Venture Capital

Structure and its Scope in India

Concept of Venture
Capital
• Venture capital finance is often thought of as “the
early stage financing of new and young enterprise
seeking to grow rapidly”. Managerial and
technical expertise are often also provided. also
called risk capital
-----------
• In short, Venture capital is a means of equity financing for
rapidly-growing private companies.
• Finance may be required for the start-up,
development/expansion or purchase of a company.
Objective
 To make a capital gain in equity
investment at the time of exit, and
regular on debt financing
 Long-term investment in growth-
oriented small/medium firms
 Long-term capital is injected to enable
the business to grow at a rapid pace,
mostly from the start-up stages
Features of Venture
Capital
 Long Term Investment
 Equity Participation
 Participation in Management
 Borrowers are New Entrepreneurs
 High Technology Projects
 High Risk - Return Ventures
 Higher Success - Higher Liquidity
Development in India
The Industrial Finance Corporation of India
(IFCI) launched the first venture capital fund
in the year 1975
IDBI venture capital fund created by the
Central Government with effect April 1, 1986.
In 1988, an ICICI sponsored company, viz.
Technology Development and Information
Company of India Ltd. (TDICI)
Government started levied 5% cess on all
payment related to venture fund
Present Scope in India
High Growth in Technology and KBI
KBI growing fast and mostly global, less
affected by domestic issues.
Several emerging centres of innovation
Serve both global and domestic markets.
Low-cost services to higher-value
products.
VC Investment by
Industries
Process of Venture
Financing
VC INVESTMENT
PROCESS
STEP 1 ●
● INTRODUCTION- an idea is presented in front of the VC’s

STEP 2 ●
● VC meets the entrepreneur or team. Discusses the business opportunity

STEP 3 ●
● VC performs reference checks on the team

STEP 4 ●
● Management team meets all the partners at the VC firm

STEP 5 ●
● Terms are negotiated , Term sheet is signed.

STEP 6 ●
● Legal, financial and technical due diligence performed

STEP 7 ●
● Shareholder Agreements are drafted if all goes well.

STEP 8 ●
● Legal
Legal documents
documents are
are signed,
signed, and
and funds
funds transferred
transferred from
from VC
VC fund
fund to
to company.
company.
VENTURE CAPITAL FIRMS
& FUNDS
How does the VC
industry work
 Source the majority of their funding
from large investment.
 Typically invest in a venture capital
fund for a period of up to ten years.
 Basically promote growth in the
companies they invest in and
manage the associated risk
Advantages of Venture
Capital
• Injects long term equity finance
• Provides a solid capital base for future
growth
• Share both the risks and rewards
• Provide practical advice and
assistance which add value
Top 10 Investors in Infrastructure
Companies
Any Queries
?
THANK YOU
Presented by
GROUP I

MBA SEM II, Usha Martin Academy Ranchi