Venture Capital

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Venture Capital
12/7/2010
Venture Capital
Non-Equity Financing
Equity Financing Angel Financing
Self Finance / Bootstrapping Debt / Bank Finance
Venture Capital
Private Equity
Public Stock Markets

12/7/2010 Venture Capital 3
VC - Funds made available for startup & SB VC - Money provided by professionals Venture Capitalists generally:
Finance new and rapidly growing companies Purchase equity securities Assist in the development of new products or services Add value to the company through active participation
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Venture Capital
Long time Lack of horizon liquidity
High risk
participation
Equity
Participation in management
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Venture Capital
1 2 3 4 5
Injects long term equity finance The VC is a business partner, sharing both the risks and rewards The VCs provide practical advice and assistance The VC may be capable of providing additional rounds of funding VCs are experienced in the process of preparing a company for an IPO of its shares onto the stock exchanges or overseas like NASDAQ, facilitate a trade sale.
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Venture Capital
Stages of Financing
Seed Money Start Up First Round Second Round Third Round Forth Round
To prove a concept (15-25L)
Provided to companies (25-60L)
Manufacturing funds (1-3cr)
Working capital & expenses (2-5cr)
For newel profitable company (2-10cr)
Bridge Financing for going public process (100cr)
Extreme risk
Very high risk
High risk
Sufficiently high
Medium
Low
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Acquisition or buyout financing (10-100cr) Venture Capital
VC investment process
Screening
Market Product
Entrepreneurial (managerial)
Product
Evaluation Approval
Expected Return
Expected Risk
Decision
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Venture Capital
Equity Conditional loan
Methods
Participating debentures Income note
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Venture Capital
Initial public offer(IPOs)
Trade sale
Promoter buy back
Acquisition by another company
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Venture Capital
10
The regulatory, tax and legal environment
Resource raising, investment, management and exit should be simple
Should have global exposure and investment opportunities
Infrastructure in the form of incubators and R&D need to be promoted using government support
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Venture Capital
12
Attorney Accountant Banker Introductions are Angel Investor best: Industry Executive
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Venture Capital
13
The concept of VC was formally introduced in India in 1987 by IDBI. The government levied a 5 per cent cess on all knowhow import payments to create the venture fund.
ICICI started VC activity in the same year
Later on ICICI floated a separate VC company - TDICI
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Venture Capital
14
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
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Venture Capital
16
VC can help in the rehabilitation of sick units. VC can assist small ancillary units to upgrade their technologies VCFs can play a significant role in developing countries Provide financial assistance to people coming out of universities, technical institutes, etc
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Venture Capital
17
VOIP service provider Revenues based on, advertising or some such No cost for PC-to-PC calls Initial VC investors: 2002,Draper Investment Company - $250,000 initial investment Sold to eBay in 2005 for $2.1B Initial VCs make 1300X return on their initial investment
The online fashion site My Wardrobe won 6m of funding
GroupSpaces, secured $1.3m funding
Source: 5 July 2010
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Venture Capital
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Venture Capital
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Venture Capital
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In 2010, record 111 VC-backed M&A deals were reported with an aggregate value of $5.6 billion.
*Mergers and acquisitions *Information-technology sector *Biotechnology companies *Medical and health
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Source: Thomson Reuters
Venture Capital
22
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Venture Capital
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Venture Capital

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12/7/2010

Equity Financing Angel Financing

Self Finance / Bootstrapping Debt / Bank Finance

Public Stock Markets

Long time Lack of horizon liquidity

To prove a concept (15-25L)

Provided to companies (25-60L)

Manufacturing funds (1-3cr)

Working capital & expenses (2-5cr)

For newel profitable company (2-10cr)

Bridge Financing for going public process (100cr)

Very high risk

Acquisition or buyout financing (10-100cr) Venture Capital

Equity Conditional loan

Participating debentures Income note

Initial public offer(IPOs)

Promoter buy back

Acquisition by another company

The regulatory, tax and legal environment

Resource raising, investment, management and exit should be simple

Should have global exposure and investment opportunities

ICICI started VC activity in the same year

Later on ICICI floated a separate VC company - TDICI

The online fashion site My Wardrobe won 6m of funding

GroupSpaces, secured $1.3m funding

Source: 5 July 2010

Source: Thomson Reuters

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