Page 1 of 9
European Journal of Business &
Social Sciences
Available at https://ejbss.org/
ISSN: 2235-767X
Volume 07 Issue 03
March 2019
Available online: https://ejbss.org/ P a g e | 704
Venture Capitalists’ Funding In Different Sectors of India-A Bird Eye View
Rakesh Chander
E-mail: rakeshchander212@gmail.com
Mobile: +919996555512
Research Scholar, Department of Commerce, Kurukshetra University Kurukshetra
Abstract
With developing Indian entrepreneurship standard, government support policies and many
campaigns like as Startup India-Stand up India, Make in India and Digital India, the economy has
attracted a big chunk of Private Equity and Venture Capital flow in over the last few years. Not
only these campaigns, but also the implications of Goods and Services (GST) have given a
significant boost to create the large opportunities for investors. Venture Capital funds are very
much interested to invest their capital in fast growing industries like technology oriented industries
and consumer oriented due to their well doing in new economies. The main aim of this paper is to
compare the sector-wise investment. For this purpose, five sectors have been selected, which
received the highest amount of Private Equity and Venture Capital during the study period from
1
st January 2012 to 31st December 2016. Descriptive statistics and Welch model were applied to
reach the conclusion. Based on the results, it has been found that Consumer Technology sector
attracted the highest amount. Further, it has also been observed that there is no significant
difference among the sector wise investment. Finally, the study suggested that venture capital firms
should diversify their investment in various sectors rather than investing in a specific sector.
Keywords: Private Equity and Venture Capital, Normality, Homogeneity and Welch Model
Introduction
Since, the Financial Sector Reforms, venture capital has become an important sources of financing
for high-technology or innovative firms and played an unbelievable role in the Indian economy.
Many firms one being funded by Venture Capital and Private Equity like as Uber, Flipkart, google
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European Journal of Business &
Social Sciences
Available at https://ejbss.org/
ISSN: 2235-767X
Volume 07 Issue 03
March 2019
Available online: https://ejbss.org/ P a g e | 705
and Airbnb etc. With developing Indian entrepreneurship standard, government support policies
and many campaigns like as Startup India-Stand up India, Make in India and Digital India there
are vast opportunities for Private Equity and Venture Capital firms to invest in India. Private Equity
and Venture Capital investment are pre-IPO processes, in the term of quasi equity rather than loan
and controlled by a small group of persons or a firms known as venture capitalists. They provide
the seed capital and growth or expansion capital along with value added services to the startup
firms in different sectors. Further, Venture Capital firm concentrates their investment in a fruitful
sectors and look for very specific characteristics like as investment return, high growth and
substantial market size.
According to Bains Private Equity report (2017), Real Estate, Banking, Financial Services and
Insurance (BFSI), Information Technology (IT) and Information Technology Enabled Services
(ITES) has more attractive sector for Venture Capital firms in India. The sector has received the
investment worth of 1.4 USD billion, 1.8 USD billion with the total number of deals as 225 and
44 respectively. The main boost up reason of this sector may be considered or the easy regulatory
environment i.e.100% Foreign Direct Investment (FDI) in Real Estate and moderation in real states
prices (Indian Private Equity Report, 2016). In the year 2016, the Consumer Technology, Banking,
Financial Services and Insurance (BFSI), Information Technology (IT) and Information
Technology Enabled Services (ITES) have got the maximum share of Private Equity and Venture
Capital than other industries, but decline in term of number of deals. The Private Equity funding
in the (BFSI) Information Technology (IT) and Information Technology Enabled Services (ITES)
was valued of 2.4 USD billion in values as compared to previous year. It gives a clear idea that the
investors are very much interested to invest their capital in fast growing industries which are
technology oriented and doing well in new economics (Kumar,2013). However, every sector
(except IT & ITES) has received less amount of Venture Capital as compared to previous year,
due to global economic slowdown and political upheavals.
The Consumer Technology, Banking, Financial Services and Insurance (BFSI), Information
Technology (IT) and Information Technology Enabled Services (ITES) industries warm welcomed
Page 3 of 9
European Journal of Business &
Social Sciences
Available at https://ejbss.org/
ISSN: 2235-767X
Volume 07 Issue 03
March 2019
Available online: https://ejbss.org/ P a g e | 706
a host of digit measures such as `the Bharat Interface for Money` (BHIM) app, `Digi Gaon`1
the
payment regulatory board and Aadhaar pay. Not only make in India, but the implications of GST
have also given a significant boost to create the large opportunities such as point of sale (POS),
billing system and digital payments for these (IT & ITES) sectors (Price Waterhouse Coopers
MoneyTree India, Report Q1 & Q2, 2017). According to `Private Equity in India 2025` report, in
term of sector, Private Equity funds believe that Retail and Consumer sector will be their biggest
focus and top performer sectors for investment by 2025, followed by the sectors such as
Information Technology (IT) & Information Technology Enabled Services (ITES) and Financial
Services which shows the overall anticipate growth in the Indian economy.
Review of Literature
Gupta et al. (1992) analyzed the Venture Capital firm`s preference regarding sectors and region
scope of their investment. The data was collected from 169 domestic Venture Capital firms during
the year 1987. It was found that early investor firms did not preferred industry diversity. It was
also concluded that the larger Venture Capital firms preferred the greater industry diversity and
broader geographic scope as compared to smaller Venture Capital firms.
Sinha (2000) examined the growth and development of Venture Capital by sector wise and region
wise in India. Secondary data were collected from websites, newspapers, database and analyzed
with the help of F-test. The study found a difference in Private Equity backed buyout deals among
North America, Europe, Asia and rest of the world.
Srinivas K.T. (2013) studied the venture capitalists funding in different sectors of Karnataka. The
required data were collected from Journals, Reports, websites and Venture Intelligence database.
Analysis of variance (ANOVA) and factor analysis were used to obtain the results. The study
found that Venture Capital firms preferred the Banking, Financial Services and Insurance (BFSI)
for investment in the Karnataka region.
1
(Footnote: Digi Gaon initiative launched by the BJP government to provide the tele Medicare,
education and skills through digital technology and 2500 crore digital transaction are targeted in
the FY 2018).
