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WHAT IS VENTURE CAPITAL Money provided by investors to startup firms and small
businesses with perceived long-term growth potential.
2. FEATURES OF VENTURE CAPITAL Long-time horizon Lack of liquidity High risk
High-tech Equity participation and capital gains Participation in management
3. ADVANTAGES OF VENTURE CAPITAL They can provide large sum of equity finance
Able to bring wealth and expertise to your company Easier to secure future funding from
other sources The business is not obligated to repay the money
4. DESADVANTAGES OF VENTURE CAPITAL Lengthy and complex process (needs
detailed business plan, financial projections and etc.) In the deal negotiation stage, you
will have to pay for legal and accounting fees Investors become part owners of your
business - founder loss of autonomy or control
5. Stages & Risk of financing Financial Stage Seed Money Start Up First Stage Period (Funds
locked in years) 7-10 5-9 3-7 Risk Perception Extreme Activity to be financed For
supporting a concept or idea or R&D for product development Very High Initializing
operations or developing prototypes High Start commercials production and marketing
6. Financial Stage Second Stage Period (Funds locked in years) 3-5 Risk Perception Activity
to be financed Sufficiently high Expand market and growing working capital need Market
expansion, acquisition & product development for profit making company Third Stage 1-3
Medium Fourth Stage 1-3 Low Facilitating public issue
7. VC INVESTMENT PROCESS Deal origination Screening Due diligence (Evaluation) Deal
structuring Post investment activity Exit plan
8. METHODS OF VENTURE FINANCING The financing pattern of the deal is the most
important element. Following are the various methods of venture financing: Equity
Conditional loan Income note Participating debentures Quasi equity
9. Exit route Initial public offer(IPOs) Trade sale Promoter buy back Acquisition by
another company
11. Promoted By All India Financial Institutions State Level Financial Institutions Private Sector
Institutions Commercial Banks Indian IFCI Venture Capital Funds Ltd. IDBI Venture Capital
Fund ICICI Venture Fund Management Company Ltd. SIDBI Venture Capital Ltd. Foreign
12. Venture capital funds in India VCFs in India can be categorized into following five groups: 1)
Those promoted by the Central Government controlled development finance institutions.
For example: - ICICI Venture Funds Ltd. - IFCI Venture Capital Funds Ltd (IVCF) - SIDBI
Venture Capital Ltd (SVCL)
13. 2) Those promoted by State Government controlled development finance institutions. For
example: - Punjab Infotech Venture Fund - Gujarat Venture Finance Ltd (GVFL) - Kerala
Venture Capital Fund Pvt Ltd. 3) Those promoted by public banks. For example: - Canbank
Venture Capital Fund - SBI Capital Market Ltd
14. 4)Those promoted by private sector companies. For example: - IL&FS Trust Company Ltd -
Infinity Venture India Fund 5)Those established as an overseas venture capital fund. For
example: - Walden International Investment Group - HSBC Private Equity management
Mauritius Ltd
15. A venture capital fund may be set up by a company or a trust, after a certificate of
registration is granted by SEBI on an application made to it. On receipt of the certificate of
registration, it shall be binding on the venture capital fund to abide by the provisions of the
SEBI Act, 1992. The following are the various provisions: VCF are regulated by the
SEBI (Venture Capital Fund) Regulations, 1996. Rules by SEBI
16. A VCF may raise money from any investor, Indian, Non-resident Indian or foreign,
provided the money accepted from any investor is not less than Rs 5 lakhs. The VCF shall
not issue any document or advertisement inviting offers from the public for subscription of
its security or units SEBI regulations permit investment by venture capital funds in equity
or equity related instruments of unlisted companies and also in financially weak and sick
industries whose shares are listed or unlisted
17. SEBI Regulations do not provide for any sectoral restrictions for investment except
investment in companies engaged in financial services. At least 80% of the funds should
be invested in venture capital companies and no other limits are prescribed.
18. Scientific Human Resource Capital High Technology REASONS FOR GROWTH OF
VENTURE CAPITAL & SEBI Initiative Government Initiative Technical Research
19. Their primary ROI comes from capital gains although they also receive some return
through dividend. VCs invest in companies with high potential where they are able to exit
through either an IPO or a merger/acquisition. Investment institutions expect very high
ROI Venture capital firms typically source the majority of their funding from large
investment institutions. How does the Venture Capital work?
20. Venture capital industry wise segmentation Percentage 9.03 3.36 6.94 IT & ITES 7.73
Energy Manufacturing 12.92 11.5 Media & Ent. BFSI 4.32 11.43 Shipping & logistics Eng. &
Const. Telecom Health care 4.82 27.95 Others
21. Top cities attracting venture capital investments CITIES SECTORS MUMBAI Software
services, BPO, Media, Computer graphics, Animations, Finance & Banking BANGALORE
All IP led companies, IT & ITES, Bio-technology DELHI Software services, ITES , Telecom
CHENNAI IT , Telecom HYDERABAD IT & ITES, Pharmaceuticals PUNE Bio-technology,
22. THE