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Venture Capital

This document provides an overview of venture capital. It discusses what venture capital is, its key features like long time horizons and high risk. The advantages and disadvantages of venture capital for businesses are outlined. Different stages of venture capital financing are presented along with the associated risk levels. The venture capital process, methods of financing, and typical exit routes are described. The document also discusses venture capital funding in India, the funds promoted by different institutions, and SEBI regulations. Finally, the growth of venture capital in India is attributed to factors like high technology and government initiatives.

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86 views

Venture Capital

This document provides an overview of venture capital. It discusses what venture capital is, its key features like long time horizons and high risk. The advantages and disadvantages of venture capital for businesses are outlined. Different stages of venture capital financing are presented along with the associated risk levels. The venture capital process, methods of financing, and typical exit routes are described. The document also discusses venture capital funding in India, the funds promoted by different institutions, and SEBI regulations. Finally, the growth of venture capital in India is attributed to factors like high technology and government initiatives.

Uploaded by

Itronix Mohali
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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You are on page 1/ 24

WELCOME TO VENTURE CAPITAL PRESENTATION

Presented By:-
Sandeep Mane
Amol Waghmare
Nisha Negi
Rupali
WHAT IS VENTURE CAPITAL

Money provided by investors to startup firms and small


businesses with perceived long-term growth potential.
FEATURES OF VENTURE CAPITAL

• Long-time horizon
• Lack of liquidity
• High risk
• High-tech
• Equity participation and capital gains
• Participation in management
ADVANTAGES OF VENTURE CAPITAL

• They can provide large sum of equity finance


• Able to bring wealth and expertise to your
company
• Easier to secure future funding from other
sources
• The business is not obligated to repay the
money
DESADVANTAGES OF VENTURE CAPITAL

• Lengthy and complex process (needs detailed


business plan, financial projections and etc.)
• In the deal negotiation stage, you will have to
pay for legal and accounting fees
• Investors become part owners of your
business - founder loss of autonomy or control
Stages & Risk of financing
Financial Stage Period (Funds locked Risk Perception Activity to be
in years) financed

For supporting a
Seed Money 7-10 Extreme concept or idea or
R&D for product
development

Initializing operations
Start Up 5-9 Very High or developing
prototypes

Start commercials
First Stage 3-7 High production and
marketing
Financial Stage Period (Funds locked Risk Perception Activity to be
in years) financed

Expand market and


Second Stage 3-5 Sufficiently high growing working
capital need

Market expansion,
acquisition & product
Third Stage 1-3 Medium development for
profit making
company

Fourth Stage 1-3 Low Facilitating public


issue
VC INVESTMENT PROCESS

Deal origination

Screening

Due diligence (Evaluation)

Deal structuring

Post investment activity

Exit plan
METHODS OF VENTURE FINANCING

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
Exit route

• Initial public offer(IPOs)


• Trade sale
• Promoter buy back
• Acquisition by another company
VENTURE CAPITAL FUNDING IN INDIA
Promoted By

All India State Level Private


Commercial
Financial Financial Sector
Banks
Institutions Institutions Institutions

Indian Foreign

IFCI IDBI ICICI Venture


Venture Fund SIDBI
Venture
Capital Management Venture
Capital
Funds Ltd. Company Ltd. Capital Ltd.
Fund
Venture capital funds in India

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
Rules by SEBI

 VCF are regulated by the SEBI (Venture Capital


Fund) Regulations, 1996.
 The following are the various provisions:
 A venture capital fund may be set up by a
company or a trust, after a certificate of
registration is granted by SEBI on an application
made to it. On receipt of the certificate of
registration, it shall be binding on the venture
capital fund to abide by the provisions of the
SEBI Act, 1992.
• A VCF may raise money from any investor, Indian,
Non-resident Indian or foreign, provided the money
accepted from any investor is not less than Rs 5
lakhs. The VCF shall not issue any document or
advertisement inviting offers from the public for
subscription of its security or units
• SEBI regulations permit investment by venture
capital funds in equity or equity related instruments
of unlisted companies and also in financially weak
and sick industries whose shares are listed or
unlisted
 At least 80% of the funds should be invested in
venture capital companies and no other limits are
prescribed.

SEBI Regulations do not provide for any sectoral


restrictions for investment except investment in
companies engaged in financial services.
REASONS FOR GROWTH OF VENTURE
CAPITAL

 High Technology

 Human Resource Capital

 Scientific & Technical Research

 Government Initiative

 SEBI Initiative
How does the Venture Capital work?

 Venture capital firms typically source the majority of


their funding from large investment institutions.

 Investment institutions expect very high ROI

 VC’s invest in companies with high potential where


they are able to exit through either an IPO or a
merger/acquisition.

 Their primary ROI comes from capital gains although


they also receive some return through dividend.
Venture capital industry wise segmentation

Percentage
9.03 6.94
IT & ITES
3.36 7.73
Energy
Manufacturing
12.92
11.5 Media & Ent.
BFSI
Shipping & logistics
4.32
Eng. & Const.
11.43
Telecom
Health care
4.82
Others
27.95
Top cities attracting venture capital
investments
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


THE END

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