Venture capital

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					            Venture Capital


Submitted To:        Submitted By:
Mr. Pardeep Kumar      Parneet Ahluwalia
Assist. Prof. MFS      175
                       MBA
Venture capitalists only have two emotions: fear and
greed. All their decisions are reached by balancing one
against the other.
  Venture


     A course of action or
 proceeding, the outcome of
which is uncertain but which
  is attended by the risk of
       danger of ‘loss’.
 Capital

The resources to start the enterprise
               OR
  The money, property, and other
    valuables which collectively
represent the wealth of an individual
            or business.
        Definition of venture capital
 wealth available for investment in new or
 speculative enterprises
“Venture Capital is defined as long-term
 equity investment in novel technology
 based projects with display potential for
 significant growth and financial return.”
                      - According to 1995 Finance Bill
    Venture capital financing
Venture capital financing is a type of
financing by venture capital: the 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.
      ORIGIN OF VENTURE
      CAPITAL

              In the 1920’s and 30’s, the wealthy
families of and individual investors provided the
startup money for companies that would later
become famous Eastern Airlines and Xerox are
the more famous ventures they financed In its
early years VC may have been associated with
high technology, over the years the concept has
undergone a change and as it stands today it
implies pooled investment in unlisted companies
       Characteristics Of VC
 New Ventures.
 Continuous Involvement.
 Mode of Investment.
 Objective.
 Hands-on Approach.
 High risk-Return Ventures.
 Nature Of Firms.
 Liquidity.
      VENTURE CAPITAL
      INVESTMENT PROCESS

Deal origination
Screening
Due diligence (Evaluation)
Deal structuring
Post investment activity
Exit plan
     Dimensions of Venture
     Capital

Equity Participation.
Conventional loan.
Condition Loan.
Income Notes.
      Stages OF Venture Capital
      Financing

A. Early Stage Financing
       Seed capital.
       Start-up Finance.
       Additional finance
       Second-round Financing.
       Establishing Finance.
     Stages of VC Financing (Contd.)

Development Capital.
Bridge/Expansion capital.
Management Buyouts.
Mgmt. Buyins.
Turnarounds.
    Methods of Evaluation of VC


A. Conventional Method.
B. First Chicago Method.
C. Revenue Multiplier Method.
      A. Conventional Method
Annual Revenue.
Expected Earnings level.
Future Market Valuation.
Present Value of VC.
Minimum Percentage of Ownership.
        B. First Chicago Method
 Alternative Scenarios.
 Present value of VC .
 Expected value of VC.
 Minimum Percentage of Ownership :
         Finance sought * 100
Expected Present Value of the Venture Capitalist
     C. Revenue Multiplier
        Method

Annual revenue of the company   *
 estimated revenue multiplier
       Advantages
 Provides large sum of finance &expertise.
 Mentoring .
 Alliances .
 Facilitate exit.
 Business & Management Consultations.
 Additional Resources.
 Encourages new breed of Entrepreneur.
       Disadvantages
 Pricing / Negotiation.
 Intrusion
 Control / demand of the board of the
  company .
 Industry specific .
 Bring enormous pressure to profit
  quickly .
 Long and complex process.
 Requirement of Professional business
  Plan Drawer.
          Venture Capital industry in
          India
 Risk Capital and Technology Finance Corporation
  limited.
 IDBI venture capital fund.
 Technology development and Information Company
  of India Limited (TDICI)
 Indus Venture Capital fund.
 Small Industrial Development bank of India (SIDBI).
 Gujarat Venture Finance Limited.
 Others.

				
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posted:4/8/2011
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