Venture Capital Funds
It was realized that many technological projects are unable to satisfy the traditional requirements of financial institutions and commercial banks. In addition to direct support to indigenous technologies development for commercialization, TDB felt the need for networking with other institutions to encourage technology focused Venture Capital Fund (VCF) so that, lack of adequate funds should not pose obstacle for good technologically innovative viable projects. The objectives of commercialization of indigenous technology could be well achieved by joining hands with technology focused venture capital institutions. This would also encourage investors to participate in the fund to have multiplier effect on resources availability for technology oriented ventures. Therefore, TDB has participated in Venture Capital Funds to spread itself by providing support to early stage ventures through SMEs having innovation and innovative products / services. TDB’s motivation and participation has resulted in the venture capitalists contouring their assistance to TDB’s mission. The Board also considered TDB’s participation in VCFs as an excellent tool for increasing geographical spread of the mandate of TDB to support technology companies especially in the MSMEs/SMEs category having innovation and innovative products / services.
However, the above thought process/policy evolved over a period of time. In India UTI was the first company to start venture scheme under the name of India Technology Venture Scheme in 1997. In 1999 UTI Executive Trustee met the then Chairperson, TDB and Secretary, TDB and requested TDB’s participation in Venture Capital Fund. The Board in its 13th Meeting dated 19th November, 1999 approved TDB’s participation in UTI-India Technology Venture Unit Scheme (ITVUS) with commitment of Rs. 25 Cr. This was first commitment by TDB in any Venture Capital Fund and the agreement for this was signed on 6th July, 2000. Thereafter on case to case basis TDB Board took decision to participate in the different Venture Funds (as given in the list as Annexure) as Limited Liability Partner.
So far TDB has been participating in Venture funds which are mainly concentrated in technology orientation, early stage projects and also investment in state level funds where TDB’s presence was inadequate. The initiative of TDB has also given confidence to Venture Capitalist/Private equity funds to come up in big way to support the technology based projects with a pronounced emphasis on sectors witch which are growth drivers of Indian economy.
The Board in their different meetings, recognized the importance of TDB’s participation in VCFs in achieving the objectives of TDB by enlarging the base of technology oriented projects.
The Board in its 44th meeting dated 17th March, 2010 decided to constitute a committee to consider and review the support provided by the TDB to Venture Capital Funds and suggest the methodology/ to be adopted for supporting the VCFs by TDB.
The ventures funds companies who had approached TDB, vary in fund type, its size, focus areas, track record, contribution amount, reputation of the fund managers/promoters and other investors etc. and as such it was felt necessary to formulate a guidelines for participation in Venture Funds by TDB so that TDB may support good technologically innovative viable projects through Venture Capital/ Private Equity houses within the mandate of TDB to achieve the ultimate objective.
The Board in its 45th Meeting dated 10th May, 2010, after elaborate discussions on the investment policy for participation in Venture Capital Funds, decided to broadly follow the following guidelines:-
- TDB funds will primarily be deployed in VCFs which have policy to invest in innovative and/or technology oriented portfolio.
- Contribution in small to medium size fund would be preferred.
- The beneficiaries of the VCFs be should primarily from SMEs sector.
- The contribution by TDB in the VCF will normally be upto 15%. Higher contribution can be considered in case of VCFs serving innovation for inclusive growth / industrially backward regions or first generation entrepreneur’s upto 25%. In case the portfolio is 100% technology oriented even higher contribution by TDB can be considered based on Board approval.
- As an over sight mechanism, TDB representative will be a member of the Investment Committee of the VCF, to concur in proposals based on technology content.
- The representative will be authorized to make exceptions to balance the portfolio.
- Track record of the Fund Manager to be considered.
- Financial services are not preferred.
The TDB has so far supported 11 Venture Capital funds with total commitment of Rs. 285 Cr. leveraging total funds aggregating to Rs. 2232.41 Cr. from other investors.