| Summary: | Post liberalization, emerging markets and transition economies have become the most sought after destination for investment by venture capital firms. Governments have been undertaking radical regulatory changes in order to provide finance for the developmental phase of their economies.
Using a framework (Wright et al, 1993) to analyse and compare development between India and Central and Eastern Europe reveals that there are numerous factors that influence the development of the venture capital industry. As the rate at which institutions develop vary from country to country so does the level of development. An environment conducive for the growth of venture capital would need to have ample opportunities for investment along with legal and accounting support in creating deals. A thriving stock market and adequate liquidity in the economy will allow venture capitalists to realise their value.
In order to better understand venture capital behaviour in an emerging market scenario, the study presents an analysis of syndication practices in India. The results reveal that the economic conditions and internationalisation factors greatly influence the motives of firms to syndicate.
The study is presented based on a combination of interviews with venture capitalists and extensive desk based research and has significance for policy makers, venture capitalists and entrepreneurs. Policy makers need to make regulatory changes to encourage flow of funds from across the borders as well as from with the country. Venture capitalists entering the country need to be aware of the syndication practices of local firms in order to avoid ex-post investment decision managerial problems. While entrepreneurs by knowing the motives behind syndication, can leverage on the resources to enhance the value of the business.
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