Institute Of Management &
Technology
Presentors:
Isha Vohra
Submitted To:
Parul Banga
Ms. Kavita Kanna
Meaning of VC.
Features of VC.
Stages of Financing.
Risk in each stage.
VC Process
Venture capital means funds made available
for startup firms and small businesses with
exceptional growth potential.
Venture capital is money provided by
professionals who alongside management invest
in young, rapidly growing companies that have
the potential to develop into significant economic
contributors.
Venture Capitalists generally:
Finance new and rapidly growing companies
Purchase equity securities
Assistin the development of new products or
services
Add value to the company through active
participation.
The SEBI has defined Venture Capital
Fund in its Regulation 1996 as ‘a fund
established in the form of a company or
trust which raises money through loans,
donations, issue of securities or units as
the case may be and makes or proposes
to make investments in accordance with
the regulations’.
Long time horizon.
Continuous involvement.
Generation of
new ideas/technologies.
Small & medium scale.
enterprises.
High risk.
High growth potential.
Equity participation.
Participation in management.
1. Seed Money:
Low level financing needed to prove a new idea.
2. Start-up:
Early stage firms that need funding for expenses
associated with marketing and product
development.
3. First-Round:
Early sales and manufacturing funds.
4. Second-Round:
Working capital for early stage companies that are
selling product, but not yet turning a profit .
5. Third-Round:
Also called Mezzanine financing, this is
expansion money for a newly profitable
company
6. Fourth-Round:
Also called bridge financing, it is intended
to finance the "going public" process
Financial Stage Period (Funds Risk Perception Activity to be
locked in financed
years)
For supporting a
Seed Money 7-10 Extreme concept or idea
or R&D for
product
development
Initializing
Start Up 5-9 Very High operations or
developing
prototypes
Start
First Stage 3-7 High commercials
production and
marketing
Financial Stage Period (Funds Risk Perception Activity to be
locked in financed
years)
Expand market
Second Stage 3-5 Sufficiently high and growing
working capital
need
Market
expansion,
Third Stage 1-3 Medium acquisition &
product
development for
profit making
company
Fourth Stage 1-3 Low Facilitating public
issue
Selecting
investment
proposal
Financial Analysis
Mode Of
Investment
Monitoring
Valuing Portfolio
Exit plan
Itinjects long term equity finance which provides
a solid capital base for future growth.
The venture capitalist is a business partner,
sharing both the risks and rewards. Venture
capitalists are rewarded by business success and
the capital gain.
The venture capitalist is able to provide practical
advice and assistance to the company based on
past experience with other companies which were
in similar situations.
The venture capitalist also has a network of contacts
in many areas that can add value to the company.
The venture capitalist may be capable of providing
additional rounds of funding should it be required to
finance growth.
Venture capitalists are experienced in the process of
preparing a company for an initial public offering (IPO)
of its shares onto the stock exchanges or overseas
stock exchange such as NASDAQ.
They can also facilitate a trade sale.
The financing pattern of the deal is the
most important element. Following are the
various methods of venture financing:
Equity
Conditional loan
Income note
Participating debentures
Quasi equity
Initial
public offer(IPOs)
Trade sale
Promoter buy back
Acquisition by another company
The concept of venture capital was formally
introduced in India in 1987 by IDBI.
Thegovernment levied a 5 per cent cess on all
know-how import payments to create the venture
fund.
ICICI started VC activity in the same year
Later
on ICICI floated a separate VC
company - TDICI
VCFs in India can be categorized into following
five groups:
1)Those promoted by the Central Government
controlled development finance institutions.
For example:
- ICICI Venture Funds Ltd.
- IFCI Venture Capital Funds Ltd (IVCF)
- SIDBI Venture Capital Ltd (SVCL)
2) Those promoted by State Government
controlled development finance
institutions.
For example:
- Punjab Infotech Venture Fund
- Gujarat Venture Finance Ltd (GVFL)
- Kerala Venture Capital Fund Pvt Ltd.
3) Those promoted by public banks.
For example:
- Canbank Venture Capital Fund
- SBI Capital Market Ltd
4)Those promoted by private sector
companies.
For example:
- IL&FS Trust Company Ltd
- Infinity Venture India Fund
5)Those established as an overseas venture capital
fund.
For example:
- Walden International Investment Group
- HSBC Private Equity
management Mauritius Ltd
VC can help in the rehabilitation of sick units.
VC can assist small ancillary units to upgrade
their technologies
VCFs can play a significant role in developing
countries in the service sector including
tourism, publishing, health care etc.
They can provide financial assistance to
people coming out of universities, technical
institutes, etc thus promoting entrepreneurial
spirits
CITIES SECTORS
MUMBAI Software services, BPO, Media,
Computer graphics, Animations,
Finance & Banking
BANGALORE All IP led companies, IT & ITES,
Bio-technology
DELHI Software services, ITES , Telecom
CHENNAI IT , Telecom
HYDERABAD IT & ITES, Pharmaceuticals
PUNE Bio-technology, IT , BPO