Business Start Ups and Alternate Routes of Investment: New Paradigms of Entrepreneurial Financing in India

Abstract

The report on the Committee on Angel Investment and early stage Venture Capital constituted by the Planning Commission (Now NITI Ayog) highlights that India needs to create 1 - 1.5 Crore (10 - 15 million) jobs per year for the next decade to provide gainful employment to its young population. Accelerating entrepreneurship and business creation is crucial for such large scale employment generation. The heightened interest rates in the startups during the interest boom years resulted in the need for startup funding. The most notable feature of the traditional financing agencies, which to a large extent resulted in the growth of Private Equity and Angel Investments in India, is that the banks, Development Financial Institutions and even the Stock Markets gave specific funding priority to large and well-known companies. The Private Equity firms and Angel Investors visualized this as an opportunity and a potential area of investment though risky to a large extent. The concept of Private Equity and Angel Investments are the latest and most dynamic financial instruments which have grown significantly even though its genesis in India is of recent origin. This article delves into all the relevant aspects of Private Equity Investment and Angel Financing in India.