New Delhi, July 27 - Dreamy-eyed Indian entrepreneurs hoping to talk their way into getting venture capital for their start-ups might as well look elsewhere for funding. It doesn't happen in India, not often anyway, investors and experts in the industry maintain.

Venture capitalists in India only prefer growth-stage companies -- firms already up and running that need money for expansion. Most start-up entrepreneurs, as a result, dive into their own pockets or banks, or draw funds from family and friends.

Seed capital for a new business has not come of age in India, they added.

'The concept of seed capital does not exist in India, there are a few funds which have come up of late, but it is minuscule compared to the need and potential,' said Kalpana Jain, co-chairperson of Venture Capital Association of India.

'In the US or other developed markets, higher returns always come coupled with higher risks. And higher returns are prevalent mostly in a new venture which takes off,' Jain, also senior director with global consultancy Deloitte Touche Tohmatsu, told IANS.

'In India on the contrary, many companies which are already operational give much higher returns. Then why risk money in a new venture?'

And the problem has also compounded by the current economic scenario, where financial institutions are more concerned with keeping their capital safe than risk their funds with a new venture.

'Venture capital firms invested $740 million India in 2008 compared to $876 million in the previous year,' said the managing director and chief executive of Venture Intelligence, Arun Natarajan, adding hardly any funding went to start-up projects.

'The number of deals were also down to 125 in 2008 from 144 in 2007.'

Jagannadham Thunuguntla, equity head at SMC Capitals, has an explanation.