Man always Lhlnks Man always Lhlnks

abouL Lhe new abouL Lhe new

opporLunlLles opporLunlLles
22 november 2011 1
8ecause he/she 8ecause he/she
ls lnnovaLlve ls lnnovaLlve
22 november 2011 2
lnnovaLlons Lo be
commerclallsed Lhen
only lL ls proflLable Lo
Lhe companles/cusLomers
22 november 2011 3
An economlc enLlLy
cannoL funcLlon
wlLhouL requlred
amounL
22 november 2011 4
8ecause Lhe amounL ls
needed Lo acqulre
machlnery equlpmenL
and oLher producLlve
faclllLles
22 november 2011 3
Pere Lhe flnanclal
asslsLance Lo Lhe
company refers as
caplLal
22 november 2011 6
Why compan|es need f|nanc|ng?
uurlng Lhelr sLarLup growLh and expanslon
sLages Lhe companles are ofLen faced wlLh
Lhe facL LhaL Lhe lncomlng cash flow ls noL
sufflclenL for Lhe operaLlons
A long producL developmenL sLage and slow
markeL whlch leads Lo negaLlve cash flow
22 november 2011 7
venLure CaplLal ls money venLure CaplLal ls money
provlded by professlonals who provlded by professlonals who
lnvesL and manage young lnvesL and manage young
rapldly growlng companles rapldly growlng companles
LhaL have Lhe poLenLlal Lo LhaL have Lhe poLenLlal Lo
develop lnLo slgnlflcanL develop lnLo slgnlflcanL
economlc conLrlbuLors economlc conLrlbuLors
22 november 2011 8
venLure caplLal fund means a fund venLure caplLal fund means a fund
esLabllshed ln Lhe form of a esLabllshed ln Lhe form of a
company or LrusL whlch ralses company or LrusL whlch ralses
money Lhrough Loans donaLlons money Lhrough Loans donaLlons
lssue of securlLles or unlLs and lssue of securlLles or unlLs and
makes or proposes Lo make makes or proposes Lo make
lnvesLmenLs ln accordance wlLh Lhe lnvesLmenLs ln accordance wlLh Lhe
regulaLlons regulaLlons
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1he funds so collecLed are 1he funds so collecLed are
avallable for lnvesLmenL ln avallable for lnvesLmenL ln
poLenLlally hlghly proflLable poLenLlally hlghly proflLable
enLerprlses aL a hlgh rlsk enLerprlses aL a hlgh rlsk
22 november 2011 10
A venLure CaplLallsL A venLure CaplLallsL
ls an lndlvldual or a ls an lndlvldual or a
body/company body/company
22 november 2011 11
venLure CaplLallsLs provldes venLure CaplLallsLs provldes
lnvesLmenL CaplLal ManagemenL lnvesLmenL CaplLal ManagemenL
LxperLlse neLworklng markeLlng LxperLlse neLworklng markeLlng
supporL whlle fundlng and runnlng supporL whlle fundlng and runnlng
hlghly lnnovaLlve prospecLlve hlghly lnnovaLlve prospecLlve
areas of producLs as well as areas of producLs as well as
servlces servlces
22 november 2011 12
Ienture Cap|ta| I|nanc|ng
lL generally lnvolves sLarL up flnanclng Lo
help Lechnlcally sound globally
compeLlLlve and poLenLlal pro[ecLs Lo
compeLe ln Lhe naLlonal lnLernaLlonal
markeLs wlLh Lhe hlgh quallLy and
reasonable cosL aspecLs
22 november 2011 13
Managers of venLure caplLal flrms
(venLure caplLallsLs) closely follow Lhe
Lechnology and markeL developmenLs ln
Lhelr area of experLlse (eg compuLer
sofLware communlcaLlons compuLer
hardware medlcal/healLh lndusLrlal/
energy bloLechnology reLalllng
resLauranLs eLc)
22 november 2011 14
1be system of collectloo 1be system of collectloo
lovestmeot of fooJs lovestmeot of fooJs
- ubllc
- rlvaLe
lnvesLors
CollecLlon of CollecLlon of
funds funds
- - Ienture Ienture
cap|ta||st cap|ta||st
Investment Investment
funds funds
- Lqu|ty Cap|ta|
- reference
cap|ta|
- Debentures
company
1hese |nst|tut|ons typ|ca||y |nvest |n a venture cap|ta| fund for a per|od
of up to ten years
22 november 2011 13
22 november 2011 16
PlS1C8? Cl vLn1u8L CAl1AL
1he concepL of venLure CaplLal orlglnaLed ln
uSA durlng Lhe 19
Lh
and early 20
Lh
cenLurles
ln 1946 Lhe Amerlca 8esearch and
uevelopmenL (A8u) was formed as Lhe flrsL
venLure organlsaLlon whlch flnanced nearly for
11 years abouL 100 companles and made 33
Llmes lLs lnvesLmenLs
22 november 2011 17
1he orlgln of venLure caplLal ln uk ls also
Lraceable durlng Lhe 19
Lh
cenLury only
Luropean venLure caplLal assoclaLlon was
formed wlLh 40 funds ln 1983 1he maln
ob[ecLlve was Lo promoLe Lhe developmenL of
lndusLry across naLlonal borders and
encourage Lhe provlslons of equlLy flnance for
lnnovaLlon and for small Lo medlum slzed
buslnesses
22 november 2011 18
Powever growLh of venLure caplLal ln lndla ls
of recenL orlgln
venLure CaplLal lund wlLh lnlLlal caplLal of
8s10 crore was esLabllshed by lu8l ln Lhe year
1983
CredlL CaplLal venLure (lndla) LLd was seL up
ln Lhe prlvaLe secLor ln Lhe year 1989
lndusLrlal llnance CorporaLlon esLabllshed
8lsk CaplLal 1echnology llnance CorporaLlon
of lndla (8C1L) Lo fund pro[ecLs lnvolvlng new
Lechonology
22 november 2011 19
- romoLed by all lndla
developmenL flnanclal
lnsLlLuLlons
1
-romoLed sLaLe level
flnanclal lnsLlLuLlons
2
-romoLed by
commerclal banks
3
-romoLed by venture
cap|ta||sts
4
ILN1UkL IINANCL CAN 8L kCIIDLD IN INDIA 8
22 november 2011 20
22 november 2011 21
eed tage pr|or to a product be|ng
deve|oped or to the startup be|ng organ|zed
nere a re|at|ve|y sma|| amount of cap|ta| |s
prov|ded to an entrepreneur
1he fund amount a|so |nvo|ves product
deve|opment to some extent
NC1L 1echno|ogy Deve|opment and Informat|on Company of Ind|a a
[o|nt venture of U1I ICICI ID8I prov|des seed cap|ta| |n Ind|a
22 november 2011 22
Lar|y tage Lar|y tage I|nance |s prov|ded to compan|es
to |n|t|ate commerc|a| manufactur|ng and sa|es
( Ck )
after a company has expended |n|t|a| cap|ta| |n
deve|opment and market test|ng and |s now
ready to beg|n fu||sca|e operat|ons and sa|es
Iunds are ||ke|y to pay for market|ng and
product deve|opment
22 november 2011 23
Lxpans|on tage Lxpans|on tage the company |s the company |s
produc|ng d|str|but|ng and has grow|ng produc|ng d|str|but|ng and has grow|ng
|nventor|es and accounts rece|vab|e |nventor|es and accounts rece|vab|e
(Ck) (Ck)
work|ng cap|ta| ls provlded for Lhe expanslon of
Lhe company ln Lerms of growlng accounLs
recelvable and lnvenLory
22 november 2011 24
lunds provlded for ma[or expanslon of a company
havlng lncreaslng sales volume 1hls sLage ls meL
when Lhe flrm crosses Lhe break even po|nt
22 november 2011 23
Acqu|s|t|on 1hls slLuaLlon occurs when managers
wlsh Lo purchase an lndependenL company or a
dlvlslon or producL llne of Lhe company Lhus creaLlng
a new lndependenL flrm
22 november 2011 26
8r|dge I|nanc|ng or Later tage I|nanc|ng 8r|dge I|nanc|ng or Later tage I|nanc|ng
8rldge llnanclng or LaLer SLage llnanclng ls 8rldge llnanclng or LaLer SLage llnanclng ls
flnanclng a company [usL before lLs lC (lnlLlal flnanclng a company [usL before lLs lC (lnlLlal
ubllc Cffer) CfLen brldge flnance ls ubllc Cffer) CfLen brldge flnance ls
sLrucLured so LhaL lL can be repald from Lhe sLrucLured so LhaL lL can be repald from Lhe
proceeds of a publlc offerlng proceeds of a publlc offerlng
22 november 2011 27
Ienture cap|ta| has a number of
advantages over other forms of f|nance
22 november 2011 28
lL ln[ecLs long Lerm equlLy flnance whlch lL ln[ecLs long Lerm equlLy flnance whlch
provldes a solld caplLal base for fuLure growLh provldes a solld caplLal base for fuLure growLh
22 november 2011 29
1he venLure caplLallsL ls a buslness parLner sharlng boLh
Lhe rlsks and rewards venLure caplLallsLs are rewarded by
buslness success and Lhe caplLal galn
22 november 2011 30
1he venLure caplLallsL ls able Lo provlde pracLlcal
advlce and asslsLance Lo Lhe company based on
pasL experlence wlLh oLher companles whlch
were ln slmllar slLuaLlons
1he venLure caplLallsL may be capable of
provldlng addlLlonal rounds of fundlng
22 november 2011 31
1he venLure caplLallsL also has a neLwork of
conLacLs ln many areas LhaL can add value Lo
Lhe company such as ln recrulLlng key
personnel provldlng conLacLs ln naLlonal
lnLernaLlonal markeLs lnLroducLlons Lo
sLraLeglc parLners and lf needed co
lnvesLmenLs wlLh oLher venLure caplLal flrms
when addlLlonal rounds of flnanclng are
requlred
22 november 2011 32
22 november 2011 33
rob|ems of Ienture Cap|ta| I|nanc|ng
8equlremenL of an experlenced managemenL
Leam
8equlremenL of an above average raLe of reLurn
on lnvesLmenL
Longer payback perlod
1he success raLe ln developed counLrles ls 60
whereas ln a developlng counLrles 2030
22 november 2011 34
uncerLalnLy regardlng Lhe success of Lhe
producL ln Lhe markeL
CuesLlons regardlng Lhe lnfrasLrucLure deLalls
of producLlon llke planL locaLlon accesslblllLy
relaLlonshlp wlLh Lhe suppllers and credlLors
LransporLaLlon faclllLles labour avallablllLy eLc
1he caLegory of poLenLlal cusLomers and hence
Lhe packaglng and prlclng deLalls of Lhe producL
22 november 2011 33
1he slze of Lhe markeL
Ma[or compeLlLors and Lhelr markeL share
Skllls and 1ralnlng requlred and Lhe cosL of
Lralnlng
22 november 2011 36
llnanclal conslderaLlons llke cosL of Lhe
pro[ecL LoLal amounL of funds requlred raLlo
of owners lnvesLmenL (personnel funds of Lhe
enLrepreneur) borrowed caplLal morLgage
loans eLc ln Lhe caplLal employed
22 november 2011 37
1he followlng polnLs can be consldered as Lhe
lndlcaLlons of vC flnanclng ln lndla
LxlsLence of a globally compeLlLlve hlgh
Lechnology
Clobally compeLlLlve human resource caplLal
Second LargesL Lngllsh speaklng sclenLlflc
Lechnlcal manpower ln Lhe world
22 november 2011 38
vasL pool of exlsLlng and ongolng sclenLlflc and
Lechnlcal research carrled by large number of
research laboraLorles(8u)
lnlLlaLlves Laken by Lhe CovernmenL ln formulaLlng
pollcles Lo encourage lnvesLors and enLrepreneurs
lnlLlaLlves of Lhe L8I Lo develop a sLrong and
vlbranL caplLal markeL glvlng Lhe adequaLe llquldlLy
and flexlblllLy for lnvesLors for enLry and exlL
22 november 2011 39
S1A1lS1lCAL uA1A
22 november 2011 40
venLure CaplLal flrms lnvesLed uS$ 117 mllllon
over 27 deals ln lndla durlng Lhe slx monLhs
endlng !une 2009 accordlng Lo a sLudy
Ieotote copltol fltms lovesteJ 5475 mlllloo
ovet 92 Jeols lo loJlo Jotloq tbe twelve
mootbs eoJloq uecembet 2009 occotJloq to o
stoJy by Ieotote lotelllqeoce
22 november 2011 41
22 november 2011 42
22 november 2011 43
22 november 2011 44
vC lnvLS1MLn1S 200809
lnuuS18? WlSL
27
2
8
1
1
12
7
7
12
24
C1PL8S lCCu8LvA8ACL LnCC
18AvLL SPllnCLCClS1lCS 8lSl
PLAL1PCA8L 8LAL LS1A1L MAnulAC1u8lnC
l1l1LS
22 november 2011 43
22 november 2011 46
15%
17%
25%
44%
11%
22%
16%
51%
INDIA WORLD
CCMA8lSCn Cl vLn1u8L CAl1AL lnvLS1MLn1 A1 ulllL8Ln1 S1ACLS CCMA8lSCn Cl vLn1u8L CAl1AL lnvLS1MLn1 A1 ulllL8Ln1 S1ACLS
22 november 2011 47
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
1
9
9
0
1
9
9
1
1
9
9
2
1
9
9
3
1
9
9
4
1
9
9
5
1
9
9
6
1
9
9
7
1
9
9
8
1
9
9
9
2
0
0
0
2
0
0
1
2
0
0
2
2
0
0
3
Number of Venture Capital Deals in number
YEAR WISE
22 november 2011 48
Lxamples of companles LhaL
recelved venLure caplLal
fundlng ln Lhelr early
developmenL
whlch lncludes
22 november 2011 49
22 november 2011 30
22 november 2011 31
1he world ls becomlng lncreaslngly
compeLlLlve Companles are requlred Lo be
super efflclenL wlLh respecL Lo cosL
producLlvlLy labour efflclency Lechnlcal back
up flexlblllLy Lo consumer demand
adapLablllLy
22 november 2011 32
1here ls awalLlng demand for hlghly cosL
effecLlve quallLy producLs and hence Lhe need
for rlghL access Lo valuable human experLlse
Lo gulde and monlLor along wlLh Lhe necessary
funds for flnanclng Lhe new pro[ecLs
22 november 2011 33
1he CovernmenL of lndla ln an aLLempL Lo
brlng Lhe naLlon aL par and above Lhe
developed naLlons has been promoLlng
venLure caplLal flnanclng Lo new lnnovaLlve
concepLs ldeas llberallslng LaxaLlon norms
provldlng Lax lncenLlves Lo venLure flrms
22 november 2011 34
1here are large secLors of Lhe economy LhaL
are ready for vC lnvesLors llke l1 harma
ManufacLurlng 1elecom 8eLall franchlses
food processlng and many more 1he naLlon
awalLs for Lhe growLh of vC buslness ln lndla
lnsplLe of Lhe exlsLlng shorLcomlngs ln Lhe
lndlan lnfrasLrucLure Looklng ahead for a
brlghL fuLure for lndla lndusLrles
22 november 2011 33
8lbllography
22 november 2011 36
22 november 2011 37
,agaz|nes News papers
1ualal sLreeL 1 8uslness llne
2 8uslness world 2 8uslness sLandard
Webs|tes 8ooks
wwwvenLure Acom 18hole Mahakud llnanclal
lnsLlLuLlons markeLs 3
Lh
edlLlon LaLa
mcraw hlll uelhl
wwwlclclbankcom 2urpunlLhavaLhy pandlan flnanclal
servlces and markeLs pg8083 1
sL
edlLlon vlkas publlshers new uelhl
wwwlndla lnfollnecom 3vasanL desal flnanclall markeLs and
flnanclal servlces pg 428440 1
sL
edlLlon
hlmalaya publlshlng house mumbal
22 november 2011 38
22 november 2011 39