A Presentation

on
Venture Capital

By
D.Pradeep Kumar
Exe-MBA, IIPM ,HYd
 WHAT IS VC FUNDING?

IS IT JUST THE STORY OF THE MAN WITH

THE IDEA AND THE MAN WITH THE
MONEY?
VC FUNDING IS NOT JUST ABOUT

 … FIRST GENERATION ENTREPRENEURS

 … TECHNOCRATS
 … HIGH TECHNOLOGY
 … FIRST TIME TECHNOLOGIES
 … SEED CAPITAL AT SOFT TERMS
 WHAT VC FUNDING IS

… It is the business of employing capital ‘Patiently’ to

‘Maximise Returns’ while managing risks in a
relatively high-risk venture

VERSUS

Simply ‘Minimising Risks’ for a surer fixed return

 VC FUNDING IS

… DIFFERENT FROM OTHER TYPES OF FUNDING

IN THE:

 - SELECTION OF INVESTMENT
 - STRUCTURING OF INVESTMENT
 - ACTIVITY FOLLOWING INVESTMENT
 - EXITING FROM INVESTMENT
VC WILL LOOK FOR EXITING FROM
INVESTMENT THROUGH...

- IPO
- THIRD PARTY ACQUSITION
- BUYBACK BY ENTREPRENEUR
 WHAT VCs WILL LOOK FOR IN
INVESTEE COMPANIES

 PROMOTER’S INTEGRITY, RELEVANT

EXPERIENCE, DRIVE LEVEL
 UNIQUENESS OF THEIR IDEA
 FOCUS ON/COMMITMENT TO THEIR IDEA
 HIGH ENTRY BARRIERS
 COMPETITIVE ADVANTAGES
 GOOD MARKET SIZE & GROWTH RATES
 ACCEPTABLE GEOGRAPHIC LOCATION
 APPROPRIATE STAGE OF INVESTMENT
 RISKS IN VENTURES

 FINANCE
 PEOPLE
 RESEARCH & DEVELOPMENT
 IMPLEMENTATION
 PRODUCTION
 REGULATORY
 MARKETING
 EXIT
 Venture capital perspective

 A VC is accountable to its Limited Partners—the institutions

and people who have invested money in the VC’s funds

 A VCs only responsibility is to make money for its “Limiteds”

 Each fund has a specific mandate that the VC must follow

in making its investments

 Willing to take risks to realize high return but looking for

every way possible to mitigate that risk

 VCs are looking for companies that have the potential to

become “home runs”

 We see 2 to 3 business opportunities per week Our goal is to

fund 2 to 3 businesses per year
SELECTION OF INVESTMENT BY THE VC
WILL SPAN ...
PROMOTERS WITH SIGNIFICANT & PROVEN
BUSINESS TRACK RECORD, WHO WILL
DEVELOP NEW TECHNOLOGIES &/OR BUILD
NEW BUSINESSES
TO
PROMOTERS WHO ARE TECHNOLOGY
SAVVY, HAVE DEVELOPED INNOVATIVE
TECHNOLOGIES TO A SIGNIFICANT EXTENT,
BUT HAVE NO RELEVANT BUSINESS TRACK
RECORD
IN THE POST- INVESTMENT STAGE, VCs WILL

 ADD VALUE Vs ONLY MONITORING AND RELYING

ON COLLATERAL RECOVERY

 HELP WITH FINANCIAL, MARKETING, TECHNICAL &

PERSONNEL LINKAGES

 PROVIDE INCENTIVES FOR BETTER

PERFORMANCE Vs PENALTIES FOR LACK OF IT

 MONITOR CLOSELY THROUGH BOARD

REPRESENTATION PLUS CONTINUAL CONTACT
SO, WHAT DO WE DO WITH
THESE RISKS

- EXAMINE THEM CAREFULLY

- QUANTIFY THEM, WHERE POSSIBLE
- MANAGE THEM
- OFFSET BY COMMENSURATE
RETURNS
 SOME USEFUL HINTS
 THINK A GREAT DEAL ABOUT THE BUSINESS
 CONVINCE YOURSELF THAT THE BUSINESS IS RIGHT
 ENSURE COMFORT WITH
- GESTATION PERIOD
- CAPITAL REQUIREMENT
 ENSURE ABILITY TO KEEP PACE WITH TECHNOLOGY
CHANGES
 BE SURE OF SALES PROJECTIONS AND ACHIEVEMENT OF
TARGETS
 SEE HOW YOU COULD BE DIFFERENT AND BETTER AT EVERY
STEP
 CHECK THE VC TEAM BACKGROUND AND PAST PROJECTS.
 UNDERSTAND CLEARLY THE TERMS OF VC FUNDING &
THEIR IMPLICATIONS