The aim of this chapter is to outline the objectives and scope of the study and discuss in detail the data, definitions, and the profile of the sample venture capital (VC) firms.

The Objectives

The objectives for this study can be divided into two aspects: First, the macrolevel objectives concerning the supply and demand aspects of the VC ecosystem. Second, those related to the micro-level decision-making strategies of the VC firms (fund managers).

Macro-level Objectives

Based on the macro aspects of the VC ecosystem, we derive the first three objectives:

• 1. To determine the systematic and non-systematic influences governing the supply side of the Indian VC ecosystem.

• 2. To understand the systematic influences governing the demand side of the VC ecosystem (with specific emphasis on the development of the VC start-up geographic clusters).

• 3. To derive policy implications for promoting VC funding for the growth of start-ups and new economy ventures in India.

Micro-level Objectives

Based on the micro aspects pertaining to the decision-making strategies of VC fund managers, we derive the next five objectives:

• 1. To probe the investment decisions of the Indian VC firms in the light of the ensuing adverse selection risks. Our aim is to understand the nature of tacit signals (and tangible factors) that enable the VC fund managers to establish control over the magnitude of such risks.

• 2. To understand the determinants of the intensity of involvement of the VC fund managers in the investee firms, particularly from the viewpoint of addressing the agency risks.

• 3. To examine the determinants of successful exits for Indian investee firms. To further study how these are related to the magnitude of the underlying agency risks.

• 4. To derive managerial implications for the VC fund managers and entrepreneurs based on the analysis. For the former, we propose to outline the factors that similar peers regard important in assessing potential risks from prospective deals. For the latter, we provide pointers about the specific segments of VC fund managers they need to approach in order to enhance their chances of successful funding.

• 5. To derive policy implications based on the above with the aim of addressing the major areas of friction encountered by the VC fund managers while investing in India.