Vishnu Varshney is a pioneer. His firm, Gujarat Venture Finance Ltd, has been investing in companies for 16 years that most Indian venture capital firms wouldn't touch with a six-foot bargepole.

GVFL, started in 1990, was the first venture capital firm in India, and still the only one in Gujarat, and it invests mostly in technology startups, where returns are a long while in coming - on average, you won't see a profit before six-seven years, according to Varshney - and most of the technology is quite niche, and takes time and effort to evolve into a marketable entity.

"We have to do due diligence when an idea is brought to us," elaborates Varshney. "We have to investigate the concept," he continues, "and if we are convinced, we then have to assess the market. We've worked on path-breaking technologies that the Indian market hasn't seen before; this means that there is no one to follow."

Varshney has invested in firms that have developed the world's first ultra-filtration water purifier, and technology to vacuum freeze-dry fruits and vegetables for export; in ideas that have immense application potential, and are mostly developed by young people straight out of college, who would otherwise have had no way to raise funds on their own.

"Look at the US," says Varshney. "They are based on a culture of innovation; that is what we need. Nowadays, after all the recessions we've had, everyone is still risk averse and wants to invest in sure things, either real estate or companies that have already been established and are growing. Technology takes time; you have to establish it, then scale it up, and then market it."

GVFL has now started two more funds, one for small and medium sized enterprises worth Rs 100 crore (rs 1 billion) and a biotech fund worth Rs 50 crore (Rs 500 million).

For the SME fund, Varshney will look at startups, but not from the concept stage as he did before; these companies have already been set up, are profitable and are looking to grow to the next stage.

While he is looking at companies such as Parsec Technologies in Gurgaon, which provides call centre solutions to BPOs among other services, he says technology startups are still his first love. "For the SME fund, we're working on technology that has already been validated," says Varshney.

"Funding startups is high-risk, and a lot of hard work, you need to really get involved in day-to-day operations. We need to compensate somewhere, and so I'm looking also at companies where the risk is not so high. I'm also diversifying in terms of industries. For instance, I'm looking healthcare and education - as long as the idea is innovative, I'm interested."

The average investment in companies for the SME fund will be Rs 2-10 crore (Rs 20-100 million), and GVFL will look at an overall involvement for 3-5 years.