Venture capital finance is instrumental in inducing technological development, stimulating creativity and innovation and nurturing entrepreneurship. Concerted efforts are required by financial institutions, private sectors and other agencies to create a conducive environment for the growth of venture capital. In particular, initiatives are required to widen the perspective of venture capital finance and create a favorable fiscal and regulatory environment.

The venture capital schemes of the term-lending financial institutions presently focus mainly on supporting development of technology and implementing indigenously developed yet untested technologies. While this concern is understandable because of a genuine need for expanding the base of viable indigenous technology, it leads to a somewhat limited view of venture capital. What is required is a broader perspective on venture capital so that it is viewed as an instrument for financing a wide range of projects that essentially have a high risk- high-return profile.

In this context, it is important that entrepreneurs, financing bodies, fiscal authorities, regulatory bodies and others understand the concept and relevance of venture capital. It should be appreciated that venture capital is an instrument for strengthening entrepreneurial forces in the economy; a device for inducing risk taking and a mechanism for promoting a closer investor/investee relationship. Those who participate in venture capital arrangements must overcome certain traditional psychological barriers and be willing to build a relationship of genuine partnership and not a perfunctory association of limited involvement.

To nurture the growth of venture capital, a favorable fiscal and regulatory environment should be created. Some of the specific things that may be are investors subscribing to the capital of venture capital funds may be given greater tax reliefs, and the long-term capital gains of the venture capital funds may be taxed at a concessional rate or even exempted totally from taxation. Orderly and efficient mechanisms must be evolved to facilitate liquidation of investments of venture capital funds.