WELCOME TO VENTURE CAPITAL PRESENTATION
WELCOME TO VENTURE CAPITAL PRESENTATION
WHAT IS VENTURE CAPITAL
Money provided by investors to startup firms and small businesses with perceived long-term growth potential.
FEATURES OF VENTURE CAPITAL
Lack of liquidity
Equity participation and capital gains
Participation in management
ADVANTAGES OF VENTURE CAPITAL
They can provide large sum of equity finance
Able to bring wealth and expertise to your company
Easier to secure future funding from other sources
The business is not obligated to repay the money
DESADVANTAGES OF VENTURE CAPITAL
Lengthy and complex process (needs detailed business plan, financial projections and etc.)
In the deal negotiation stage, you will have to pay for legal and accounting fees
Investors become part owners of your business - founder loss of autonomy or control
Stages & Risk of financing
Financial StagePeriod (Funds locked in years)Risk PerceptionActivity to be financedSeed Money7-10ExtremeFor supporting a concept or idea or R&D for product developmentStart Up5-9Very HighInitializing operations or developing prototypesFirst Stage3-7HighStart commercials production and marketing
Financial StagePeriod (Funds locked in years)Risk PerceptionActivity to be financedSecond Stage3-5Sufficiently highExpand market and growing working capital needThird Stage1-3MediumMarket expansion, acquisition & product development for profit making company Fourth Stage1-3Low Facilitating public issue
VC INVESTMENT PROCESS
Due diligence (Evaluation)
Post investment activity
METHODS OF VENTURE FINANCING
The financing pattern of the deal is the most
Following are the various methods of venture
Initial public offer(IPOs)
Promoter buy back
Acquisition by another company
VENTURE CAPITAL FUNDING IN INDIA
All India Financial Institutions
State Level Financial Institutions
Private Sector Institutions
IFCI Venture Capital Funds Ltd.
IDBI Venture Capital Fund
ICICI Venture Fund Management Company Ltd.
SIDBI Venture Capital Ltd.
Venture capital funds in India
VCFs in India can be categorized into following five groups:
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.
- Punjab Infotech Venture Fund
- Gujarat Venture Finance Ltd (GVFL)
- Kerala Venture Capital Fund Pvt Ltd.
3) Those promoted by public banks.
- Canbank Venture Capital Fund
- SBI Capital Market Ltd
4)Those promoted by private sector
- IL&FS Trust Company Ltd
- Infinity Venture India Fund
5)Those established as an overseas venture capital fund.
- Walden International Investment Group
- HSBC Private Equity
management Mauritius Ltd
Rules by SEBI
VCF are regulated by the SEBI (Venture Capital Fund) Regulations, 1996.
The following are the various provisions:
A venture capital fund may be set up by a company or a trust, after a certificate of registration is granted by SEBI on an application made to it. On receipt of the certificate of registration, it shall be binding on the venture capital fund to abide by the provisions of the SEBI Act, 1992.
A VCF may raise money from any investor, Indian, Non-resident Indian or foreign, provided the money accepted from any investor is not less than Rs 5 lakhs. The VCF shall not issue any document or advertisement inviting offers from the public for subscription of its security or units
SEBI regulations permit investment by venture capital funds in equity or equity related instruments of unlisted companies and also in financially weak and sick industries whose shares are listed or unlisted
At least 80% of the funds should be invested in venture capital companies and no other limits are prescribed.
SEBI Regulations do not provide for any sectoral restrictions for investment except investment in companies engaged in financial services.
REASONS FOR GROWTH OF VENTURE CAPITAL
Human Resource Capital
Scientific & Technical Research
How does the Venture Capital work?
Venture capital firms typically source the majority of their funding from large investment institutions.
Investment institutions expect very high ROI
VCs invest in companies with high potential where they are able to exit through either an IPO or a merger/acquisition.
Their primary ROI comes from capital gains although they also receive some return through dividend.
Venture capital industry wise segmentation
Top cities attracting venture capital investments
CITIES SECTORSMUMBAISoftware services, BPO, Media, Computer graphics, Animations, Finance & BankingBANGALOREAll IP led companies, IT & ITES, Bio-technologyDELHISoftware services, ITES , TelecomCHENNAIIT , TelecomHYDERABADIT & ITES, PharmaceuticalsPUNEBio-technology, IT , BPO
IT & ITESEnergyManufacturingMedia & Ent.BFSIShipping & logisticsEng. & Const.TelecomHealth careOthers
Chart1IT & ITESEnergyManufacturingMedia & Ent.BFSIShipping & logisticsEng. & Const.TelecomHealth careOthers
Sheet1IndustryPercentageIT & ITES6.94Energy7.73Manufacturing11.5Media & Ent.4.32BFSI27.95Shipping & logistics4.82Eng. & Const.11.43Telecom12.92Health care3.36Others9.03