VENTURE CAPITAL

M.PARAMESWARAN

Meaning
The venture capital represents financial investment in a highly risky projects with the objective of earning a high rate of return.

Private capital firms/funds-The primary institutional source of venture capital is a venture capital firm. venture capitalists take high risks by investing in an early stage company with little or no history and they expect a higher return for their high risk-equity investment in the venture

Features of Venture Capital

High degree of risk Equity participation Long term investment Participation in management Achieve social objectives Investment is Illiquid

Type of Venture Capital

Venture capital funds set up by angel investors, that is, high network individual investors Venture capital subsidiaries of corporations-these are established by major corporations, commercial bank holding companies and other financial institutions

Mode of financing by venture capitalists Equity-49 % Conditional loan Convertible loan Areas of investmentSoftware Media Health and pharmaceuticals Agri business Retailing and others

Stages of Investment/Financing
Early stage Seed capital and R&D Projects Start ups Second round finance Later stage financing Development capital Expansion Finance Replacement capital Turn around Buy outs

Factors affecting investment Decision Strong management Team A viable idea Business Plan Project Cost and Return Future Market Projects Existing Technology Miscellaneous Factors

Selection of Venture Capitals

Approach adopted by VCsHands on approach Hands off approach Flexibility in deals Exit policy Fund viability and liquidity Track record of vc&its team

Procedure followed by VCs Receipt of proposal Appraisal of plan Investments Provide value added service exist

Venture capital in India

1.specialized financial institutions Risk capital scheme of IFCI Technology Development & information company of India Ltd(TDICI) of ICICI Seed Capital scheme or venture capital fund of IDBI Funds promoted by state level institutions APIDC-Venture Capital Ltd(AVCL) Gujarat Venture Finance Ltd(GVFL)

3Funds promoted by public sector banks such as canara bank venture capital fund(CVCF) Private Agency Credit Capital Venture Fund 20th Century Venture Capital Fund India investment Fund Indus Venture capital Fund(IVCF) SBI Capital Venture Capital

5.Overseas venture Capital Funds

The Global insurance Giant The IL&SF is also planning to launch a $100 million fund with the ADB George Sors has already floated the Indocean Fund Nikko Securities has tiedup with Walden and San Francis Company to float a venture capital fund with a minimum capital of $500 million