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CHAPTER 3

RESEARCH METHODOLOGY

3.0 Introduction As mentioned earlier, the study has been divided mainly into two parts. On supply side,

venture capital firms in India have been surveyed to provide an overview of the venture

capital investment process and their investment policy. On demand side, the

entrepreneurs who have availed venture capital funding in Gujarat have been studied so

as to analyse the role played by the venture capitalists in the development of their

venture. Besides, the funding preferences of young entrepreneurs from Gujarat have also

been studied to identify the potential for the development of venture capital in the state.

The overview of the study is depicted in the chart 3.0. The detailed research

methodology including research objectives, research design framework, sample/data

description methodology, sources of information, content of the questionnaire and data

analysis methods with respect to each of these studies is discussed in this chapter. The

highlight of the same for all the three studies together has been presented under table 3.4

at the end of the chapter.

Figure 3.0 Overview of the Study

VC Survey (Supply Side)

(Studying the Venture Capital Investment Process in India)

Entrepreneurs with VC funding

(Studying the role of the VC in the development of the venture in Gujarat)

Entrepreneur’s Survey

(Demand Side)

Entrepreneurs without VC funding

(Studying the funding preferences of young

entrepreneurs in Gujarat)

Classification of the Study

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3.1 Research Questions After understanding the need for the research, it is now possible to derive specific

research questions. The context which inspires the research questions along with the

specific research questions are given in the table 3.0.

Table 3.0 Research Questions and Their Context Context Research Questions

The growth of venture capital industry is not just restricted to developed countries such as US and Europe. Developing countries, specifically Asia-Pacific, are witnessing an increase in venture capital investments.

What is the growth pattern of venture capital industry in US and Europe? (Chapter four) Which developing coutries, in Asia-Pacific rim, are experiencing an increase in venture capital investment and what are the reasons for the same? (Chapter four)

Indian venture capital industry is growing across different stages of venture development, sectors and cities.

What is the historical evolution and current scenario of venture capital industry in India? (Chapter five)

Gujarat is at systematic disadvantage as far as the provision of venture capital investment is concerned. However, there are various developments taking shapes in this entrepreneurial state that highlight the potential for the development of the venture capital industry in future.

What is the current scenario of venture capital industry in the state? (Chapter six) Which are the major barriers for the development of the venture capital industry in the state? (Chapter six) What are the political, economical, social and technological developments initiated in the state that would facilitate the growth of venture capital industry in the state? (Chapter six) What are the funding preferences of young entrepreneurs of Gujarat? (Chapter seven)

Venture capital investment decision process is a complex and ill-defined process. There are various stages of venture capital investment and decision determinants related to this process differ across different countries.

What are the decision determinants related to the process of venture capital investment as preferred by Indian venture capitalists? (Chapter seven)

More than financial support, venture capitalists provide non-financial support to the ventures.

What kind of support is extened by venture capitalist (GVFL) in the development of the venture in Gujarat? (Chapter seven)

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3.2 Research Objectives To answer the research questions as highlighted in the table above, following specific

research objectives have been set for the study.

1. To study the the evolution and growth of venture capital industry at international

(US, Europe and Asia-Pacific), national (India) and regional level (Gujarat).

2. To investigate in detail the decision determinants of Indian venture capitalists in

relation to pre-investment strategies, post-investment activities, monitoring and

controlling of the investee, investor-investee relationship, syndication,

geographical preference for investment and the divestment of the VCs from the

business of the investee.

3. To investigate the structure and functioning of VC firms and their invested

companies.

4. To examine the role played by the venture capitalists in the gwoth of the ventures

funded by them in Gujarat (Specifically of GVFL).

5. To find out the funding preferences of young entrepreneurs from Gujarat.

6. To make suggestions for the further development of the venture capital industry

at national level (India) and regional level (Gujarat).

3.3 Research Design Descriptive research design was used for the present study as the research aims to

investigate the venture capital investment process with basic emphasis on the investor-

investee relationship.

3.3.1 Scope of the Study For studying the venture capital investment process, venture capital firms operating

across different cities in India such as Bangalore, Mumbai, Chennai, Pune, Delhi etc.,

have been considered. Foreign VC/PE firms investing in India were also approached

through their offices located in India. For studying the role played by the venture

capitalists in the development of the ventures, responses were collected from the

companies that had raised VC funding in Gujarat. For this study, the ventures from

which the VC had already made an exit were also included in order to have a larger set of

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responses for meaningful analysis. For studying the funding preferences of young

entrepreneurs, again the responses were collected from the firms located in Gujarat. Care

has been taken to include only knowledge based and innovative entrepreneurial ventures.

For the purpose of the study, entrepreneurial ventures are defined as those ventures that

are pursuing opportunities, characterized by innovative practices beyond what a small

business might exhibit, high risk and have growth and profitability as their main goals.

The innovation may be in the product or service itself, or in the business processes used

to deliver it. Demand side studies were restricted to geographic region of Gujarat due to

convenience, access available and willingness to share the information on the part of

investee companies.

 3.3.2 Data Sources and Research Approach It is well established that while the secondary data provides good conceptual clarity and

direction to begin with, primary data based on empirical study often helps the researcher

get insightful inferences about the subject of interest. Hence, for the purpose of gaining

maximum possible knowledge related to the study, both the data sources have been duly

and optimally used.

3.3.2.1 Primary Data Primary data from venture capitalists across India and entrepreneurs from Gujarat was

collected using the survey approach through structured questionnaires. These surveys

covered various issues to meet the objectives of the study. A survey questionnaire was

developed building upon the insights obtained through structured interview with Gujarat

Venture Finance Limited (GVFL) and various other venture capitalists and academicians

approached at VC-PE meet organized at IIM-A during February, 2009. Questionnaires

were prepared in English considering the profiling of the respondents on demand

(knowledge entreprenrus) and supply side (venture capitalists) of the studies.

3.3.2.2 Secondary Data For studying the evolution and growth of venture capital industry at international (US,

Europe and Asia-Pacific), national (India) and regional (Gujarat) level, secondary data

was considered. The literature studies related to venture capital and private equity,

articles, journals, books, previous students’ projects at IIM-A, other published and

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unpublished sources, internet web pages and electronic database like ebsco were used as

secondary sources. Various libraries, particularly of IIM-A, were accessed to collect the

information. Reports with respect to industry statistics available free on the website of

IVCA and VentureIntelligence were used for supporting the industry statistics.

3.3.3 Sample Selection and Contact Methods

A sampling plan basically entails the sample selection criteria, sampling unit, sampling

technique, sample size, element and respondent definition for the survey.

(A) For Studying the Venture Capital Investment Process by Indian Venture

Capitalists (Supply Side)

The database of 163 venture capital firms was complied for this study. In order to

assemble this database, the first and the obvious choice was to look for the members of

Indian Venture Capital Association (IVCA). However, upon the closer scrutiny of the

Indian venture capital industry, it was found that the data were questionable in two ways.

First, it included a few set of actors that may not be classified as venture capital firms.

There are many members registered with the association that were intermediaries

facilitating the investments by the VC in the investee companies but not actually

investing themselves in those investee companies. Second, the association did not have

some VC firms as members. The next choice was to compile the list from the SEBI

registered funds. But the same problem was encountered there too. There were 127 funds

registered with SEBI as on September 2008. It is worth noting here that these are the

funds and not the firms. A single firm may have multiple funds for investment in

different sectors and stages of venture development.

For this survey, the responding unit was a firm and not the fund so as to capture the

investment approach of the entire firm for all these funds rather than a fund specific

approach. With respect to IVCA, there are around 50 members registered with the

association as on September 2008. Hence, database of 163 VC firms in India was

compiled in contrast to much smaller number of firms listed by IVCA and SEBI.

The list was then expanded by including VC firms found in a number of other sources

namely Indian School of Business (ISB), Hyderabad’s database of VC firms, list of VC

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firms compiled by National Entrepreneurship Network (NEN) in India and various

newspaper articles that frequently report about the new investments happening in India.

By bringing all these data together, a gross list of 163 VC firms was assembled. This list

included only VC firms operating in India. Foreign VC/PE firms investing in India were

also part of the list and they were approached through their offices located in India.

The next task was to assemble contact details of the firms for distributing the

questionnaires among them. The contact details of these VC firms were downloaded

from the websites of these respective firms. Besides, the contact details, information

regarding these funds, investment strategies, portfolio firms, and top management teams

were also collected through their web pages. This was to ensure that these are the firms

investing at early expansion and expansion stages because the funds active only in

buyout deals were not a part of the survey.

Out of 163 firms, 81 firms responded to the survey. However, only 38 responses were

found to be useful as they had returned the completely filled in questionnaires. 18 VC

firms declined to participate in the survey for various reasons such as confidentiality,

policy of not participating in such survey, lack of time to complete the comprehensive

details, they had stopped investing in the current scenario etc. Further, 25 VC firms were

intermediaries and hence could not participate in the survey. The survey was conducted

during October 2008 to June 2009. Thus, nine months following the launch of the

survey, after several rounds of reminder (almost every month through emails followed by

phone calls), only 38 responses were considered to be useful for analysis resulting in the

response rate of 23% approximately. In those cases, where other members of team

replied, it was again ensured that they are not merely junior staff members. In many

cases, telephonic talks were organized with the members of venture capital team on the

appointed day and time.

(B) For Studying the Role Played by the Venture Capitalist in the Development of

the Ventures in Gujarat (Demand Side) The study was carried out in the companies that had raised venture capital funding in

Gujarat. For surveying the VC funded entreprenurs in Gujarat, the first taks was to

assemble the list of such entrepreneurs. However, there was no aggregate statistics

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available that presents the details of the venture capital investments in Gujarat.

Therefore, to select the representative sample, Gujarat Venture Finance Limited (GVFL)

which is making substantial investments across various sectors and stages of venture

development through its various funds, in Gujarat as well as outside Gujarat, was

approached. As per the opinion of the officials at GVFL, the investment deals, which can

be typically categorized as venture capital investment (i.e. investments by the firms at the

early expansion stages), are being carried out majorly by GVFL in Gujarat.

As mentioned in the report, VCs have specific geographical preferences for investments.

They prefer local investing rather long distance investing for better monitoring and

control. And VC firms in India are highly concentrated in the western part (Mumbai) and

southern part (Bangalore) of the country. So, naturally they may hesitate to consider the

option of investing in Gujarat. If such investment deals are taking place though in less

number, they are normally in syndication with a local partner i.e. GVFL. Or such deals

are private equity deals and buyout deals. However, study of these kinds of deals was

outside the scope of the research.

Further, to generate the list of the VC funded ventures in Gujarat, the details of the

portfolio investment companies available from the websites of the venture capital

companies were also investigated. However, there were no concrete venture capital

investments found in the state. So, finally it was decided to make a detailed quantitative

analysis of all the venture capital funded companies by GVFL in Gujarat.

GVFL has funded 68 ventures across India, out of which it made an exit from 57

ventures till 2009. So at present it has 11 companies in its portfolio. Since the study was

limited to only Gujarat, the ventures funded by GVFL in Gujarat were considered for the

survey purpose. It has funded total 26 ventures in Gujarat, of which it made an exit from

15 of the ventures. All these 26 ventures were approached for the study. Out of all these

ventures, 22 ventures funded by GVFL in Gujarat had responded to the survey resulting

in a response rate of 85%. Four ventures which were not a part of the study were those

ventures that had been closed down since a long time or there was a change in the

management and the original management was not approachable. So, these 22 ventures

studied included the combination of both the kinds of the ventures i.e. ventures from

which GVFL had already made an exit and the ventures in which it continues to have

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investments. From these 22 ventures, GVFL had made an exit from 12 of them (11 full

and 1 partial exit). Only in two cases, GFVL had invested in syndication with other

venture capitalist. Otherwise it had invested individually in all the rest of the cases.

These 22 ventures are spread across different parts of Gujarat like Ahmedabad, Baroda,

Bhuj, Gandhinagar, Sanand and Valsad. The ventures which are headquartered in

Ahmedabad were approached personally during working hours. The ventures situated

outside Ahmedabad were approached through emails and telephone calls. In all the cases,

the respondents were requested to fill the questionnaire with full honesty and correct

information. The respondents for the survey were the CEOs, Managing Directors or the

Heads of the Finance departments of the company.

(C) For Studying the Funding Preferences of Young Entrepreneurs from Gujarat

(Demand Side)

To select the representative sample of the population, various relevant sources were used

with the help of which a comprehensive list of the entrepreneurs for the study was

complied. Search began with premier education institutes in Ahmedabad like NIRMA

University and Entrepreneurship Development Institute of India (EDI) that are running

various courses on entrepreneurship. Generally, those who already have family

businesses and want to join/diversify them enroll for such courses. The representatives of

such institutes were approached by the researcher for collecting the contact details of

such students. With the help of the email IDs and other telephonic details, these students

who have already passed out and became entrepreneurs; were approached for the survey.

Further, incubate (entrepreneurs availing the facility at the incubation centres) at Centre

for Innovation and Entrepreneurship (CIIE) of IIM, Ahmedabad; National Design

Business Incubation (NDBI) of National Institute of Design (NID); Mudra Institute of

Communications and Dhirubhai Ambani Institute of Information and Communication

Technology; were contacted. For this purpose, incubates who are availing the facilities of

the incubation cells at present and those who have already left these incubation centres

were contacted.

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To extend the list of such entrepreneurs further, two web sources i.e. The National

Entrepreneurship Network (NEN), and Plugged in were used. NEN, founded in 2002, is

a not-for-profit initiative of the Wadhwani Foundation, working to inspire, educate and

support the next generation of high-growth entrepreneurs in India. NEN was co-founded

by five of India's premier academic institutions like IIT Bombay, IIM Ahmedabad, SP

Jain Institute Bombay, IBAB Bangalore and BITS Pilani. NEN had introduced TATA

NEN Hottest Startup Awards, in association with TATA, a rapidly growing business

group in India in 2008. The purpose was to recognize and support high-impact startups

that innovate, solve hard problems, grow fast and create jobs. For preparing the list of the

entrepreneurs, the startups nominated for this competition from Gujarat were selected

and approached for the survey. Like NEN, Plugged In- Learning through Technology;

also has a list of startups from Gujarat. Plugged In has evolved into a nationally

acclaimed organization operating various innovative high impact programs for the

entrepreneurs.

In addition to these resources, while conducting the VC supported survey, it was

discovered that GVFL receives number of proposals every day for funding requirements.

With the help of GVFL’s staff executives, some of these relevant cases were also

contacted for the survey.

Now-a-days, many management institutes are also gearing up their students towards

entrepreneurship rather adopting routine corporate jobs. The placement cells of such

management institutes were also approached for enlarging the list of the entrepreneurs.

Particularly, IIM-A placement data was very helpful in reaching to those students who

have adopted entrepreneurship as a career option.

Lastly, the newspaper articles featuring the success or failure story of entrepreneurs were

regularly being tracked and also aided the discovery of many such entrepreneurs from

Gujarat. Particularly, the column of “Starting Up” from The Economic Times on every

Friday features the innovative entrepreneurial ventures nationally. Out of these, ventures

from Gujarat were selected for preparing the list.

Also, a kind of snowball sampling was followed where, the respondents were asked to

identify others who belong to the target population of interest. Subsequent respondents

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were selected based on referrals. The existing startups have been contacted to give

references of their family and friends who have started such innovative ventures in

Gujarat. Thus, by compiling all these resources together, a gross list of the

entrepreneurs/startups was prepared.

After compiling this list, all these entrepreneurs were approached for the survey. In

majority of these cases, the email Ids of these entrepreneurs was collected. As these

startups form the part of knowledge based or technology based sector, they were more

comfortable responding to the survey electronically rather physically. In few of the cases,

the interviews were conducted on telephone as well while the researcher met in person

few entrepreneurs in Ahmedabad for survey purpose.

The survey period was the same as that of VC supported entrepreneurs’ survey i.e.

November-December 2008 to May-June 2009. Unlike other survey (VC survey and the

VC supported entrepreneurs survey), these entrepreneurs were more wiling to share the

information so, though there was a follow up to sending of the questionnaire but it was

not so extensive as compared to the prior two surveys. Without exception, majority of

the entrepreneurs approached for the survey were forthcoming with their response and

displayed significant interest and involvement. That truly shows the passion of the youth

to help improve existing entrepreneurial ecosystem in the state.

The respondents were the entrepreneurs/promoters of these startups. In total, it was

possible to generate the responses from 43 startups from the state. Most of these

responses came from Ahmedabad city of Gujarat which is considered to be an

entrepreneurship hub of the state. This fact is quite evident from the list of the nominees

available on the website of TAT NEN Hottest startups. They have listed 18 high growth-

high impact ventures on the website from Gujarat of which 14 were from Ahmedabad

city. Further, as mentioned before, all the incubation centres of Gujarat are also located

in Ahmedabad. All the premier institutes promoting entrepreneurship and supporting the

innovations are situated in Ahmedabad. Considering all these facts, it is natural to

conclude that the maximum responses (91%) were from Ahmedabad city.

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3.3.4 Research Instrument Development Prior to selecting survey approach for the research, several other methods for data

collection, potentially viable for such a study, have been considered and assessed. Brief

evaluation of these alternatives is presented below.

Though case studies are used as means to validate findings from other methods and to

deepen the knowledge in specific areas, case study research is rarely applied

methodology in VC/PE research. This is due to the tendency of the VC/PE firms to

withhold the detailed information about transactions thinking that this information is

confidential. Hence, comprehensive and reliable case data can not be obtained. For

studies related to entrepreneurs, due to unwillingness on their part to share all the

financial and non-financial details with respect to role performed by the VC, it was not

possible to write detailed cases on such companies. In the survey also, financial details

like the bifurcation of equity holdings between the promoter and the VC, were not

mentioned in few of the cases.

Participatory action research, whereby the researcher gets directly involved in the

investment process, would have permitted deep insights into specific situation. Action

research would have been very useful in order to fully understand the entire venture

capital investment process. However, as a matter of policy, these firms would not allow a

third party, even the researcher, to be closely involved in such a process. This is again

due to very high concern for confidentiality of information. In literature review, there are

no specific instances of scientific studies based upon participatory action research.

A large amount of data published by various associations and research agencies in the

area of venture capital could have been used for performing time series analysis or

multivariate data analysis. Such vast data facilitates generalization of findings but on the

contrary, dilutes the ability to analyse the relationships of variables in-depth. In fact,

availability of consolidated data on venture capital investment in India is rather poor.

The main source of information is in the form of highly aggregated statistics produced

annually by IVCA and other research agencies like Venture Intelligence. Small venture

capital firms which are not the members of this association are excluded for the purpose

of reporting the data. So the reported data may be biased towards larger deals. Moreover,

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databases do not contain information necessary to fully understand the reasons for

certain transaction.

Considering the merits and demerits of all methods, it was felt that for collecting useful

data a survey method was appropriate. VC/PE firms were more willing to share

information about the investment preferences and styles in surveys on the condition that

the information provided by them would be treated highly confidential and on an

anonymous basis, rather than for specific cases or databases, which tie the data to

identify the VC/PE firms.

3.3.5 Description of Variables and Design of Questionnaire

(A) For Studying the Venture Capital Investment Process by Indian Venture

Capitalists (Supply Side)

The entire questionnaire was divided mainly into five parts keeping in mind the scope of

the study. The first part of the questionnaire was designed to study of the variables

describing the characteristics of participating Indian VC firms in the survey. These

variables mainly include demographics of VC firms like the location, year of

establishment, type of the firm for example government sponsored VCF, bank sponsored

VCF or private VCF etc., number of portfolio companies and number of top management

team with entrepreneurial background etc.

The second part of the questionnaire highlighted the variables with respect to the

investment policy of the respective VC firms. It concentrates upon the investment policy

details like their preference for stage of investment i.e. seed, startup, early expansion or

expansion stages; sectors for investment, minimum and maximum amount of investment,

instrument of financing used including equity, debt, convertible securities; ownership

stake normally taken by them.

The study of the location pattern of the participating VC firms as well as the secondary

information suggested that VC investments in India are concentrated mainly in Western

and Southern part of the country. To verify upon the same, this portion of the

questionnaire throws light upon the geographical investment preferences of the VC firms

in India i.e. whether they prefer to invest in India or outside India or combination of

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both. If they invest in India whether they have any region specific interest for investment

i.e. they prefer investing in south, north, east or west. The questionnaire also asked the

respondents to rate the importance they give to be geographically near to the investee

companies.

Further, investment preferences of the VC firms for investing in the businesses that were

earlier incubated or funded through angels were also checked upon. For this, the

participants were asked to rate their perceptions of these early stage financing options

like incubation and angel investors on an agreement scale of strongly agree, agree,

neutral, disagree, and strongly disagree. They were provided with the statements like

incubators and angel investors add value to the investment, they are vital source of early

stage finance and they are necessary to ensure VCs continue getting a good deal.

The second part also investigated the preferences of VC firms for syndication as an

investment option. The VC firms were asked to rate the reasons considered for

syndication on an importance scale of extremely important, very important, neutral,

somewhat important and not important. The reasons mainly include: financing of larger

investment, risk sharing, superior selection of investment, window dressing, access to

specific skills for better management, deal outside the preference of industries or

geographical regions etc. In addition, they were also asked to specify the stage i.e. early,

late stage or exit stage, for syndicating with other VCs.

Now, third part of the questionnaire deals with the pre-investment activities of the VCs

mainly, the sources of deals used by them for generating the deal flow and the evaluation

criteria considered by them prior to actual investment options. With respect to deal

sources, the participating VC firms were asked to rate their preferences for sources of

potential deals starting with least preferred to highly preferred sources. These sources

mainly include referrals, looking for deals themselves, getting deals from the VC

community, unsolicited calls by entrepreneurs themselves and getting deals from the

prior investees.

The questionnaire further asked the investors whether they prefer in-house experts,

outside consultants or a combination of them for due diligence purpose. To analyse the

evaluatin criteria, the survey asked the VC firms to rate the same on an importance scale

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of irrelevant, desirable, important and essential. These criteria were grouped under five

different heads i.e. Entrepreneur ( quality of management team, personality and attitude

of the entrepreneur, Past track record, urge to grow, referred by a reliable source,

familiarity with the market, promoter’s own contribution and focused development

strategy), Market (growth rate, domestic/international market potential, little threat of

competition), Product/Service (high tech product, ready prototype, proprietary

protection), VC firm’s financial and non-financial requirements (rate of return, size of

investment, exit routes, liquidity, consistency with investment preference, quality of

business plan, consistency with VC firm’s expertise and presence of co-investors) and

lastly, Environmental Conditions (tax benefits and regulatory environment)

Fourth part of the questionnaire relates to post-investment activities of the VC firms

mainly the investor-investee relationship and the monitoring and the control exercised by

them over the investees. With respect to the investor-investee relationship, the VC firms

were asked to rate their involvement in general with the business of the investee on a

scale of high, medium, low and no involvement. These involvement areas were clustered

under four different heads like Product Development (technology, research and

development and production), Marketing (customer knowledge, sales, formulating and

evaluating marketing plans), General Business Management (serving as a sounding

board, selecting management team, networking, strategic alliance partner),and finally,

Finance and Accounting (cash management, budgeting, further funding and exit). For

emphasizing the relationship between the VC and the investee company, the survey

asked the VC firms to specify the areas of conflict with the investee company like

information concealed by the investee, timing and amount of investment, differences in

the perception of both the parties, staging and excessive control by VC.

With respect to monitoring and controlling, the participating VC firms were asked to rate

the methods and means for formal monitoring i.e. use of budgets, business plans,

monthly accounts and financial statements. They were also asked to rate the methods of

collecting information (telephonic conversation, board meeting, personal Visit and

management reports) on a preference scale of least preference to highest preference. To

validate the findings, the VC firms were requested to specify the frequency of

performance review and personal visits to the investee companies as monthly, quarterly,

half yearly and yearly. In order to avoid the agency problem (i.e. problems arising due to

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goal incongruence between the VC and entrepreneur), VC firms normally put restrictive

covenants in the venture capital investment agreement. Here, the participants were asked

to rate the areas of investee company normally controlled by them on a scale of high

control, medium control, low control and no control. These areas include capital

expenditure, working capital management, debt levels, dividend payment, management

remuneration, recruitment of personnel, participation in mergers and sale of assets.

Finally, the fifth part of the questionnaire was related to the divestment mechanisms

applied by the VC firms in India. It included the various exit options used by them like

initial public offer (IPO), trade sale, secondary sale, liquidation and repurchase of shares

by the investee company. In addition to the options, they were also asked to specify the

time frame preferred for exiting the business of investee. The durations were specified as

less than 5 years, 5-7 years and 7-10 years. VC firms were asked to indicate the average

target annual rate of return from investments made in the ventures from the options such

as 10%-20%, 20%-30%, 30%-40% and more than 40%.

The questionnaire for the study is attached in the appendix at the end of the thesis (Refer

Appendix B). The break up of the questionnaire is presented in the following table.

Table 3.1 Details of the Questionnaire (Supply side)

Part Description Number of Questions

Total

I Characteristics of Participating VC firms: 1. Name and Location 2. Year of Establishment 3. Firm Type 4. Number of Portfolio Companies 5. Members of Management Team with Entrepreneurial

Background

1 1 1 1 1

5 II Investment Policy Variables:

1. Stage of Investment 2. Sector of Investment 3. Minimum and Maximum Amount of Investment 4. Percentage of Actual Investment and Reasons for

Rejecting Investment Proposals 5. Instrument of Financing and Percentage of Equity Stake 6. Regional Preference 7. Policy with respect to Investment in Businesses Earlier

Incubated or Funded by Angel Investors 8. Syndication

1 2 1 2

2

5 3 3

19 (Contd.)

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Part Description Number of Questions

Total

III Pre-Investment activities: 1. Deal Sources 2. Evaluation Criteria

1 1

2 IV Post-Investment Activities:

1.Involvement in the Business of Investee 2.Monitoring and Control

1 5

6 V Divestment Mechanism:

1.Exit Options 2.Time Frame for Exit 3.Targeted Rate of Return

1 1 1

3 Grand Total 35

(B) For Studying the Role Played by the Venture Capitalist in the Development of

the Ventures in Gujarat (Demand Side) The questionnaire for this study was mainly divided mainly into two parts. The first part

addressed various demographic variables such as gender, education, age, nativity,

location for starting venture, entrepreneurial family background, the support extended by

the family members and previous work experience.

Literature on entrepreneurship suggests that there are diverse motives that trigger

entrepreneurship within an individual. Therefore, the study also concentrated upon

investigating various internal and external drivers that motivates an individual for taking

up entrepreneurship over a corporate job. These mainly include ‘need for independence’,

‘achievement’, ‘monetary gain’, ‘break-off from the corporate gain’, ‘inspiration’ and ‘to

support the society and family business’.

The questionnaire also sought venture specific details like nature of innovation (product

or service), sector/industry (IT and ITES, education, healthcare, textile, bio-tech,

tourism, automobile, hospitality etc.) and stage of venture development (seed, startup,

early expansion and expansion), the number of ventures (first, second, third and so on)

undertaken by them and ownership structure of these ventures (partnership, private

limited company, public limited company, others).

The entrepreneurs were asked whether they had presented their business plans in any

competitions and if so, they were further asked to rate the role of such competition on a

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scale of high, medium and low. The study also checked upon the familiarity of the

entrepreneurs towards early stage funding options like incubation and angel investments.

The entrepreneurs were asked to rate their familiarity with these options on a scale of

never heard of, heard of only, know a little bit, know a fair amount and know very well.

Besides, the study also highlighted the use of bootstrapping techniques among these

entrepreneurs used during the early stages of their venture development like buying used

equipments, renting the physical space, working from home, discounting, use of credit

cards, partnering, loan from family and friends, sharing of equipment-employees and

office space, employing the relatives and friends at below market salaries, obtain

advance payment from customers etc.

Now focusing upon the second part of the questionnaire which mainly relates to value

added role performed by the VC and the investor-investee relationship, presented first of

all venture capital investment details like the amount of investment, the year in which the

funds were raised, whether the VC had already exited from the venture or continues to

have investments, instrument of financing used, the bifurcation of equity holding

between the promoters and the venture capitalist, time gap between the application to

approval etc. The study also finds out the reasons for approaching the VC. The

questionnaire asked the entrepreneurs how they came to know about this particular

option for raising funds. The options included newspaper, consultants, banks/financial

institutions, friends or any other sources.

With respect to the involvement of the VC on the board of the investee company, the

survey had kept questions related to number of seats offered to the VC and how did the

entrepreneurs perceive the role of the VC on the board of their companies. They were

asked to rate the same on a scale of active, passive or none. The entrepreneurs were

further asked to specify the frequency of interaction with the VC or its staff. They were

provided with various options like once a moth, twice a month, once in two months, once

in three months and once in several months.

To specifically highlight the role of the VC in various functional areas of the business of

the investee company, the entrepreneurs were asked to rate the differences in the

expected contribution prior to VC investment and the perceived actual contribution post

VC investment on a scale of 1(least involved) to 5(most involved). These areas were the

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same as analysed in the VC survey. They include the options like Product Development

(technology, research and development and production), Marketing (customer

knowledge, sales, formulating and evaluating marketing plans), General Business

Management (serving as a sounding board, selecting management team, networking,

strategic alliance partner),and finally, Finance and Accounting (cash management,

budgeting, further funding and exit).

Lastly, the entrepreneurs were provided with various positive and negative set of

statements related to VC in general and were asked to rate these perceptions on a scale of

strongly agree, agree, neutral, disagree and strongly disagree. The future plans of

expansion have also been addressed through the questionnaire and the entrepreneurs

were asked whether they will approach the same VC or have not yet decided.

This questionnaire is attached in the appendix at the end of the thesis (Refer Appendix

C). The detailed break up of the content of the questionnaire is presented below.

Table 3.2 Details of the Questionnaire (Demand Side)

Part Description Number of Questions

Total

I Profile of VC Supported Entrepreneurs 1. Gender 2. Education 3. Age 4. Nativity (State of Origin) 5. Location 6. Entrepreneurial Family Background and Support of

Family Members 7. Previous Work Experience 8. Reasons for being an Entrepreneur 9. Reasons for Starting Venture in Gujarat

1 1 1 1 1 2

1 1 1

10 Venture Specific Detail

1. Stage of Venture Development 2. Sector of Venture 3. Nature of Innovation 4. Number of Venture 5. Ownership Structure

1 1 1 1 1

5 Early Stage Financing Options and Other Detail

1. Use of Bootstrapping Technique 2. Awareness towards Incubators and Angel Investors 3. Availing Incubation Facility 4. Participation in Business Plan Competitions

1 1 1 1

4

(Contd.)

75

Part Description Number of Questions

Total

II Details Related to Venture Capital Investment 1. Amount of Investment 2. Year of Raising Venture Capital 3. Exit of Investor 4. Syndication 5. Instrument of Financing 6. Equity Holding by Promoter and Investor 7. Means of Knowing about Investor 8. Reasons for Approaching this Investor 9. Round of Funding 10.Raising Funds from Angels prior to VC Investment 11.Time Gap between Application to Approval

1 1 1 1 1 1 1 1 1 1 1

11 Pre-Investment Development Activities and Post-

Investment Use of VC in Acquiring the Resources 2

2

Involvement and the Value Added Role 1. Role on BOD of Investee Companies 2. Frequency of Interaction 3. Involvement in Responding to Problems 4. Difference in Expected and Actual Contribution of VC

in various Functional Areas of Investees’ Business 5. Overall Satisfaction of Entrepreneurs

2 1 1 1 1

6

Perceptions of the Entrepreneurs Towards Venture Capitalists in General

1

1

Importance Assigned to Geographical Proximity to the Investor

1

1

Future Expansion and Approaching the same VC 2 2 Grand Total 42

(C) For Studying the Funding Preferences of Young Entrepreneurs from Gujarat

(Demand Side)

The entire questionnaire was divided into three parts where the first part of the

questionnaire like the earlier survey on the entrepreneurs, was related to the study of

demographic and social variables like age, education, nativity, entrepreneurial family

background, support of the family members etc. In addition to profiling of these

individuals, the study also throws light on various internal and external factors triggering

the entrepreneurship. As this survey is focused upon Gujarat, this study also analysesd

various reasons for commencing the businesses in Gujarat by Gujarati and non-Gujarati

entrepreneurs.

76

The second part of the questionnaire was mainly related to studying various venture

specific details like nature of innovation (product or service), sector/industry (IT and

ITES, education, healthcare, textile, bio-tech, tourism, automobile, hospitality etc.) and

stage of venture development (seed, startup, early expansion and expansion), the number

of ventures (first, second, third and so on) undertaken by them and ownership structure

of these ventures (partnership, private limited company, public limited company, others).

The third part of the questionnaire focused upon the main theme i.e. studying the

preferences of these new age entrepreneurs towards funding their ventures. This part

attempts to explore various funding sources employed by these entrepreneurs at the

initial stages of their ventures like personal savings, spouse’s income, friends and

relatives, loan from banks/financial institutions, angel investors, venture capital and

government subsidy. The study also asked the entrepreneurs to specify ratio of

promoters’ contribution viz. a viz. other sources of financing used. The survey examined

whether these entrepreneurs had approached equity investors (i.e. angel investors and

venture capitalists) and if so, why the arrangements did not work out in their favour. For

those who have not availed any external funding yet, the study requests them to mention

the reasons for the same. As most of these ventures were at initial stages, the study also checked upon the use of

incubation centres, business plan competitions and various bootstrapping techniques, by

these entrepreneurs. These entrepreneurs were asked whether they had presented their

plans in any such competitions or not and if so how did they perceive the role of such

competition (high, medium and low) in the starting of their ventures. They were asked

whether they have availed the services of incubation centre at the seed/startup stage.

They were also requested to rate their familiarity on a scale of never heard, heard of

only, know a little bit, know a fair amount and know very well. For bootstrapping

techniques, they were presented with the same set of options as given to the VC

supported entrepreneurs. Besides, the study checked upon the familiarity of these entrepreneurs towards equity

funding options i.e. angel capital and venture capital on a scale of never heard of, hear of

only, know a little bit, know a fair amount and know very well. Like VC supported

entrepreneurs’ survey, the questionnaire also addressed various positive and negative

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perceptions of these entrepreneurs towards these equity investors. Those who were

familiar with these investors were asked to rate their perceptions for the said investors on

a scale of highly agree, agree, neutral, disagree and highly disagree. These statements

were the same as that of VC baked entrepreneurs’ options so as to facilitate the

comparison among their responses.

Those who have raised debt funding were asked to specify the reasons for approaching

debt investors and rate their experiences with them. Finally, the study explored the

intentions of these entrepreneurs towards expansion in future and the sources that would

be preferred by them for funding such expansion projects.

The detailed break-up of the content of the questionnaire is provided as under.

Table 3.3 Details of Questionnaire (Demand Side) Part Description Number

of Questions

Total

I Profile of Young Entrepreneurs(Without VC support) 1.Gender 2.Education 3. Age 4. Nativity (State of Origin) 5. Location 6. Entrepreneurial Family Background and Support of

Family Members 7. Previous Work Experience 8. Reasons for being an Entrepreneur 9. Reasons for Starting Venture in Gujarat

1 1 1 1 1 2 1 1 1

10 II Venture Specific Detail

1.Stage of Venture Development 2.Sector of Venture 3.Nature of Innovation 4.Number of Ventures 5.Ownership Structure

2 1 1 1 1

6

(Contd.)

78

Part Description Number

of Questions

Total

III Study of Funding Preferences and Other Relevant Detail 1.Sources of Funding Used During Startup Stage 2.Bifurcation between Promoter’s Contribution and

Other Investors’ Contribution 3.Awareness towards Angel Capital and Venture Capital4.Rating of Perception towards these Equity Investors 5.Use of Bootstrapping Technique 6.Use of Incubators and Awareness towards such

Incubation Centres 7.Business Plan Competition and its Role 8.Approaching Equity Investors and Reasons for not

Getting Funding 9.Approaching Debt Investors and Rating Experience of

Entrepreneurs with them 10.Reasons for not involving External Investors 11. Expansion and Preferred Source of Funding for

Proposed Expansion.

1 1 1 1 1 2 1 2 2 1 3

16

Grand Total 32 3.3.6 Data Analysis Plan

(A) For Studying the Venture Capital Investment Process by Indian Venture

Capitalists (Supply Side)

As mentioned previously, the useful responses for the survey were only 38. Hence, use

of parametric statistical models was not desirable because these models essentially

require larger samples and their underlying assumption is normality in data distribution.

The more appropriate methodology to approach a small sample situation is to employ

distribution free non-parametric statistical models. Hence, present study used non-

parametric statistical analysis for inferring the patterns in data. Apart from the problem

of sample size, parametric tests also require certain assumptions about populations and

data that were violated by the venture population studied herein. The assumptions of

normality of the data were investigated with the help of Kolmogorov-Smirnov test for

each variable that was subject to use of sophisticated statistical analysis.

79

For most of our propositions, the Mann-Whitney U test, Friedman One Way Anova Test,

Kruskal Wallis test etc, were used. The selection of non-parametric statistics imposed

some limitations on our research. Most notably, it was not possible to measure the

magnitude of statistical relationships. Statistical Package for Social Science (SPSS) 12

was applied for analysis of the data in the present study.

With respect to study of characteristics of participating VC firms in the survey, the

responses were analysed with the help of simple frequency tabulation showing frequency

and percentages. For analysing number of portfolio companies and members with

entrepreneurial background, descriptive statistics such as mean, median, mode and

standard deviation, were also calculated. For studying the investment policy variables

like preference for sector and stage of investment, use of financing instruments etc. the

same methodology of frequency tabulation was applied. Here, for studying the minimum

and maximum investment limits and equity stake by the VC, again the descriptive

statistics were calculated. For many of these variables where only frequencies are

calculated, these variables were found to be nominally scaled or dichotomous type where

the use of further sophisticated statistical analysis was not applicable.

For analyzing the importance of geographical proximity, the VCs were asked to rate the

importance of the same on a scale of extremely important (5), very important (4), neutral

(3), somewhat important (2) and not important (1). The figures in the bracket represent

the weights assigned to the respective measurement scale. This facilitated the calculation

of weighted average score for the geographical importance from the VC’s point of view.

In the entrepreneur’s survey as discussed later in the study, the same question was asked

to the entrepreneurs to judge the importance given by them for locating themselves near

to the VC. In order to compare the statistically the differences in the importance assigned

to geographical proximity by both the parties, Mann- Whitney U test was performed.

Further, with respect to the policy of VCs for investing in the businesses earlier funded

by angels or incubated earlier, again Mann Whitney U test was performed. The

differences in the perceptions were statistically tested among the two groups of VC i.e.

those (VCs) who have invested in such businesses and those who have not invested in

such businesses towards the early stage funding options.

80

For studying the syndication policy of the investors, various reasons for syndication were

rated on the same importance scale as highlighted earlier i.e. extremely important, very

important, neutral, somewhat important and not important. Here, simply the weighted

average mean was calculated to highlight the importance assigned to various reasons, as

mentioned in the content of the questionnaire above.

In pre-investment activities, variables regarding the use of deal sources and evaluation

criteria were studied in detail. To highlight the differences in the use of deal sources

among the VC firms in India as against their age (i.e. recently established, already

established and in between these two), Kruskal-Wallis test was used.

To find out the importance of evaluation criteria by Indian VCs, scale used by

MacMillan et al. (1985) was followed in this survey too. The present study applied

previously validated constructs and measurement variables. The evaluation criteria used

here were the same as used in all these different studies because the variables identified

in these studies were developed over a period of time and are robust when it comes to

reliability. In the study by Tyebjee and Bruno (1984) and the study by MacMillan et al.

(1985) the responses were factor-analyzed to determine what major groupings of criteria

occurred among criteria. Since, many sophisticated statistical tools like factor analysis,

cluster analysis, regression etc. have already been applied by the researchers over a

period of time, the present study merely calculates the mean scores and the results are

almost similar to the previous studies on the same theme. And as the sample size for the

study was relatively small, the factor analysis was not considered.

With respect to value adding functions, VCs were asked to rate their perceptions of the

involvement in the business of the investee on a scale of high, medium, low and no

involvement. For defining the value added functions by the VC, the same areas/functions

as used in the study of Berg-Utby et al. (2007) were followed for the reason that this

categorization of the functional areas was supported with the discriminant validity.

Internal consistency is provided with composite reliability as well as Cronbach’s alpha.

Further, the categorization and the measurement scales were tested by means of a

confirmatory factor analysis by these researchers. In the present study, the mean and

standard deviations were calculated for all these value adding functions categorized into

four parts namely: product development (technical), marketing, general business

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management and accounting and finance. Further, these perceptions of the VCs were

compared with the entrepreneurs’ expectations from the investors using Mann-Whitney

U test.

For monitoring and control, the variables with respect to means of formal monitoring and

methods of exercising control were analysed with simple frequency tabulation.

Preferences of Indian VCs for collecting the information were analysed with Friedman

Test. For the areas that VCs normally control, descriptive statistics (mean and standard

deviations) were calculated to highlight the areas where higher degree of control was

exercised by the VCs.

Lastly, for divestment mechanism, the exit options, time frame and the targeted rate of

returns were analysed with the help of simple frequency tabulation.

(B) For Studying the Role Played by the Venture Capitalist in the Development of

the Ventures in Gujarat (Demand Side)

Like VC survey, here also due to small sample size (the number was 22) and the

violation of the assumption of normality of data, parametric testes could not be applied.

For analyzing most of the variables, distribution free non-parametric tests like Mann-

Whitney U test, Wilcoxon Matched Pair Signed Ranks test, Kruskal-Wallis, Spearman’s

Correlation etc. were used. The application of these tests has been discussed herein

detail. SPSS 12 is applied for analysis of the data.

For studying the profiling of the entrepreneurs who have/had raised VC funding from

GVFL (age, education, location, nativity, previous work experience, reasons for being an

entrepreneur, reasons for starting venture in Gujarat) and various venture specific details

(stage, sector, ownership structure, number of ventures) simple frequency tabulations and

bar charts were used. As these variables were nominally scaled, performing further

statistic was not possible here. There are two kinds of VC funded entrepreneurs i.e.

entrepreneurs with entrepreneurial background and entrepreneurs without such

background. So, for studying the relationship between the entrepreneurial family

background and the support extended by the family members to them, Mann-Whitney U

test was performed.

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For analyzing the use of business plan competitions, bootstrapping techniques,

incubation facility and raising funds from angel investors before approaching the VC,

again frequency tabulations with a combination of bar charts were used as these variables

were not capable for further statistic analysis due to their nominal scale. For analyzing

the familiarity of these entrepreneurs towards incubation centres and angel investors,

Wilcoxon Matched Pair Signed Ranks test was applied with a null hypothesis that there

is no difference in the familiarity of the entrepreneurs towards incubation centres and

angel investors. Wilcoxon Matched Pair Signed Ranks test is used for examining the

differences in the location of two populations based on paired observation, taking into

account the magnitude of the difference. Descriptive statistics were also calculated for

these variables.

As mentioned before, prior to probing into the role of the VC in the development of the

venture, various investment related details like year of raising funding, instrument of

financing, exit option, syndication, rounds of funding, time gap between application to

approval etc; were analysed simply with frequency tabulations and percentages. For

analyzing amount of investment and bifurcation of equity holding between the promoter

and the VC, descriptive statistics like mean, median, mode and standard deviations were

calculated.

Now concentrating upon the main theme, i.e. studying the differences between the

expected contribution (prior to VC investment) and the actual contribution as perceived

by the entrepreneurs (post VC investment), Wilcoxon Matched Pair Signed Ranks test

was applied with a null hypothesis that there was no significant difference in the

expected and actual contribution by the VC with respect to various functional areas as

discussed above. The composite mean scores for the expected and actual contribution for

the areas like product development, marketing, general business management and

accounting/finance were calculated and compared with a study of Berg-Utby et al.

(2007). As mentioned in the VC survey, the categorization of the functional areas as used

in the study of Berg-Utby et al. (2007) was supported with the discriminant validity and

internal consistency is provided with composite reliability as well as Cronbach’s alpha.

For studying the satisfaction level of the entrepreneurs, Kruskal-Wallis test was

performed with a null hypothesis that there was no significant difference in the

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satisfaction level of the entrepreneurs of the ventures with VC exit, partial VC exit and

the ventures where still GVFL holds investment. With respect to the perceptions of

entrepreneurs regarding VCs in general, weighted average mean scores were computed

for each of the positive and negative statements.

Finally, the entrepreneurs were asked whether they have any plans for expansion in

further and if so, whether they will prefer to approach the same VC. For analyzing these

nominally scaled variables again simpler frequency tabulations were used.

(C) For Studying the Funding Preferences of Young Entrepreneurs from Gujarat

(Demand Side)

The results of the study have been analysed with frequency tabulations, charts,

descriptive statistics and relevant statistical tests. It is worth noting here that, again due

to small sample size and the violation of the assumption of normality of data, distribution

free non-parametric tests, specifically, Mann-Whitney U Test and Wilcoxon Matched

Pair Signed Ranks Test were applied wherever possible. For studying the relationship

between the variables where there was a scope for applying the parametric tests, first of

all, Kolmogorov-Smirnov test was run to detect whether the sampling distribution

follows a normal distribution. The application of these tests has been discussed herein

detail. SPSS 12 is applied for analysis of the data.

Various demographic and social variables and venture specific details, as mentioned

before in the details of the questionnaire, were analysed simply with frequency

tabulations, percentages and bar charts. As majority of these variables are non-metric by

nature, application of statistics test was not possible here. This study like the study of VC

supported entrepreneurs, also had two kinds of entrepreneurs i.e. entrepreneurs with

family business background and entrepreneurs without such backup. So, for studying the

relationship between the family business background and the support of family members,

Mann-Whitney U test was performed.

For analyzing the sources of funds used at the initial stages, frequency tabulations and

percentages were applied. And the ratio between the promoters’ contribution viz a viz

other sources of financing, was analysed with the descriptive statistics. For those

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entrepreneurs who had not availed any sort of external funding, the reasons for the same

were analysed again with the help of frequency and percentages. For use of business plan

competitions and bootstrapping techniques as described in the previous section,

frequency and percentage analysis have been used. These variables were again

categorical.

For comparing the awareness of these entrepreneurs regarding the equity investment

options, particularly, angel capital and venture capital, Wilcoxon Matched Pair Signed

Ranks test was applied. Here also, the familiarity of the entrepreneurs regarding angel

capital and venture capital was measured as metric variable. Further, the familiarity of

these entrepreneurs with respect to angel capital was compared with the familiarity of the

VC supported entrepreneurs with the help of Mann-Whitney U test. These two groups

were not compared for venture capital as it is quite obvious that the VC supported

entrepreneurs know very well about this option as compared to non-VC supported

entrepreneurs.

Further, the perceptions of these entrepreneurs for equity investors were analysed with

the help of descriptive statistics. Besides, these rating of perceptions were compared with

the similar rating by VC baked entrepreneurs with the help of Mann-Whitney U test. In

case of those entrepreneurs who had availed bank funding for their ventures, the reasons

for availing the same were analysed with frequency tabulation and percentages. And the

experience of the entrepreneurs with respect to various parameters of baking services

were analysed again with the descriptive statistics. Finally, the willingness of the

entrepreneurs to expand their operation in future, preferred sources of funding for the

same and willingness to approach investors in Gujarat or Outside Gujarat have been

analysed with frequency and percentages.

The scheme of ther esearch methodology for all the three studies has been compiled in

the following table.

85

Table 3.4 Scheme of Research Methodology Sr. No.

Research Plan

Indian Venture Capitalists’

Survey

Entrepreneurs with VC Funding

Entrepreneurs Without VC

Funding 1 Research

Problem/ Objectives

Study of venture capital investment process, specifically characteristics of VC firms, investment policy variables, pre-investment and post-investment activities and divestment mechanism.

Study of the role played by the venture capitalists in the development of the venture along with profiling and use of early stage financing options by the entrepreneurs in Gujarat

Study of the funding preferences of new age entrepreneurs in Gujarat along with profiling and use of early stage financing options by them.

2 Research Design

Descriptive Descriptive Descriptive

3 Data Sources

Primary and secondary data

Primary and secondary data

Primary data

4 Research Approach

Survey approach. Survey approach. Survey approach.

5 Research Instrument

Questionnaires and telephonic interviews

Questionnaires, personal and telephonic interviews

Questionnaires, personal and telephonic interviews

6 Sampling Unit

Venture capital firms operating in

India.

Entrepreneurial ventures that have

availed VC funding in Gujarat.

High-growth entrepreneurial

ventures without venture capital

funding in Gujarat. 7 Respondents Members of

management team of such VC firms specifically fund

managers.

Members of management team of

these ventures specifically CEOs, managing directors

and finance executives

Promoters/Owners heading these

ventures.

8 Sample Size 38 VC firms in India.

22 Entrepreneurial ventures in Gujarat.

43 Entrepreneurial ventures in Gujarat.

(Contd.)

86

Sr. No.

Research Plan

Indian Venture Capitalists’

Survey

Entrepreneurs with VC Funding

Entrepreneurs Without VC

Funding 9 Sampling

Procedure Compilation of own list of VC firms through various sources and approaching each of them for survey

Compiling list of firms funded by VCs in Gujarat, mainly GVFL and approaching each of them for survey.

Compiling list of firms from various sources like the students of entrepreneurship courses at NIRMA University and EDI, Incubates availing the facility of the incubation centres, the nominees of Hottest Startups on NEN, list of startups from Plugged in, the entrepreneurs who had approached GVFL for funding, placement cell data of various management institutes, members of HeadStart group, references from existing startups and newspaper articles; and then approaching each of them for survey.

10 Contact Method

Emails and telephone

Personal interviews, emails and telephone.

Personal interviews, emails and telephone.

11 Data Analysis Tools

Frequency tabulations, descriptive statistics, non-Parametric test like Mann-Whitney U test, Friedman test and Kruskal-Wallis test

Frequency tabulations, descriptive statistics, non-Parametric test like Mann-Whitney U test, Wilcoxon Matched Pair Signed Ranks test, Friedman test and Kruskal-Wallis test, Spearman’s correlation

Frequency tabulations, descriptive statistics, non-parametric test like Mann-Whitney U test and Wilcoxon Matched Pair Signed Ranks test.

87

3.4 Conclusion

This chapter on research methodology describes various methodological steps involved

in carrying out this study. An overview about the research design, data collection

sources and methods, sampling procedure and data analysis plan helps to understand the

research approach used. For all the three studies as discussed in the chapter descriptive

research design was used. A survey of venture capitalists across India and the

entrepreneurs (with and without VC funding) from Guajart was conducted based upon

the structured questionnaires. The respondents were contacted through emails, telephone

calls and personal visits wherever possible. The data collected were quantitatively

analysed with frequency tabulations, charts, descriptive statistics and certain non-

parametric tests. A brief on different variables of interest and their appearance in the

venture capitalists’ and pentrepreneurs’ questionnaires provides direction for data

analysis. The next chapter analyses the global scenario of venture capital industry based

upon secondary data.