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Concept of Venture Capital

Venture capital finance is often thought of asthe early stage financing of new and youngenterprise seeking to grow rapidly. Managerialand technical expertise are often also provided.also called risk capital

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In short, Venture capital is a means of equity financing forrapidly-growing private companies.

Finance may be required for the start-up,development/expansion or purchase of a company.

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Objective

To make a capital gain in equityinvestment at the time of exit, andregular on debt financing

Long-term investment in growth-oriented small/medium firms

Long-term capital is injected to enable

the business to grow at a rapid pace,mostly from the start-up stages

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Features of Venture Capital

Long Term Investment

Equity Participation

Participation in Management

Borrowers are New Entrepreneurs

High Technology Projects

High Risk - Return Ventures

Higher Success - Higher Liquidity

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Development in India

The Industrial Finance Corporation of India(IFCI) launched the first venture capital fund inthe year 1975IDBI venture capital fund created by theCentral Government with effect April 1, 1986.In 1988, an ICICI sponsored company, viz.Technology Development and InformationCompany of India Ltd. (TDICI)Government started levied 5% cess on allpayment related to venture fund

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Present Scope in India

High Growth in Technology and KBI

KBI growing fast and mostly global, less

affected by domestic issues.Several emerging centres of innovation

Serve both global and domestic markets.

Low-cost services to higher-value

products.

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VC Investmentby Industries

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Process of Venture Financing

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VC INVESTMENTPROCESSSTEP 1

INTRODUCTION- an idea is presented in front of the VCs

STEP 2

VC meets the entrepreneur or team. Discusses the businessopportunity

STEP 3 VC performs reference checks onthe team

STEP 4

Managementteam meets allthe partners atthe VC firm

STEP 5 Terms are negotiated , Term sheet is signed.

STEP 6 Legal, financialand technical due diligence performed

STEP 7

Shareholder Agreements are drafted if allgoes well.

STEP 8

Legal documents are signed, and funds transferred from VCfund to company.

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VENTURE CAPITAL FIRMS & FUNDS

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How does the VC industry work

Source the majority of their fundingfrom large investment.

Typically invest in a venture capitalfund for a period of up to ten years.

Basically promote growth in thecompanies they invest in andmanage the associated risk

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Advantages of Venture Capital

Injects long term equity finance

Provides a solid capital base for

future growth Share both the risks and rewards

Provide practical advice and

assistance which add value

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Top 10 Investors in Infrastructure Companies

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