Copy of Vc Latest
-
Upload
mandipsethi -
Category
Documents
-
view
217 -
download
0
Transcript of Copy of Vc Latest
-
8/8/2019 Copy of Vc Latest
1/32
VENTURE CAPITALVENTURE CAPITAL
-
8/8/2019 Copy of Vc Latest
2/32
Presented by
DALJIT ARORA 03
JAY BHATT 14
DHARAMVEER SINGH
SIMRAT SINGH
ROHIT DUTT 28
DEEPAK JAIN 34
NIKHIL JAIN 35
-
8/8/2019 Copy of Vc Latest
3/32
y Venture Capital is a form of "risk capital".
y Risk capital is invested as shares (equity)
y Equity stake in the business is exchanged againststake.
MEANING
-
8/8/2019 Copy of Vc Latest
4/32
Venture Capitalists generally:
y Finance new and rapidly growing companies
y Purchase equity securities
y Assist in the development of new products orservices
y Add value to the company through activeparticipation
y Provide additional funding, if required
-
8/8/2019 Copy of Vc Latest
5/32
Characteristics
y Long time horizon
y Lack of liquidity
y High risk
y Equity participation
y Participation in management
-
8/8/2019 Copy of Vc Latest
6/32
How does the Venture Capital
work? Venture capital firms typically source the majority
of their funding from large investmentinstitutions.
Investment institutions expect very high RoI
VCs invest in companies with high potentialwhere they are able to exit through either an IPOor a merger/acquisition.
Their primary RoI comes from capital gainsalthough they also receive some return throughdividend.
-
8/8/2019 Copy of Vc Latest
7/32
What do VC look for in business
y Is the product or service commercially viable?
y Does the company have potential for sustainedgrowth?
y Does management have the ability to exploit thispotential and control the company through thegrowth phases?
y Does the possible reward justify the risk?
y
Does the potential financial return on theinvestment meet their investment criteria?
-
8/8/2019 Copy of Vc Latest
8/32
Difference between
Venture Capital & Angel investorsPoint Venture capital Angel Investors
1)Sources of funds Pool money from otherpeople
Uses own funds
2)Stage ofdevelopment
Invests in differentstage of businessdevelopment
Invest in earlier stageof businessdevelopment
3)Role Desire an active role in
business
Do not play an active
role
4)Ease ofobtainingfinancing
Highly rigorous process Relatively easy toidentify
-
8/8/2019 Copy of Vc Latest
9/32
STAGES OF VENTURE CAPITAL FUNDING
EARLY STAGEDEVELOPMENT
SEED CAPITAL
START -UP
OTHER EARLYSTAGE
EXPANSION
EXPANSIONFINANCING
TURNAROUNDS
REFINANCINGBANK DEBT
SECONDARYPURCHASE
LEVERAGEDBUYOUTS &
BUY-INS
MBO
BUY-IN
COMBINED BUY-IN/MBO
INSTITUTIONALBUY-OUT
-
8/8/2019 Copy of Vc Latest
10/32
Advantages
y It injects long term equity finance.
y It shares both the risks and rewards.
y It provides practical advice and advantages tothe entrepreneur.
y
Has a network of contacts in many areas that canadd value to the company.
-
8/8/2019 Copy of Vc Latest
11/32
Advantages (Cont.)
Experienced in the process of preparing acompany for an initial public offering (IPO)
They can also facilitate a trade sale
Capable of providing additional rounds of funding,
if needed
-
8/8/2019 Copy of Vc Latest
12/32
1.
IDENTIFYING A OPPORTUNITY
2.
Screening
3. Due diligence (Evaluation)
4. Deal structuring
5. FUNDING
-
8/8/2019 Copy of Vc Latest
13/32
Identifying an opportunity
y Conceptualising a product or service tooffer
y Recognising the market available for it
y Recognising the acceptance of the product
of service
-
8/8/2019 Copy of Vc Latest
14/32
Screening
Venture capitalists tend to focus on fivespecific areas when evaluating a company
Areas of Focus:
Management
Marketplace
Competition
Business Economics Risks
-
8/8/2019 Copy of Vc Latest
15/32
Due Diligence
The heavy lifting for the venture capitalist starts
with the due diligence process.
y Management information systems
y Forecasting techniques and accuracy of past forecasting
y Assumptions on which financial assumptions are based
y The latest available management accounts, including the
company's cash/debtor positionsy Bank facilities and leasing agreements
y Pensions funding
y Employee contracts, etc.
-
8/8/2019 Copy of Vc Latest
16/32
Deal structuring
y Second most important part of the deal
y Various issues are finalised at this pointwhich are as follows:
The amount of money that will beinfused
- The board composition
- Various contracts such as leasing,financing etc.
-
8/8/2019 Copy of Vc Latest
17/32
Funding
y The final round of deal
y At this stage entrepreneurs will receiveactual capital decided by the venturecapital
y It will also decide the level of funding thatit might offer in coming stages, if needed
-
8/8/2019 Copy of Vc Latest
18/32
Some interesting facts
y 6 in 1000 business plans get funded on anaverage
y 5% of the business plans are read
beyond executive summary.
y 10% of business proposal pass initialscreening.
y
10% of pre screened funding pass duediligence and receive funding
-
8/8/2019 Copy of Vc Latest
19/32
Methods of Venture Financing
EQUITY SHARES
LOAN CAPITAL
PREFERENCE SHARES
PREFERRED ORDINARY SHARES
-
8/8/2019 Copy of Vc Latest
20/32
VENTURE CAPITAL RETURNS
Dividend on share
Interest on loan
Profits from realization
Advisory fees
-
8/8/2019 Copy of Vc Latest
21/32
EXIT ROUTESFOR VC
EXIT
ROUTES
TRADE SALE
IPO
RE-FINANCING
INVOUNTARYEXIT
REPURCHASE
-
8/8/2019 Copy of Vc Latest
22/32
DEVELPOMENT OFDEVELPOMENT OF
VENTURE CAPITALVENTURE CAPITALIN INDIAIN INDIA
-
8/8/2019 Copy of Vc Latest
23/32
VENTURE CAPITAL IN INDIA
y The concept of venture capital was formallyintroduced in India in 1987 by IDBI.
y ICICI started VC activity in the same year
y Later on ICICI floated a separate VCcompany Technology Development InformationCompany of India (TDICI)
-
8/8/2019 Copy of Vc Latest
24/32
Venture capital funds in India
VCFs in India can be categorized intofollowing five groups:
1) Promoted by the Central GovernmentFor example:
- ICICI Venture Funds Ltd.- IFCI Venture Capital Funds Ltd (IVCF)
- SIDBI Venture Capital Ltd (SVCL)
-
8/8/2019 Copy of Vc Latest
25/32
2) Promoted by State Government
For example:- Punjab InfoTech Venture Fund- Gujarat Venture Finance Ltd (GVFL)- Kerala Venture Capital Fund Pvt Ltd.
3) Promoted by public banks.For example:- Canbank Venture Capital Fund
- SBI Capital Market Ltd
-
8/8/2019 Copy of Vc Latest
26/32
4) Promoted by private sector companies.
For example:- IL&FS Trust Company Ltd- Infinity Venture India Fund
5) Established as an overseas venture capital fund.
For example:- Walden International Investment Group- HSBC Private Equitymanagement Mauritius Ltd
At present there are 144 Foreign Venture Capital firmsand 157 Domestic Capital Venture firms registeredwith SEBI.
-
8/8/2019 Copy of Vc Latest
27/32
Venture Capital industry wise-segmentation
Percentagecalculated onthetotal VC investment- Rs.43,686 Cr. (as on30th June 2010)
8%
15%
3%
1%
3%6%
4%
22%
38%
Total Invesments IT
TELECOM
PHARMA
BOITECH
MEDIA
SERVICES
INDUSTRIAL
PRODUCTS
REAL ESTATE
OTHERS
-
8/8/2019 Copy of Vc Latest
28/32
Impact of recession on the VC
industryThe down market virtually closed the IPO market
for emerging companies.
With less opportunities for getting ROI investorstend to scale back, adjust their investment focusand/or get more picky in funding companies.
The investors that put money into their funds
became less aggressive during recession so itwas harder for the VCs to raise money.
-
8/8/2019 Copy of Vc Latest
29/32
Future prospects of VC in India
y VC can help in the rehabilitation of sick units.y VC can assist small ancillary units to upgrade
their technologiesy
VCFs can play a significant role in developingcountries in the service sector includingtourism, publishing, health care etc.
y They can provide financial assistance topeople coming out of universities, technicalinstitutes, etc thus promoting entrepreneurialspirits
-
8/8/2019 Copy of Vc Latest
30/32
CASE STUDY
y SUBHIKSHA DOWNFALL
-
8/8/2019 Copy of Vc Latest
31/32
-
8/8/2019 Copy of Vc Latest
32/32