VC funds back in action

JAIPUR: With signs of economic revival, venture capital funds seem to be back in business. Indian Venture Capital and Private Equity Association (IVCA) president Mahendra Swarup told ET that the pick up in the economy has evinced interest of investors and companies for the VC funds. ���In the last 6 months, around 25 new funds have come up with size ranging between US$ 50 million and US $150 million.

VC funds have started looking at deals. Though the number of deals may not reflect the momentum, the ticket size has increased. The VC investments, which used to be in the order of US $ 0.5 million to US$ 5 million, have now gone up to US $15 to US$ 30 million,��� he said on the sidelines of the 6th national conference on venture capital finance ��� fostering innovations and entrepreneurship.

The improved business environment has also encouraged companies as they can now command better valuation. ���A year ago when the world economic was in the grip of recession, companies preferred to hold up their plans to hit the VC route as the market was not enthusiastic to assign the valuation they wanted. Now that sentiments are improving, valuations are at realistic levels, due diligence process has started.

Deals are now in the pipeline. Funds too are willing to park their funds in anticipation of high returns,��� says Technopak management consultants vice president Anil Rajpal.

Venture Capital funds looks for growth opportunity in start-ups and early stage investment in companies that promise better returns.

���Investors in VC Funds can expect 20-25% average returns with a with longer lock-in period of 5-7 years. But these high returns also carry a certain level of high risk unless invested in right companies with solid growth prospects,��� said RVCF CEO Girish Gupta.