Five reasons why now is the best time to start an enterprise venture capital fund
HVAC businesses were at a nascent stage in India until now as they mainly focused on long-term strategic goals and immediate financial returns and gave nominal freedom to startups. The emergence of tech-focused startups has encouraged corporate venture capital (CVC) groups to regularly invest in new technologies, innovative products, and solutions compatible with their existing operations. According to the CB Insights report, the number of new CVCs rebounded in 2021 from a 6-year low of 144 in 2020 to 221, a whopping 53% growth from 2020 data. Given that the ecosystem is currently Faced with the funding winter, it is imperative to understand that the cyclical event will not affect tech-savvy startups and unicorns with big ideas and real business models because tech always wins such a downturn.
Here are five reasons why now is the best time to start an enterprise venture capital fund:
Indian government support
The government has launched a series of initiatives, funds and policies to encourage entrepreneurs to create jobs and innovations to support the startup and SME ecosystem. This includes financial assistance, technical support, grants, business development, growth, product innovation, research and development, legal support, tax exemptions, grants, a simple test for public procurement and credit guarantee schemes, etc. The government has also defined 31 innovation centers, 15 start-up centers, 15 technology business incubators, seven research parks and 500 DIY labs. The government recently funded the world’s largest innovation campus T-hub 2.0 in Hyderabad; which plans to encourage up to 20,000 start-ups to shape sustainable business models and grow their businesses. Through this, India is set to become an entrepreneurial powerhouse and bring economic prosperity.
Improved quality of contractors
It used to be that the primary motive for entrepreneurs was to open a business and make a profit, but lately we’ve seen an escalation in startups that are committed to making a social impact and solving a real problem.
For early-stage startups, CVCs offer decades of invaluable business operating experience, corporate knowledge, R&D resources, M&A opportunities, and an extensive network. Given that entrepreneurs are now driven, tech-savvy, customer-centric, highly adaptive and flexible; they have bridged the technology gap and expanded into various industries across India and abroad. A CVC fund can maintain consistency in the creation of wealth, innovation and value across both businesses; making India a hub of globally relevant products and services. As the world expands creates powerful international brand recognition and improves sales, it creates a win-win situation for venture capitalists to set up funds to bet on such startups.
Development of investors beyond the metropolis
The onset of the pandemic has accelerated digitalization across India, and with increasing internet penetration, almost 50% of internet users come from beyond metropolitan cities. Nearly 40% of recognized startups come from Tier 2 and 3 cities, including Ahmedabad, Lucknow, Jaipur, Indore, Kochi, and smaller Indian cities. The increased availability of all kinds of educational information on investments and startups on several digital modes, especially social media, has raised awareness among the general public across India and increased the maturity of investors. A significant portion of small town investors have begun to diversify their investments into more contemporary or alternative financial asset classes from traditional savings avenues. Several industry bodies including NASSCOM, ASSOCHAM, TIE-Con, etc. also provided financial assistance, knowledge, incubation and networking opportunities to support innovative ideas from small towns in India.
Improved participation of foreign investors.
Modern startups have created products embraced by a global customer base, resulting in high-value businesses with powerful revenue streams. Several nations have found India a lucrative market for investment due to its domestic market. Despite the Russian-Ukrainian conflict, the pandemic and rising inflation, there has been a growth in foreign investment, especially in IT, pharmaceuticals, FMCG, financial services, etc. With 83.57 billion dollars in 2020-21, the inflow of FDI in India was at its highest and is expected to reach 100 billion dollars in 2022-23 according to the industrial chamber PHDCCI. This is mainly due to India’s favorable business landscape and favorable government policies and reforms in all sectors including coal mining, contract manufacturing, IT, digital media, software and hardware. , medical devices, power exchanges, retail, civil aviation, defense, insurance, automotive and telecom among the orders. The government often reviews and modifies the FDI policy and keeps it liberal and transparent so that India remains an attractive and investor-friendly destination.
With the government’s Digital India program, tech startups, rising incomes and internet penetration, India’s digital economy is set to grow exponentially to $800 billion by 2030, recording growth of around 10 times from 2020. According to a McKinsey survey, the digital economy will unlock productivity and create 60-65 million jobs by 2025. Among the world’s top 17 economies, India ranks second among the most digitized economies. The strong foundation of digital infrastructure and increased digital access across India will lead to tremendous economic growth as the integration of breakthrough technologies such as data pooling, machine learning, cloud computing, blockchain, web3.0, artificial intelligence, etc. operations, monitoring and solving real problems in a wide range of sectors such as agriculture, medicine, environment, logistics, e-commerce and financial markets, among others
Apart from angel investors and venture capitalists, venture capital firms (VCCs) also play an influential role in funding early-stage startups. With the funding capital and expertise of modern startups, HVAC companies can gain competitive advantage, access breakthrough technologies and innovative businesses.
The opinions expressed above are those of the author.
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