Venture Capital

Venture Capital
Venture capital is a means of equity financing for rapidly growing private companies Finance may be required for the start-up, development/expansion or purchase of a company Venture Capital firms invest funds on a professional basis, often focusing on a limited sector of specialization (e.g. IT, infrastructure, health/life sciences, clean technology, etc.) The goal of venture capital is to build companies so that the shares become liquid (through IPO or acquisition) and provide a rate of return to the investors (in the form of cash or shares) that is consistent with the level of risk taken

 With venture capital financing, the venture capitalist acquires an agreed proportion of the equity of the company in return for the funding Equity finance offers the significant advantage of having no interest charges. It is "patient" capital that seeks a return through long-term capital gain rather than immediate and regular interest payments, as in the case of debt financing Given the nature of equity financing, venture capital investors are therefore exposed to the risk of the company failing. As a result the venture capitalist must look to invest in companies which have the ability to grow very successfully and provide higher than average returns to compensate for the risk

 When venture capitalists invest in a business they typically require a seat on the company's board of directors They tend to take a minority share in the company and usually do not take day-to-day control Rather, professional venture capitalists act as mentors and aim to provide support and advice on a range of management, sales and technical issues to assist the company to develop its full potential

Stages of Venture Capital

There are 6 stages of venture round financing offered in Venture Capital, that roughly correspond to these stages of a companys development:
Seed Money: Low level financing needed to prove a new idea, often provided by angel investors. Start-up: Early stage firms that need funding for expenses associated with marketing and product development First-Round: Early sales and manufacturing funds Second-Round: Working capital for early stage companies that are selling product, but not yet turning a profit

 Third-Round: Also called Mezzanine financing, this is expansion money for a newly profitable company Fourth-Round: Also called bridge financing, 4th round is intended to finance the going public Between the first round and the forth round, venturebacked companies may also seek to take venture debt

Institutional Venture Capitalist in India

Andhra Pradesh Industrial Development Corporation Axis Venture Capital Fund CanBank Venture Capital Fund GVFL Venture Capital Fund HDFC Property Fund ICICI Econet Fund ICICI Emerging Sector Trust IDFC India Infrastructure Fund 3 IDFC Infrastructure Fund IDFC Infrastructure Fund - 2

IFCI Venture Capital Funds Ltd. Kerala Venture Capital Fund Rajasthan Venture Capital Fund SBI Macquarie Infrastructure Trust SIDBI SME Venture Fund West Bengal Venture Capital Fund

Cases of Venture Capital Financing

Hyderabad-based venture capital firm VenturEast, has invested $5 million in USbased wireless technology licensing company Ocra Sytems, Inc.
Orca Systems, Inc, is a semiconductor and intellectual property licensing company providing integrated radio frequency (RF) and modem technology for high performance wireless applications

 IFCI venture Capital to put Rs. 25 crore into metals recycling company Rajasthan Ventures Capital Fund (RVCF) has acquired 32 per cent stake in its first round of funding in Mumbai-based NexTenders (India) Pvt Ltd for an undisclosed amount. RVCF has invested in this company through its Rs 150 crore SME Tech Fund

 NexTenders is engaged in web-based procurement of goods and services and mainly caters to various state governments, government agencies and public sector undertakings both in India and abroad. For this purpose, the company utilises e-procurement technologies, including e-tendering, e-auctions, ecatalogues, etc

Company that have corporate VC financing to fund their research activities

Reliance Industries Limited CISCO Tata Unilever Adobe Dell Birla Group Infosys

Informal Venture Capitalist

Mrs. Sudha Murthy