According to International Finance Corporation (IFC), venture capital is an equity or equity featured capital seeking investment in new ideas, new companies, new production, new process or new services that offer the potential of high returns on investments.
As defined in Regulation 2(m)of SEBI (Venture Capital Funds) Regulation , 1996 "venture capital fund means a fund established in the form of a company or trust which raises monies through loans, donations issue of securities or units as the case may be, and makes or proposes to make investments in accordance with these regulations.
Thus venture capital is the capital invested in young, rapidly growing or changing companies that have the potential for high growth. The VC may also invest in a firm that is unable to raise finance through the conventional means.
Globally venture capital investment is one of the most flexible form of financing. It is a more wide way of getting finances for investment in business enterprises which hold a bright future in terms of profit as well as growth. Globally venture capital investments are experiencing enormous growth and over the years approximately 70 counties have started providing venture capital funds to business enterprises.
In U.S.A., venture capitalists invested $28.4 billion in 3,673 deals in 2011, an increase of 22 percent in dollars and a 4 percent rise in deals over the prior year, according to the Money Tree Report by PricewaterhouseCoopers LLP and the National Venture Capital Association (NVCA), based on data from Thomson Reuters.
However in India, venture capital was known since the nineties era. It is now that it has successfully emerged for all the business firms that take up risky projects and have high growth prospects as well. It is one of the financing alternatives in India. Venture capital is provided as risk capital in the forms of shares, seed capital and other similar means.
In India, venture capital firms invested about $1.09 billion over 209 deals in 2011. The amount invested during 2011 was significantly higher compared to 2010, which was $699 million invested across 132 deals. (Venture Intelligence, India Venture Capital Report-2011)