The document discusses the future of family businesses in India, noting that they account for a large percentage of GDP and employment in India. Family businesses are adapting by allowing younger generations more flexibility and input, and with continued professionalization they are expected to remain an important part of the Indian economy going forward. The success of transitioning leadership between generations will be key to the long-term success of family businesses.

1. Report on
Future of Family Businesses
In
Family Business and Entrepreneurship
By:
Dhrumil Shah (400038)
S.Y. BBA
On:
21st
May’15
Submitted To:
Mr. Atul Suvagiya
Mr. Durgesh Pandit

2. Acknowledgement
I would like to thank the Programme Director for introducing such a diploma
course into the BBA curriculum which gives a practical knowledge about the
family businesses in India.
I would also like to thank Mr. Atul Suvagiya and Mr. Durgesh Pandit for
continuously guiding and supporting me in the report.
I would also like to thank all my batch mates, my parents and my brother for
their continuous support throughout my project, without whom this project
could have remained a mere pile of papers.

3. Introduction
Family firms have been crucial features of the business landscape for centuries
and remain important today. They can be small, medium, or large and have
appeared in all sectors and in all three industrial revolutions. Throughout they
have _ an important role in employment, income generation, and wealth
accumulation. This makes them remarkably hard to describe as they are
multidimensional, and no single definition fully captures their intrinsic
diversity. However, a broad general definition of the family firm is one where a
family owns enough of the equity to be able to exert control over strategy and
is involved in top management positions. This definition does transfer through
time and space, is one of the most used today, and so can be considered a
useful benchmark. However, the international range of institutional, cultural,
and governance arrangements means that it must remain a starting point
against which to explore variety, rather than an end point on which a rigid
taxonomy can be built.
A family business is a commercial organization in which decision-making is
influenced by multiple generations of a family- related by blood or marriage-
who are closely identified with the firm through leadership or ownership.
Family firm is a corporation that is entirely owned by members of single family.
It is also known as company owned, controlled and operated by members of
one or several families.
In India, family businesses range from the small mom-and-pop store (or kirana)
to large conglomerates with equally varied business interests. As their growth
has skyrocketed, many have stepped outside their zones to acquire companies
in new industries and geographies. Their contribution to India’s growth is also
being increasingly recognized.

4. Future of Family Businesses
Business families are now ensuring a more representative family charter that
has enough room for younger members to be able to work on their own plans
that are different from existing family trade. This is a marked departure from
the earlier tradition where family elders decided on how the business would be
handled and what the responsibility of each member of the family would be.
The family businesses in India have contributed to the economy significantly.
They have been gaining growth and importance over the past decade. After
the Liberalization, Privatization & Globalization, 1991 policy, the exports have
risen 116 times when compared to exports during 1970-71. A part in this
increase has been contributed by the family owned businesses. 68% of the
family businesses are into exports which show the scale of operation of these
businesses and also their bright future, which might surpass the giant MNCs
also.
The following data also backs up the fact that the family owned businesses will
have a thriving future:
 Family businesses account for 90% of gross industry output.
 As per the KPMG 2013 survey,
o Family companies account for two-thirds of India’s GDP.
o 79% of organized private sector employment is generated by
family businesses.
o 27% of overall employment is generated by family firms.
 Family businesses form a backbone of the Indian economy with gross
output equaling about 60% of GDP or about 90% of India’s industrial
output. In 2011, overall gross output produced by family businesses
amounted to about Rs. 4384 Crores.
 More than 95% Indian companies are family run.
 80% support employment in areas of operations.

5. These evidences are sufficient to support their halcyon future in India. So, it
implies that investing or being a stakeholder with a family run business is as
good as gold.
The following data is a measure of the impact and scope of family enterprises
globally:
 John Davis from Harvard Business School says that family firms account
for 2/3 (two thirds) of all businesses around the world.
 An estimated 70%-90% of global GDP annually is created by family
businesses.
 Between 50%-80% of jobs in the majority of countries worldwide are
created by family businesses.
 85% of start-up companies are established with family money.
 In most countries around the world, family businesses are between 70
and 95% of all business entities.
 PrivateWaterhouseCoopers (PWC) in the year 2012 stated that 65% of
family businesses are looking for steady income growth over the next
five years.

6. Reasons for success of Family Businesses
The reasons behind the family businesses achieving greater heights are:
 Contributing to economic development:
Family business play crucial role in economic development of most of
the countries. Retail sector, small scale industry, and service sector are
owned by family business.
 Spirit of entrepreneurship:
Family business as contributes towards development and has been
successful in country like India it paves way to various families to initiate
and bring up new ventures in country.
 Philanthropy:
Family business in India along with their development have also
concentrated towards welfare of general public by investing on
hospitals, educational institutions, construction of roads etc.
 Trust Lowers transaction cost:
Partnership and other forms of business involving outsiders usually lead
to conflict in long run. In case of family business as all the parties in
family are affected by loss incurred in company do not involve any
sought of conflict and difference in point of view arises they try and
solve it internally in the family ensuring business is not affected by the
same.
 Small, nimble and quick to react:
As managing team size in family business is small compare to other form
of business decision making process involves less period of time which
helps to take timely decision.
 Information as source of advantage:
As family business is private firm it is not required to take decision in
accordance with pressure from other sources and strategies of business
need not be revealed to outsiders of business.

7. Conclusion
Family firms are dominating global business today. To ensure longevity, they
must phase their many challenges through long-term planning. The first step is
to design a road map for the future governance of the firm and the family.
I'd say family businesses have a very bright future in India. The biggest reason
for the failure of family businesses was that they weren't able to manage the
transition between generations smoothly. Indian family business enterprises
also recognise disadvantages like attracting non-family staff, challenges around
succession, family politics and access to capital in running their businesses.
Over time, one learns how companies have managed transitions and can work
through these. There are forums and experts available to see companies
through this. Consequently, there is a lot more knowledge available and a
much greater opportunity for success if transitions go through smoothly.
Luckily in India, there is a belief in preserving family businesses within the
family, similar to Europe and Britain. Consequently, given the strong family
values and exposure to best practices and good governance I don't see why
they won't do well in the future.
Family businesses have become much more hard-headed. The most important
priorities are to remain in business and improve profitability.

8. Bibliography
 PrivateWaterhouseCoopers (PWC)
 KPMG
 Slideshare
 entrepreneur.com
 articles.economictimes.indiatimes.com
 redseerconsulting.com
 thehindu.com
 encubeindia.com

9. Report on
Role of Venture Capital Funds
in India
In
Family Business and Entrepreneurship
By:
Dhrumil Shah (400038)
S.Y. BBA
On:
21st
May’15
Submitted To:
Mr. Atul Suvagiya
Mr. Durgesh Pandit

10. Acknowledgement
I would like to thank the Programme Director for introducing such a diploma
course into the BBA curriculum which gives a practical knowledge about the
family businesses in India.
I would also like to thank Mr. Atul Suvagiya and Mr. Durgesh Pandit for
continuously guiding and supporting me in the report.
I would also like to thank all my batch mates, my parents and my brother for
their continuous support throughout my project, without whom this project
could have remained a mere pile of papers.

11. Introduction
The Venture Capitalists Financing refers to financing of new high risky venture
promoted by entrepreneurs who lack experience and are new to the market.
The venture capitalists are persons who indulge in the activity of venture
capital financing. They take calculated risks and invest their money with these
young and amateur entrepreneurs.
They provide finance to these entrepreneurs by investing in equity or debt
securities. But, the contribution in the equity share capital should not exceed
49% as it would hamper the ownership of the business. These venture
capitalists invest either by seed capital or by start-up capital. They not only
invest in these firms by the way of finance but also support in sales strategy,
business networking and management expertise.
They do not compromise on the time to analyze the business plan put forward
by the entrepreneurs as the level of risk is to be determined by them. They
analyze on the basis of some specified parameters and also they have some
pre-determined rate of return that should be received on any investment they
make in these entrepreneurial ventures.
Entrepreneurs find it difficult and costly to get early stage financing. But,
having a clear and a strategic business plan for the venture capitalists gets
them in a comfortable position to acquire finance easily.
Venture capitalists also aid these entrepreneurs in their different stages of
start-up life cycle.
 In the initial development stage as 'seed capital' for converting an idea
into a commercially viable entity.
 Implementation or 'start-up capital' when all is ready to commence
production.
 Additional capital to overcome manufacturing teething problems.
 Establishment capital to facilitate rapid expansion of an established
company.

12. Evaluation of Venture Capital Industry
The need for Venture capital industry was actually felt after the LPG policy
when there was a requirement for bulk supply of funds for fulfilling the
business opportunities. In the 21st
century, the IT industry witnessed a bullish
market and the need for funds was increased, which gave the Venture Capital
industry a boost too. But soon the markets started to decline and the venture
capital industry was shattered. This problem was not only faced in the Indian
economy but the rest of the world was also affected.
To tackle this problem, Securities Exchange Board of India (SEBI) took charge to
control the situation before it could get worse. It gave a detailed guideline
wherein a role, expectations, operationalisation and reporting guidance had
been ensured for their proper adherence.
Indian entrepreneurs had been perceived as lacking conceptual and analytical
skills to have an unambiguous rationalization of the fund requirement and
convincing power to justify their propositions to the venture capitalists.
Venture capitalists also face some challenges when the Indian entrepreneurs
prefer raising money from their friends and relatives. They are also exposed to
exit challenges due to shallow capital markets in India and limited
opportunities for selling of their stake before an Initial Public Offering (IPO).
Having discussed their challenges and threats, let us throw some light on their
growth opportunities. Industrial Development Bank of India (IDBI), Industrial
Credit and Investment Corporation of India (ICICI), and State Finance
Corporation (SFC) were responsible for the growth of the Venture Capital
financing.
In the year 1988, the Government of India announced guidelines for Venture
Capital Funds (VCFs).
A Technology Development Fund (TDF) financed by the levy on all payments
for technology imports was established. The fund was meant to facilitate the
financing of innovating and high risk technology programmes through the IDBI.
In the year, 1996, SEBI issued guidelines for Venture Capital Funds. These
guidelines described the funds as established in the form of a company or trust
which raises money through loans, donations, issue of securities or units and
proposes to make investments in accordance with the guidelines. Since then
the guidelines have been amended from time to time with the objective of

13. fueling the growth of Venture Capital activities in India. This would encourage
more funds to be set up to give the required momentum for venture capital
investment in India.
Indian startup fraternity has always had the complaint that the best talent in
India is not attracted by startups. I believe that this is largely a function of the
risks and rewards that startups have represented. It is not surprising that in an
environment, where doing a startup may involve peddling family jewels, not
many first-time entrepreneurs may come forward. Risk capital fills that gap in
the ecosystem by providing the initial support. More importantly, it amplifies
the potential rewards by providing growth capital once an idea takes off. This
decrease in risk perception, and increase in potential upside, is a key driver to
new entrepreneurs starting their businesses. Beyond entrepreneurs, the
notion of capital exit as an integral milestone for start-ups creates a currency
to attract next line of talent – It is not surprising that most venture backed
companies tend to have stock options as a cornerstone to attract talent.
India is an early venture market. As a result, even when extremely experienced
entrepreneurs form startups, they are often under-exposed to the nuances of
high growth businesses, creating and realizing strategic value, or being able to
tap into a recruiting network. Venture capital players often have the scale
within their portfolio to build experience and relationships in these areas, and
hence are able to bring those learnings and networks to bear for their portfolio
companies. The experience of global venture capital players such as Canaan,
extend beyond the geography or time constraints of the Indian market, and
the partnership as a whole can bring a rich set of learnings to the table.

14. Factors to be considered by Venture Capitalist
There are some factors on which the Venture Capitalists consider before
providing finance to any project. They analyze the business plan according on
the basis of the following factors:
 Level of expertise of company’s management:
The success of the plan depends on the quality of the team that is going
to work on it. The team should be highly skilled in order to lure the
venture capitalist to invest in the business. The team should also show a
high level of commitment towards the project.
 Level of expertise in production:
The managers should possess the necessary technical ability to be able
to develop and produce a new product. If there is a absence of the
technical skills then the venture capitalist might not feel confident in
investing in the business.
 Nature of proposed product:
The proposed product should be technically feasible and that will be
checked by the venture capitalist by employing experts who will
examine the business plan thoroughly. These experts are appointed
according to their fields of expertise.
 Future prospects:
The future of the proposed business product should be promising in
order to make the business lucrative for the venture capitalist. This is
necessary in order to compensate the risk. This requires the venture
capitalist to study a detailed business plan, outlining each and every
aspect of the business.
 Competition:
The venture capitalist should be satisfied that there will actually be a
market for the new product that is being proposed by the businessman.
They analyse the business research carried on by the entrepreneur.

15.  Risk borne by the entrepreneur:
The venture capitalist will ensure that the entrepreneur also bears a high
degree of risk. They also demand for a high level of commitment from
the entrepreneur for the project as they themselves will have a lot of
loss, should the project fail.
 Exit route:
In case, the project fails and turns out to be a disaster, then the venture
capitalist should not be facing much difficulty in recovering the amount
given as seed capital. In order to minimize the risk of loss, the venture
capitalist tries and establishes a number of exit routes. They can be
through sale of shares to the public, sale of shares to another business,
either in the same industry or another, or by sale of shares to the
original owners.
 Board membership:
The venture capitalist require a say in the business as they are going to
invest in the business and any wrong decision taken by the owners might
lead to a loss in the business. They require a place on the board of
directors. This will help in being a part of the decision making process.

16. Role of Venture Capital Funds in India
Several venture capital firms are beginning to invest in building these
relationships to the benefit of their portfolio companies. In my own
experience, I have seen this to be extremely valuable to the industry as well,
because it exposes them to the innovation that is happening right around the
corner. The startup activity in general, and venture capital enabled innovation-
led activity in particular, thus has an impact much beyond the revenues and
profits of the startup itself. In fact, most mature countries have recognized the
key role that external innovation can play in continuous evolution and
competitiveness of the large-scale private sector businesses.
The venture capitalists take different role positions in financing a business and
they do not perform the same role every time like:
 Venture partners
 Principal
 Associate
 Entrepreneur-in-residence
Venture Partners:
Venture partners are expected to source potential investment opportunities
("bring in deals") and typically are compensated only for those deals with
which they are involved.
Principal:
This is a mid-level investment professional position, and often considered a
"partner-track" position. Principals will have been promoted from a senior
associate position or who have commensurate experience in another field,
such as investment banking, management consulting, or a market of particular
interest to the strategy of the venture capital firm.
Associate:
This is typically the most junior apprentice position within a venture capital
firm. After a few successful years, an associate may move up to the "senior
associate" position and potentially principal and beyond. Associates will often

17. have worked for 1–2 years in another field, such as investment banking or
management consulting.
Entrepreneurs-in-residence (EIRs):
Entrepreneurs-in-residence (EIRs) are experts in a particular domain and
perform due diligence on potential deals. EIRs are engaged by venture capital
firms temporarily (six to 18 months) and are expected to develop and pitch
startup ideas to their host firm although neither party is bound to work with
each other. Some EIRs move on to executive positions within a portfolio
company.
Some other pivotal roles can be as follows:
 Venture Capital Funds inject long term equity finance which provides a
solid capital base for future growth.
 The venture capital funds injected by the venture capitalists act as a risk
sharing device for the entrepreneur. The venture capitalist is a business
partner, sharing both the risks and rewards via the above mentioned
way. Venture capitalists are rewarded by business success and the
capital gain.
 The venture capitalist is able to provide practical advice and assistance
to the company based on past experience with other companies which
were in similar situations.
 The venture capitalist also has a network of contacts in many areas that
can add value to the company, such as in recruiting key personnel,
providing contacts in international markets, introductions to strategic
partners, and if needed co-investments with other venture capital firms
when additional rounds of financing are required.
 The venture capitalist may be capable of providing additional rounds of
funding should it be required to finance growth.

18. Conclusion
Venture capital investment is one of the most flexible form of financing
technology based or innovative business firms. It is a more wide way of getting
finances for investment in business enterprises which hold a bright future in
terms of profit and as well as growth.
Venture capital is a source of necessary risk capital like financing for shares. It
has now emerged as the best financing alternative in developing as well as
developed countries. Approximately 70 countries provide the facility of
venture capital investment to the business enterprises.
For a virtual capital investment, you need to have the following traits:
 A business firm which has the potential to grow in near future
 The investment should be for a long time like from two to ten years.
 The business should have had invested in shares of established business
enterprises which hold a strong history of profits.
 The risk level should be high of the ongoing projects in the firm that also
ensure high amount of profits.
 Once the funding is done, the investor must remain active.
Venture Capital funding is an increasingly important source for entrepreneurial
ventures in both industrialized and developing countries. Venture Capital
financing has become especially important in India in developing information
technology sector. India has a history of state-directed institutional
development with the exception that government is avowedly hostile to
capitalism; government control over economy and the bureaucracy had a
reputation for corruption. Such an environment would be considered hostile to
the development of an institution like Venture Capital. India has a number of
strengths for venture fund development: an enormous number of small
businesses, public equity market, and low wages not only for physical labor but
also for trained engineers and scientists, a home-grown software industry that
became a significant player internationally in the mid-1990s.

19. Bibliography
 iamwire.com
 businessinsider.in
 iosrjournals.org
 theeconomictimes.indiatimes.com
 epaper.livemint.com
 ventureden.com
 iked.org