The paper emphasizes the growth and development of human and social capital in the regions taken up for this study. The diffusion of human and social capital is the basis of venture capital financing in any part of the world. Firstly, the paper makes an investigation into the growth, development and status of venture capital financing in the state of Karnataka, along with the state of development of human and social capital there. Secondly, the paper attempts to investigate the level of growth and development of the human and social capital in the state of Assam, with special emphasis on the reason behind its poor development. It also highlights the potential of venture capital financing in certain specific areas, subject to change in the mindset of the venture capitalist in the state of Assam.Thirdly, a comparison has been made between both the states under study with perceived diffusion of human and social capital. Finally, a synthesization of the entire study has been pursued. The author concludes that there were a lot of factors which had an adverse impact on venture capital financing in Assam.

Venture capital is a general term used to describe financing for start-up and early stage businesses, as well as businesses in `turn around' situations (Rao and Jain, 2002). Generally, venture capital investments are relatively high-risk investments, offering the potential for above average returns. A venture capitalist is a person who makes such investments. A venture capital fund is a pooled investment vehicle (often a partnership), that primarily invests the financial capital of third party investors in enterprises that are typically too risky for typical equity investors or bank loans (Rao and Jain, 2002, p. 57). Investments by a venture capital fund can take the form of either equity participation or a combination of equity participation and debt obligation, often with convertible debt instruments that become equity if a certain level of risk is exceeded.

In most cases, the venture capitalist becomes part owner of the new venture. Some investments are structured as debt to equity participation, often reserved by a covenant for a future buyout. Venture capital investment criteria usually include a planned exit event (an IPO or an acquisition), normally within three to seven years. With so many changes happening around venture capital financing in India, the fruitful results of exploring the advantages of such financing are not equitably distributed between the states in India. It is a fact that certain states like Maharashtra, Gujarat, Karnataka and Andhra Pradesh are far more advanced in mobilizing the venture capital funds than the rest of the country.

Especially, states like Karnataka are on the launching pad due to the advancement in information and technology. The picture of venture capital financing is gloomy in the entire North Eastern Region (NER) in general, and Assam in particular. This has been a matter of great concern. To run industrial activities in the NER is a risky proposition, due to its geographical location, socio-economic environment, infrastructural bottlenecks, etc. However, there are possibilities for the development of certain kinds of sunrise industries unique to Assam (as mentioned in the latter part of this paper), which still remain untrodden by the venture capitalists.

Human and Social Capital, Venture Capital Financing in India, North Eastern Region, NER, venture capital financing,VCF, Capitalists, Securities Exchange Board of India's, SEBI, Information technology, IT, Automotive Industry Development Centre, AIDC, North East Industrial and Investment Promotion Policy.