MATOSHRI COLLEGE OF

MANAGEMENT AND

RESEARCH CENTRE ,

EKLAHAREPresenta t ion on

V e n t u r e C a p i t a l-: P r e s e n t e d

b y :-Amit Kandekar

Kishor KadamSampat

KandalkarYogesh Kamble

Sonal Kadam

Introduction to Venture CapitalVenture Capital is a form

of "Risk Capital". In other words, capital that is invested in a project (in this case - a business) where there is a substantial element of risk relating to the future creation of profits and cash flows. Risk capital is invested as shares (equity) rather than as a loan and the investor requires a higher“ rate of return" to compensate him for his risk.

¤ Equity Participation

Features of Venture Capital

Venture Financing is potential equity participation through direct purchase of shares, options or convertible solutions. ¤ Long Term InvestmentVenture financing requires long-term investment attitude that necessitates the Venture Capital Firms (VFCs) to wait for a long period, say 5 to 10 years to make large profits.¤ Participation in

ManagementVenture financing ensures continuing participation of the venture capitalist in the management of the entrepreneur’s business.

Development in INDIA¤ This concept was introduce in India

in 1987.¤ It was operated by “ Industrial Development Bank of India ”.¤ “ Industrial Credit and Investment Corporation of India ” was also started venture capital activity in the same year .¤ Government started levied 5% cess on all payment related to venture fund.

Venture Capital Investment Stages

Start up

First Stage

Second Stage

Third Stage

Fourth Stage

Seed Stage

Contd…

Venture Capital Investment Stages¤ Seed Money: Low level financing needed to

prove a new idea.¤ Start up: Early stage firms that need funding for expenses associated with marketing and product development.¤ First Stage: Early sales and manufacturing funds.¤ Second Stage: Working capital for early stage companies that are selling product, but not yet turning a profit.¤ Third Stage: Also called Mezzanine Financing, this is expansion money for a newly profitable company.¤ Fourth Stage: Also called bridge financing, 4th round is intended to finance the "going public" process.

Process of Venture FinancingVenture

Capital Investment Process

Market Product

Entrepreneurial (Managerial)

Product

Expected Return

Expected Return

Decision

Screening

Evaluation

Approval

Methods of Venture Financing¤ Equity

A venture capitalist get the status of an owner and becomes entitled to a share in the firm’s profits as much as he is liable for losses.

¤ Conditional Loan A conditional loan is repayable in the form of a royalty after the venture is able to generate sales.¤ Income NoteIt is a hybrid security combinations of conventional loan and conditional loan.

¤ OthersParticipating Debenture, Convertible Loan, Preferred Ordinary Shares, Special Ordinary Shares.

Venture Capitalist

A venture capitalist (also known as a VC) is a person or investment firm that makes venture investments, and these venture capitalists are expected to bring managerial and technical expertise as well as capital to their investments.

Venture Capital Fund

A Venture Capital Fund refers to a pooled investment vehicle that primarily invests the financial capital of third-party investors in enterprises that are too risky for the standard capital markets or bank loans. Venture capital firms typically comprise small teams with technology backgrounds (scientists, researchers) or those with business training or deep industry experience.

When approaching a VC firm,

consider their portfolio¤ Business Cycle: Do they invest in budding or established businesses?¤ Industry: What is their industry focus?¤ Investment: Is their typical investment sufficient for your needs?¤ Location: Are they regional, national or international?¤ Return: What is their expected return on investment?¤ Involvement: What is their involvement level?

THANK YOU !