Asia-Pacific National Innovation Systems
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Venture Development

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To encourage innovation and entrepreneurship, the Government and financial institutions have been supporting programmes relating to venture development. A few important ones are detailed below:

National Science and Technology Entrepreneurship Development Board (NSTEDB)
www.techno-preneur.net
The DST has a major programme of fostering entrepreneurship amongst S&T personnel. This is done through a National Science and Technology Entrepreneurship Development Board (NSTEDB). Main aim of the projects implemented by the Board is creation of techno-entrepreneurs among the S&T persons through structured training programmes and other facilitating mechanisms. Under this scheme Entrepreneurship Awareness Camps are also organized.

A national facility for innovations, sponsored by NSTEDB has been set up at the Entrepreneurship Development Institute of India (EDI)- www.ediindia.org. The Center prepares ‘Data Bank’ of innovative projects and profiles and facilitates the transfer of technologies from R&D institutions to the industries. It encourages evolution of technology-driven enterprises by making available information on new and advanced technologies.

S&T Entrepreneurship Park (STEP)
www.dst.gov.in
S&T Entrepreneurship Parks have been set up at different places in the country, with the support of DST. They provide re-orientation in approach to innovation and entrepreneurship involving education, training, research, finance, management etc. These Parks create a conducive climate for innovation, for sharing ideas, experience and facilities and opens up avenues for students, teachers, researchers and individual managers for starting a successful economic venture. Each STEP operates in the identified thrust area based on the expertise, facilities of the institution and industrial milieu of the region. By the end of 2005, 17 STEPs in different parts of the country have been supported which have catalyzed setting up about 100 industrial technologies intensive ventures.

Technology Business Incubators (TBI)
www.dst.gov.in
These are supported by the DST. In the knowledge economy, TBIs have assumed greater significance and relevance as they nurture and support knowledge driven start-ups into successful enterprises, in addition to catering to the technological needs of the SMEs. By the end of 2005, 14 TBIs have been set up.

Venture Capital Financing
The basic principal underlying venture capital is investment in high-risk innovative projects with anticipation of high returns on success. These funds are invested in several enterprises, which require funding, but are unable to access it through the conventional banking and financial institution channels. Typically first generation entrepreneurs start such enterprises. They generally do not have any major collateral to offer as security, hence banks and financial institutions are averse to funding them. Venture capital funding may be by way of investment in the equity of the new enterprise or a combination of debt and equity, though equity is the most preferred route. A good number of projects financed through this route are in emerging areas or are new technology based or innovation based. The probability of success is rather low but where success comes it brings high returns. The high returns are enough to make up for the losses sustained in failed projects.
In India, initially, individual investors and development financial institutions played the role of venture capitalists. Entrepreneurs largely depended upon private placements, public offerings and lending by the financial institutions. In 1973 a committee on Development of Small and Medium Enterprises highlighted the need to foster venture capital as a source of funding new entrepreneurs and technology. Thereafter some public sector funds were set up but the activity of venture capital did not gather momentum as the thrust was on high-technology projects funded on a purely financial rather than a holistic basis. Later, a study was undertaken by the World Bank to examine the possibility of developing Venture Capital in the private sector, based on which the Government of India took a policy initiative and announced guidelines for Venture Capital Funds (VCFs) in India in 1988.
However, these guidelines restricted setting up of VCFs by the banks or the financial institutions only. Thereafter, the Government of India issued guidelines in September 1995 for overseas investment in Venture Capital in India. For tax-exemption purposes, guidelines were also issued by the Central Board of Direct Taxes (CBDT) and the investments and flow of foreign currency into and out of India have been governed by the Reserve Bank of India's (RBI) requirements. Further, as a part of its mandate to regulate and to develop the Indian capital markets, the Securities and Exchange Board of India (SEBI) www.sebi.gov.in framed the SEBI (Venture Capital Funds) Regulations, 1996. These guidelines were further amended in April 2000 with the objective of fuelling the growth of Venture Capital activities in India.
Indian Venture Capital Association (IVCA) – www.indiavc.org is the apex association of venture capital funds in the country, with a mission to facilitate growth of venture capital and private equity in India. At the end of 2004 it had 43 members. A few Venture Capital funding companies are:
APIDC Venture Capital Ltd. www.apidcvc.com
ICICI venture Funds Management Co. Ltd. www.iciciventure.com
IDBI Venture Capital. www.idbi.com
SIDBI Venture Capital Ltd. www.sidbiventure.com

A few areas where venture capitalists are investing are:

  • IT and IT-enabled services
  • Software Products (Mainly Enterprise-focused)
  • Wireless/Telecom/Semiconductor
  • Banking
  • Media/Entertainment
  • Bio Technology/Bio Informatics
  • Pharmaceuticals
  • Electronic Manufacturing
  • Retail

Venture capital finance is a good source of finance available to innovators.

Biotech Park and Biotechnology Incubation Center
www.dbtindia.nic.in
DBT has set up a Biotechnology Part at Lucknow. It has a number of facilities like a distillation unit, vermi-composting facilities, extraction plant, bio-business center and also a bio-informatics center. A Biotechnology Incubation Center is being set up at a few places.

Bio-ITPark and Software Technology Parks of India (STPI)
www.mit.gov.in
In order to give thrust to Bio-IT sector, the DIT in conjunction with the DBT intends to facilitate setting up of a state-of-the-art infrastructure in the form of a ‘Bio-IT Park’. The proposed park would address the IT related needs of the global life sciences industry and is expected to attract investments in the relative areas. It would provide facilities to the tenants like high-end super computing facility, data communication facility etc.

Software Technology Parks of India (STPI) acts as a single window in providing services to the software exporters and incubation infrastructure to SMEs. It has also played developmental role in the promotion of software exports with special focus on SMEs and start up units. By the end of 2005-06, it has 47 Centers all over the country.

Food Parks
www.mofpi.nic.in
Considering vast potential for growth of Food Processing Industry in the country, the Ministryof Food Processing Industrieshas set up Food Parks in different locations in the country. In these Parks, common facilities like cold storage, food testing and analysis laboratory, affluent treatment plant, common processing facilities, packaging center and power supply are provided. Till the end of 2005, there were 51 such Parks.

Incubators for Grassroots Innovations
Gujarat Grassroots Innovations Augmentation Network (GIAN)
www.west.gian.com
a NGO assists in incubation of high potential grass roots innovations into markets through a well-established incubation process. Rural Innovations Network (RIN) www.rinovations.org another NGO also incubates grassroots innovators.

Case Studies