VENTURE CAPITAL

What is VC?
Venture Capital Investments are private equity
investments in business ventures from idea stage
through expansion of a company already producing and
selling a product and through preparation for exit from
the investment via buyout or initial public offering.
risk finance for entrepreneurial, growth oriented
companies.
VC and Private equity
Venture capital is a subset of private equity
and refers to equity investments made for the
launch, early development, or expansion of a
business
Among different countries, there are
variations in what is meant by venture capital
and private equity
Who goes for PE
Private equity provides equity capital to
enterprises not quoted on a stock market .
Private equity can be used to develop new
products and technologies, to expand working
capital, to make acquisitions, or to strengthen a
company's balance sheet
It can also resolve ownership and management
issues - a succession in family-owned companies,
or the buy-out or buy-in of a business by
experienced managers may be achieved using
private equity funding.
Difference between VC and Angel
investors
Private equity
Venture capital
Angel investor
Characteristics of VC
Risky projects
Early stage financing
Entrepreneur centric
Partnering
Form of finance
Long term
Early stage financing
Seed stage : R&D
Start up stage : product development &
marketing
Other early stages : full fledged production
Later Stage financing
Expansion stage
Mezzanine financing
Acquisitions/buyouts
Turnaround
VC investment process
Deal origination
Screening
Due diligence:
Valuation:
Deal structuring
Value addition
Exit: 5-7 years
Central issues considered by the venture
capital investor at this stage are:
Is the company able to conduct profitable and growing
business operations?
Do the company executives have the necessary qualities to
manage the business in the various development stages?
Will the investor be able to obtain the desired return
through an increase in the company's net worth?
Besides the company's business plan, the venture capital
investor will assess the compatibility of the investment
request against its own investment strategy
The decisive investment strategy criteria may be company
size, development stage, branch or geographical location.
Exit strategies
IPO:
Acquisitions:
Purchase by promoter:
Purchase by outsider: