VENTURE

VENTURE CAPITAL
CAPITAL
 INTRODUCTION

Venture- A project or activity that involves risk

Capital- The money or fund needed business
Venture Capital- The capital invested in a project in which
there is a substantial element of risk, typically a new or
expanding business.
 CONCEPT OF VENTURE CAPITAL

 Venture capital is a type of private equity

capital typically provided by professional,
outside investors to new, growth
businesses .

It is emerging as a potent source of risk

financing to new ventures.

 It also provides managerial as well as

technical expertise to the potential
entrepreneurs.
VC is associated with successive stage of firm’s
development with distinctive types of
financing appropriate to each stage of
development. Thus there are four stage of
firm’s development:
 An Idea
 Start Up
 Fledgling and
 Establishment
PROCESS OF VENTURE
CAPITAL FINANCING
 Deal
Screening

Detailed Evaluation & Structuring

Investment

Monitoring
Exit
 PROCESS OF VENTURE CAPITAL
FINANCING CONT.
 Deal Origin : It is essential for venture capital
firm to have continuous source of deals in order to
survive and grow in market.
 Screening : VC firm carry out initial screening of
all the project on the basis of some broad criteria.
VCF usually prefer investing in technology related
industry which involves development at large
scale. E.g. Software industry, IT, pharmaceuticals,
bio technology, agriculture and allied industries.
They ensure success rate of project before
investing on the same.
PROCESS OF VENTURE
CAPITAL FINANCING CONT.
 Evaluation : VCF go in for detailed evaluation of
entrepreneurs business for screening business plan,
evaluating management team of company, understanding
credibility of entrepreneur of business as they invest huge
amount of money and bare high risk.
 Deal structuring : Once the proposal is found it to be
viable, then VC and entrepreneur enter into contract which
is known as deal structuring which includes
a) VC right to control business
b) board members
c) right to replace management in case of poor
performance
d) buyback agreement and acquisition
e) earn out agreements etc.
 Repurchase
V.C. Investment
Involmentry Exit
repurchases by
Companies usually
management
fail and going to
liquidation
Trade Sale
Company sold to
commercial buyer
Venture
Capital Exit
Routes

Stock Market Refinancing

Floatation Purchase of the
Through issuing IPO venture capital
share by a long term
financial institution
 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
FEATURES OF VENTURE CAPITAL
 Long-time horizon: VC undertakings take
minimum 5-10 years to become commercially
successful and hence to be patient.
 Lack of liquidity: Project is expected to run at
start-up stage for several years.
 High risk: The risk of the project is associated
with management, product and operations.
 Equity participation and capital gains: VC
invests his money in terms of equity, capital
gain comes when the project succeeds.
 Participation in management: Venture
capitalist can provide managerial expertise to
entrepreneurs besides money.
 Finance - The venture capitalist injects long-term equity
finance, which provides a solid capital base for future
growth.
 Business Partner - The venture capitalist is a business
partner, sharing the risks and rewards.
 Mentoring – The venture capitalist is able to provide
practical advice to the company based on past experience
with other companies which were in similar situations.
 Alliances - The venture capitalist also has a network of
contacts in many areas that can add value to the company
 The VC may be capable of providing additional rounds of
funding should it be required to finance growth.
 IPO - Venture capitalists are experienced in the process of
preparing a company for an IPO
 Registration
 Investment Size
 Restrictions on Investment
 Prohibition on Listing
 General Obligation
 Winding up
 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 FUND IN ASSAM

NEDFI
 Joint initiative of NEDFI &
M-Doner
 Started operation from 2017
 6 Venture till now
 VENTURE CAPITAL FUND IN INDIA
VCFs in India can be categorized into 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:

- Canara bank 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
 Success rate 50-60% of VC in India.
 Incubation of Own Business Idea by VC like Cannon
Partners, IDG Ventures India,etc.
 Help in the rehabilitation of sick units.
 Assisting small ancillary units to upgrade their
technologies
 Developing tourism, publishing, health care etc.
 Financial assistance to people coming out of
universities, technical institutes, etc
VENTURE CAPITAL FUND IN INTERNATIONAL
ARENA

 Birth Place of Venture Capital-U.S.,1946

 Legislation was-”Small Business Investment
Companies Act”
Intel Capital
 Till date, it has invested $10.7 Bn in over
1,250 companies in 52 countries.
 Startups Funded: Gigya, Hungama, Snapdeal
Forum Synergies (India) PE Fund
 Startups
Funded: Zomato, Ola, Quikr, TaxiFor Sure,
Freecharge,etc
Accel Partners accel partners
 Startups Funded: Flipkart, Book My Show,
Zansaar, Myntra,
 https://economictimes.indiatimes.com/news
 www.nedfi.com
 Management of Indian Financial Institutions
by R.M. Srivastava.