Professional Documents
Culture Documents
Venture Capital
Financing
Venture Capital Financing
Venturecapital is a means of financing fast-
growing private companies. Finance may be
required for the startup, development /
expansion or purchase of a company via a
mechanism such as in a management buyout.
A venture capital fund may raise monies from any investor whether
Indian, foreign or non-resident Indians.
(ii) Not more than 25% of the investible funds may be invested by
way of
The Venture Capital Fund shall file with the Board for information,
the copy of the placement memorandum or the copy of the
contribution or subscription agreement entered with the investors
along with a report of money actually collected from the investor.
SEBI regulations – contents of placement
memorandum
Details of the trustees or trustee company of the venture capital fund.
Preliminary Screening
The initial meeting provides an opportunity for the venture
capitalist to meet the entrepreneur and key members of the
management team to review the business plan and conduct initial
due diligence on the project. It is an important time for the
management team to demonstrate their understanding of their
business and ability to achieve the strategies outlined in the plan.
The venture capitalist will look carefully at the team's skills and
backgrounds.
What does the Investment Process entail ?
(cont)
Negotiating Investment
This involves an agreement between the venture capitalist and
management of the terms of the memorandum of understanding.
The venture capitalist will then study the viability of the market to
estimate its potential. Often they use market forecasts that have
been independently prepared by industry experts who specialize
in estimating the size and growth rates of markets and market
segments.
The venture capitalist also studies the industry carefully to obtain
information about competitors, entry barriers, the potential to
exploit substantial niches, product life cycles, distribution
channels and possible export potential. The due diligence
continues with reports from accountants and other consultants.
What does the Investment Process entail ?
(cont)
Approvals and Investment Completed
The process involves exhaustive due diligence and disclosure of
all relevant business information. Final terms can then be
negotiated and an investment proposal submitted to the board of
directors. If approved, legal documents are prepared.
A shareholders' agreement is prepared containing the rights and
obligations of each party. This could include, for example, veto
rights by the investor on remuneration and loans to executives,
acquisition or sale of assets, audit, listing of the company, rights
of co-sale and warranties relating to the accuracy of information
enclosed.
The investment process can take up to three months, and
sometimes longer.
ACC refractories - ICICI Venture
The refractories business of ACC, which makes heat resistant
cement products, was doing quite well, with sales volumes rising
by 34 per cent during the last financial year.
ASSOCIATED Cement Companies (ACC) sold its refractory
business to ICICI Venture Funds for Rs 257 crore.
From the point of view of the buyer, this would be the first time in
India that a venture fund would be getting into managing a
manufacturing business through a 100 per cent buyout.
ICICI Venture Funds is planning to work with the management of
the refractories business in its operations and sell it at later stage.
I-Sec was the sole advisor to ICICI Ventures in this deal which
took six months in the making.
Recent Deals
Web media
and
Sequioa Capital+WestBridge Indiatimes.com $36 mn content
Truck and
Newbridge Capital Shriram Holdings $100mn equip. funding
Recent Exits
Shopper's
Stop ICICI Ventures, IL&FS VC Retail Apr-05 $39.5mn
Financial
India ICICI Ventures, Intel Capital, Actis, Servic
Infoline Kothari Pioneer, TDA Capital es Apr-05 $22mn
Nectar CVC International
Lifescien Pharmace
ces uticals Jun-05 $20.9mn
Allsec
Technol
ogies Kotak Mahindra, Eurindia ITES Apr-05 $9.9mn
Recent funds
Investment Banking # Seminar
Thank You!