Venture capital

By,Sreepooja.S.P.

VEN

TURE

CAP

ITAL

•Form of Equity Financing•Designed for funding high risk and reward projects•Direct investment in securities•Financing high technology projects•Fostering growth and development•Evaluation of new management teams•In India venture capital is of recent origin

New guidelines to Venture Capital

• Venture capital funds/Companies can be set up by public sector financial institutions, SBI and scheduled banks.

• Joint ventures between private sector and institutional promoters are permitted if:

Private sector holding is 20% or less; and Private sector holding is not the largest single holding. Minimum fund size is Rs. 10 crores. Debt equity ratio should also not exceed 1:1.5 Foreign equity is permitted up to 25% while NRI to 74% on

non repatriable basis and up to 25% to 40% on repatriable basis is permitted.

Structure of Venture Capital

TYPES

•Business Situation•Some invest solely in certain industries.•Some prefer operating locally while others will operate nationwide or even globally.•VC expectations often vary. Some may want a quicker public sale of the company or expect fast growth. The amount of help a VC provides can vary from one firm to the next.

ROLES

Venture PartnersPrincipalAssociateEntrepreneur –in-residence(EIR)

FUNDING STAGES IN VC INVESTING

FINANCING STAGES IN VC

Seed FundingStart upGrowth2nd RoundExpansionExit of Venture Capitalist

a) Equity Share Capital

b) Conditional Loan

Instruments used for VENTURE FINANCING

Drawbacks of VC Industry

Insufficient understanding of venture capital as commercial activity.

Support to the venture capital industry, by the govt. is inadequate.

Exit options available to the venture capitalist are limited.

Market limitations hinder the growth of venture capital industry.

The inadequacy of the legal frame work of venture capital industry.