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Venture Capitalists are experts who
have the ability to take calculated risks to make innovative
ideas a reality through encouraging new enterprise. They are
meant to provide finance to budding entrepreneurs who have ideas
but lack the means to put them into practice. To explore this
un-chartered wealth of ideas the Venture Capitalists specializes
in analyzing all forms of risks including market risk, technology
risk, promoter’s risk and the overall financial risk.
This exceptional expertise has the ability to make perilous
innovative ideas a successful reality. A skill that no country
can ill-afford to ignore as it is the path for a nation to move
ahead to new heights of growth and development.
Venture Capital investments are traditionally made in early-stage
companies. Nevertheless today most VC’s are providing
second-stage finance, saving their bottom-lines by investing
in minimal risk ventures. An investment, that can be very well
made by banks. Very few VC’s have continued to fund start-up
and early stage projects and this is, were GVFL has carved its
niche.
A noteworthy point of the VC industry is that of late, its growth
has been a function of the growth in the IT industry. This has
been the trend in the US and, in the emerging global scenario,
India is no exception. The US slow down in the IT sector has
cascaded down to Indian IT companies too. And now, the unrealistic
valuations of this industry are expected to undergo a realistic
revision. A large number of old investments made by the pioneering
Venture Capital Funds are still illiquid due to bad capital
markets. Notwithstanding the negative trends, the VC industry
continues to be in an upbeat mood. VCs have started looking
positively at other sectors and serious efforts are being made
for making exits through mergers, acquisitions and bought-out
deals. The downturn has also taught a number of lessons to the
industry: firstly, valuations have become realistic; secondly,
the due diligence process is much more thorough, thirdly, weaker
companies have been allowed either to phase out or merge with
stronger companies.
Present scenario at GVFL
:
We at GVFL are continuing with investments from our Gujarat
IT Fund in a more prudent manner. The management has revisited
its processes and monitoring systems, which has served to increase
and improve interaction with the investee companies to a great
extent. There is now a much better rapport and deeper understanding
with the entrepreneurs of investee companies and better appreciation
of each other’s problems. In fact, GVFL is assisting some
of the companies seeking the third or fourth round of financing
with their own contacts and network. GVFL is also making realistic
estimates of companies where performance is not likely to improve
any further. Efforts are on to facilitate acquisition of these
companies with the consent of the promoters so that they help
GVFL smoothly exit from the investments.
We hope to go from strength to strength in the coming days.
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