Venture Capital has been the fertile ground for business saplings to grow and flourish in the market. While the structure of venture capital in past decades might seem vintage, they are the undercoat of some of the finest unicorns India has. Today, venture capital is much more than a consortium of investors funding startups. So what’s modified in the ever-changing world of finance and financing?
Numbers first; In August 2022, 128 Indian Startups raised $995 million in VC funding. This happened when most countries were going through a funding winter. While there are several rationales to back these numbers, let’s highlight a few.
Today, businesses have become ESG(Environmental, Social, Governance) focused, and so have venture capitalists. Sustainability is not only a booster for the environment but also for the pockets of investors. Even the government promotes the consumption of renewable energy sources. A pattern of VCs following governmental regulations to play a safe bet is not a new phenomenon. For instance, the announcement of subsidies for Electric Vehicles was followed by VC pouring funds and overflowing beakers of EV startups.
Also, with increasing digital adoption, and industries adding tech as suffixes(Fintech, Edtech, Agritech, Biotech), Venture Capitalists didn’t draw back from adding them to their portfolio. The evolving technology brings a lot of bucks, so VCs bag the highest returns from such investments.
Now, the VCs are facing more competition, like emerging angel investors and startups that let people invest in businesses with meagre amounts. Hence, startups get other varied sources of capital and prefer to diversify the ownership in the company than give it all to one rich house. Venture capital is more about investing in a company’s balance sheet to generate sizeable returns and, later, pulling out funds when they make a mint. As per the Bain & Company report, venture capital funding reached $35.8 billion in 2021, backing a major chunk of 44 unicorns that emerged in the same year.
The chronology from the status quo to the future is bound to change the destinies of many businesses across industries. Private equity and venture capital was one such industry that is being heavily influenced by the breakthrough of modern technology.