Presented to – Dr.Premraj Alva

Group Leader – Abhijeet Sankapal

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Roll no.

Name Topic

91 Prathamesh Shirsat

92 Ketan Sawant

93 Swapnali More

94 Ruchita Gurav

95 Nikhil Kalamkar

96 Premanand Maharana

97 Abhijeet Sankapal (Group Leader)

98 Manisha More

99 Raghav Gupta

100 Priyanka Dabholkar2

Meaning – VC is long term risk capital to finance high technology projects which involve risks but at the same time has strong potential for growth .venture capitalist pool their resources including managerial abilities to assist new entrepreneurs in early years of project.

Definition – “A financing institution which joins an entrepreneur as a co-promoter

in a project & share the risks & rewards of enterprise ”

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In the 1920's & 30's, the wealthy families of and individuals investors provided the start up money for companies Eg. Eastern Airlines and Xerox

VC funds set up was the one by the Rockfeller Family which started a special fund called VENROCK in 1950

General Doriot, a professor at Harvard Business School, in 1946 set up the American Research and Development Corporation (ARD)

ARD's approach was a classic VC ARD's investment in Digital Equipment Corporation (DEC) in 1957 was a watershed in the history of VC financing

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Form of equity participation High risk & high potential projects Commercialization of new idea / new

technologies Joins entrepreneur as co- promoter Continuous involvement Disinvestment option VC is not injection of funds Investment in small/medium scale enterprises

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Advantages to investing public –

1.Reuce risk & stop mal practices of management

2.Venture funds equipped with necessary skills will able to study prospects of business

3.Venture fund having representatives on BOD of company.

Advantages to promoters –

1.Success of IPO – 10 Underwrites , Brokers & Investors

2.Statutory Formalities– sanctions, underwriting , brokers arrangement

3.Cost & expenses – IPO of equity shares 10% to 15% of nominal value of issue ,recurring cost & Stock exchange listing fee.

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General- 1.Reduce time between technological

innovation & commercial exploitation 2.developing new process/ products . 3.Cushion to support business borrowings 4.Channelise investment in new high tech

business / exist of sick unit 5.Economy development 6.VC firms serves as intermediary 7.Sharing responsibility

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General Business Strategy Advice Develop a Financing Plan Refine the Business Plan Marketing Advice and Strategies Develop Contingencies

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Financial

Stage

Period

Risk Perceptio

n

Activity to be financed

Seed Money

7-10 ExtremeFor supporting a concept or idea or R&D for

product development

Start Up 5-9 Very HighInitializing operations or developing

prototypes

First Stage

3-7 HighStart commercials production and marketing

Second Stage

3-5 Sufficiently high

Expand market and growing working capital need

Third Stage

1-3 Medium

Market expansion, acquisition & product development for profit making company

Fourth Stage

1-3 Low Facilitating public issue10

Deal origination-the VC investor creates a pipeline of deals or investment opportunities that he would consider for investing in. Deal may originate in various ways. referral system, active search system, and intermediaries.

Screening-VCFs, before going for an in-depth analysis, carry out initial screening of all projects .

Due Diligence-Due diligence is the industry jargon for all the activities. The venture capitalists evaluate the quality of entrepreneur before appraising characteristics of the product, market or technology

1. Preliminary evaluation 2. Detailed evaluation

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Deal Structuring- In this process, the venture capitalist and the venture company negotiate the terms of the deals, that is, the amount, form and price of the investment

Post Investment Activities- 1.direction of the venture 2.day-to-day operation of the venture 3. install a new management team Exit- 1. Initial Public Offerings (IPOs)

2. Acquisition by another company3. Purchase of the venture capitalist's

shares by the promoter, or4. Purchase of the venture capitalist's

share by an outsider

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Introduction - The Indian Private Equity and Venture Capital Association was established in 1993 and is based in New Delhi , the capital of India IVCA is a member based national organization that represents Venture capital and Private equity firms, promotes the industry within India and throughout the world and encourages investment in high growth companies

History of Venture Capital in India-

1. Venture Capital functions were run by development financial institutions such as the IDBI  ICICI Bank, and State Financial corporations. Publicly raised funds were the main source of Venture Capital

  2. Year 1988 marked the establishment of the Technology Development and Information Company of India Ltd.promoted by the ICICI and UTI & was immediately followed by the Gujurat Venture Finance Ltd.

3. In the year 1996, Security Exchange Board of India introduced the Foreign Venture Capital and Private Equity Funds investing in India

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Year No. of VC Funds

2001 77

2002 78

2003 81

2004 86

2005 105

2006 146

2008 160

2013 333

The Growth of Venture Capital Funds In India In the year 2000, SEBI

registered 13 more VC funds & their number increases to 32 .The SEBI has permitted VC funds to invite in real estate. This has open the doors for organized debt & equity instrument in real estate sector . VC firm invited $ 117 million over 27 deals in India during 6 months Ending june 2009.

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The guidelines issued by the Govt. of India were meant to encourage private promoters. their holding could not exceed 20% of the equity of such a joint effort The guidelines of funding relatively new projects

with no proven record in market acceptability. Section 372 of the Companies Act prohibits

investment in a single company beyond 10% of the paid up

capital of a company Indian educational system fails to march laboratory

research with commercial application. Lack of entrepreneurial tradition

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Venture capital funds, as the position stands today mostly operate from metropolitan town The venture capital has not been given tax incentives Section 372 of the Companies Act places

restrictions on inter-corporate investments. Section 369,309 and 387 of the Companies Act

place restrictions on the remuneration of managing directors, directors and managers.

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Finance-The venture capitalist injects long-term equity finance, which provides a solid capital base for future grow

Business Partner-share the risks and rewards. Mentoring-The venture capitalist is able to

provide strategic, operational and financial advice to the company

Alliances-The venture capitalist also has a network of contacts in many areas that can add value to the company

Facilitation of Exit-Venture capitalists are experienced in the process of preparing a company for an initial public offering (IPO) of its shares onto the stock exchanges

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Product Risk: The products concerned may have little or no track record in the markets as they are largely untested and usually have high obsolescence rates.

Entrepreneur risk: another of the disadvantages of venture capital funding is that it is difficult to evaluate the new management and new business application without any prior track record

Concentration risk: Focusing on small market, which can relate to either the product or in geographical terms, raises exposure to sectoral downturn

Technology risk: hard to assess new technology on small set of products

Duration risk: Generally a longer long-gestation period for funding is needed.

Asset risk: Due to a high percentage of fixed assets with high obsolescence, along with a high fraction of human capital, there is a lack of collateralizable assets, which is one of the drawbacks in venture capital funding

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Debt-business loans, government-backed Small Business Administration (SBA) loans, and factoring loans

Friends and family Angel investors-like venture capitalists in that

they invest in early-stage companies to get a large return on investment

Crowdfunding- Crowdfunding is a great way to pre-sell your product before it’s ready to ship to customers

Growing organically-When you grow your company organically, you take out only what you need to survive and put the rest of your profits back into the company as an investment.

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Introduction – A committee on technology

innovation & Venture capital headed by former

finance secretary Nitin Desai was appointed by

Planning Commission in 2006 to suggest measures to rise the flow of VC funds.

Suggestions- To set up an Early Stage Venture Fund (ESVF)

through public-private partnership (PPP). To provide fiscal incentive by way of set-off against

taxable income for those individuals who invest in start up

To extend same fiscal incentive to those who invest in domestic venture capital funds with corpus less than Rs.250 cr.

To create Limited Liability Corporations(CLCs)25

To extend applicability of such LLCs & the proposed Limited Liability Partnership (LLP) structure to

VC funds. To grant tax exemption of capital gain for

registered VCF’s on exit To remove the restriction on investment of

25% in single VC undertaking by domestic & foreign VCF’s

To remove the minimum capitalization requirement of Indian subsidiaries of SEBI registered foreign VC investors.

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Intro- Druva provides integrated data protection and governance solutions for enterprise laptops, PCs, smartphones and tablets. Its headquarters located in Sunnyvale, caliotnia & pune. It’s a private company Founded in 2007, Druva is one of the fastest growing backup/storage startups

Case Study Druva Software, a Pune-based start-up that makes

proprietary backup software solutions for laptops, has raised $5 million in Series A funding (funding that follows seed funding) from Sequoia Capital India and Indian Angel Network (IAN).

The money will be used to expand the three-year old company’s marketing and sales footprint overseas, including in Europe and the US. So far, it has relied largely on Web-based channels to sell its products in those markets. 

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80 per cent of data is duplicated,”. Druva, therefore, developed a software that would allow companies to cut out this duplication and enable laptops to work faster as well as increase storage capacity

Druva had earlier raised seed funding from the Delhi-based Indian Angel Network and Hong Kong-based Accord International.

Druva was developing a continuous data protection product, which is the next level of back-up technology, we decided to fund them,” says Rehan Yar Khan, who represents IAN on the Druva board.

Some of the company’s earliest clients include

NASA and the US Marine Corps. Druva Phoenix,

Khan says, is now beginning to gain traction in

the market

Jaspreet SinghCo-founder and CEO28

Source: 5 July 2010

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Source – Thomson Reuters

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