Venture_Capital by liuqingyan


									   Venture capital (also known as VC or Venture)
    is a type of private equity capital typically
    provided to early-stage, high-potential,
    growth companies in the interest of
    generating a return through an eventual
    realization event such as an IPO or trade sale
    of the company. Venture capital investments
    are generally made as cash in exchange for
    shares in the invested company. It is typical
    for venture capital investors to identify and
    back companies in high technology industries
    such as biotechnology
   Venture capital firms typically comprise small
    teams with technology backgrounds
    (scientists, researchers) or those with
    business training or deep industry
    experience. VC has a reputation of being a
    particularly impenetrable career path,
    employing only those who bring expert value.
   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
   Venture capital is most attractive for new companies
    with limited operating history that are too small to
    raise capital in the public markets and are too
    immature to secure a bank loan or complete a debt
    offering. In exchange for the high risk that venture
    capitalists assume by investing in smaller and less
    mature companies, venture capitalists usually get
    significant control over company decisions, in
    addition to a significant portion of the company's
    ownership (and consequently value).

   Young companies wishing to raise venture capital
    require a combination of extremely rare yet sought
    after qualities, such as innovative technology,
    potential for rapid growth, well thought through
    business model and impressive management team.
    VCs typically reject 98% of opportunities presented to
    them, reflecting the rarity of this combination.
   The venture capital activity is a sequential
    process involving the following seven steps.

    1. Seed financing
    2. Startup financing
    3. First Stage Financing
    4. Second Stage Financing
    5. Third Stage
    6. Mezzanine or Bridge Financing
     7. Initial Public Offering (IPO)
   Seed financing
   This is the first stage in venture capital and
    begins when idea is still being formed and is
    not fully developed or live. The creator is
    given a small amount of money to come up
    with the first design or beta version. This
    money is usually from the creators pockets
    but also can come from family, friends, or
    "fools" and sometimes angel investors.
   Startup financing
   The project is starting to come together,
    there is at least one full time principal and
    the product is expand and getting ready for
    the first official launch. The most likely place
    that this funding will come from are angel
    investors but there are also some early stage
    venture capitalists.
   First Stage Financing
   The start up has launched and it is starting to
    see results, increases in sales and a team of
    employees is in place. First stage financing
    helps the firm reach its breakeven point and
    increase productivity while cutting unit costs
    and also building corporate infrastructure.
    This is usually in the 2nd or 3rd year of the
   This is where true venture capitalists start to
    get involved. It's important to notice that true
    venture capitalists don't like to get involved
    until the project is really showing promise.
   Second Stage Financing

   The company is really moving now, sales are
    growing and there is lots of inventory on
    hand. This stage involves rapid expansion
    including marketing expenses and entering
    new markets. This is mostly powered by
    venture capital firms.
   Third Stage

   The company is clearly going to succeed,
    everything is going well with the company
    and expansion is rapid. This is more funding
    to keep the expansion going.
   Mezzanine or Bridge Financing
   The company is a proven success and it plans
    on going public very soon. Bridge funding is
    short term financing before the company
    goes public. Clearing out old debt, buying out
    early investors, and paying for other costs
    before going public are all in this stage. The
    company is about to hit the big time. There
    are venture capitalist firms and bridge
    financing specialists that can assists with this
    stage. They are usually paid back after the
    company goes public.
   Initial Public Offering (IPO)
   The company finally has reached liquidity and
    it's stock can be bought, sold, and traded in
    public. Founders often leave the project at
    this point and try to start from square one
    again. Most startups never reach the IPO or
    Bridge stages but in the end it's the ultimate
    goal of any company with high aspirations.
    Other companies can also have some
    variations of these phases with more funding
    at a certain step.
   TDICI was incorporated in January 1988 with
    the support of the ICICI and the UTI. The
    country's first venture fund managed by the
    TDICI called VECAUS ( Venture Capital Units
    Scheme) was started with an initial corpus of
    Rs.20 crore and was completely committed to
    37 small and medium enterprises. The first
    project of the TDICI was loan and equity to a
    computer software company called Kale
   It primarily assist small and medium scale
    projects conceived by technocrats
    entrepreneurs by providing project finance in
    the from of equity or conditional loans apart
    from offering technology information
   The primary advantage of venture capital is
    that they allow entrepreneurs to build their
    company with OPM (other people's money). If
    you need financing to build your technology
    or product and don't have the money to do it
    yourself, the idea is that the ventue capitalists
    provides the capital to allow you to build. In
    exchange, the venture capitalist takes some
    ownership in your company.
   The venture capitalist then hopes that your
    company increases in value and ultimately
    has a liquidity event (e.g. IPO or sells to
    another company) so that they can get a
    return on their invested capital. In addition to
    capital, venture capitalist can be an invaluable
    source of information, resources and contacts
    to help you be successful. More times than
    not, venture capitalists have experience
    building companies themselves so they can
    really help you think strategically about how
    to grow and be successful.
   Long and complex process
   To chart out the whole business plan
   to pay legal or accounting fees whether or
    not VC is successful.

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