Startup Financing: Some Evidence from the Indian Venture Capital Industry

Abstract

This study analyses the venture capitalists’ evaluation of startups in the Indian context by using primary data obtained from a survey study of representatives drawn from the industry. A distinguishing feature of the study is the categorization of venture capitalists on the basis of their stage of financing for analyzing the nature of diversification prevalent in the industry, the rank order of risks as perceived by the different categories of venture capitalists, and their expected risk premium. The findings of the study suggest the existence of two broad categories of venture capitalists; those involved in early-stage financing and those who invested across the life stages of startups. Furthermore, results indicate that each of these two categories of venture firms attaches varying importance to the broad considerations that are known to impact a startup’s value, they are differently diversified, their rank order of perceived risks is different and so is the expected risk premium.