SOUTH ASIAN JOURNAL OF MANAGEMENT 36 Volume 22 No. 2 Information Asymmetry Risks in Venture Capital Investments: Strategies of Transnational Venture Capital Firms in India † Kshitija Joshi* and M H Bala Subrahmanya** Venture Capitalists (VCs) are niche financial intermediaries known to possess the forte in selecting and monitoring projects with an extreme level of information asymmetry. In the absence of tangible historical data on an investee firm, VC firms often base their risk estimates on tacit signals. While information asymmetry risks are the main stay of VC funded projects in general; those funded by transnational VC firms in destinations different from their countries of origin are even more risky owing to the geographical distance and cultural dissimilarities. The aim of this paper is to conceptualize, empirically investigate and statistically ascertain the relevant set of signals that matter to the transnational VC firms in India. To start with, we analyze the most pertinent signals such as the investee venture’s funding-stage, syndication, domain specialization and the past start- up experience of the prospective founding team. Furthermore, we investigate the specific set of signals that are relevant in the Indian economic, political and socio-cultural milieu. * Senior Research Scholar, Department of Management Studies, Indian Institute of Science, Bangalore 560012, India. E-mail: kshitija@mgmt.iisc.ernet.in ** Professor and Chairman, Department of Management Studies, Indian Institute of Science, Bangalore 560012, India. E-mail: bala@mgmt.iisc.ernet.in INTRODUCTION Venture Capitalists (VC firms) are financial intermediaries focused on funding projects in emerging high-technology realms. Nascent technologies, domains and business models and most importantly intangibility of assets are the mainstay of such VC funded projects. This results in an extreme level of information asymmetry and thus, funding these Key Words: Foreign VCs, India, Information Asymmetry, Signals, Transnational, Venture Capital (VC) † An earlier version of this paper was presented at the IIMB-SJSU International Conference on Transnational Entrepreneurs and International SMEs in Emerging Economies: Drivers and Strategies, organized by Indian Institute of Management Bangalore (IIMB), India, in collaboration with San José State University (SJSU), California, USA, held at Indian Institute of Management Bangalore, India from May 20-22, 2015.