other highlights of the study includes the best practices followed by different countries for encouraging early stage investments, reviewing the government policies in these countries and various models adopted for public private partnership to study how seed capital is generated from Government sources.

MORE UNI