venture capital

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  1. 1. Venture CapitalVenture Capital (Presented(Presented By Grp.-4)By Grp.-4)
  2. 2. Venture CapitalVenture Capital Venture capital is defined as a long term equity investment in novel technology based projects which display potential for significant growth and financial return.
  3. 3. Purpose of Venture CapitalPurpose of Venture Capital Venture capital is equity support to fund new concept that involve a higher risk and at the same time have high growth rate and profit. Venture capital broadly implies an investment of long term, equity finance in high risk projects with high reward possibilities.
  4. 4. ROLES WITH IN A FIRMROLES WITH IN A FIRM
  5. 5. CONTDCONTD Venture Capital General Partners: Also known as venture capitalists are executives in the firm. Limited Partners: Investors in venture capital fund. Venture Partners: Venture partners bring in deal and receive income only on deals they work on. Entrepreneur In Residence: EIRs are experts in a particular domain and perform due diligence on potential deals.
  6. 6. STAGES IN VENTURE CAPITALSTAGES IN VENTURE CAPITAL SEED MONEY-NURTURING IDEA. START-UP- FINANCING PRODUCT DEVELOPMENT. FIRST ROUND- MANUFACTURING FUNDS SECOND ROUND- EARLY WORKING CAPITAL THIRD ROUND- EXPANSION MONEY FOURTH ROUND- BRIDGE FINANCING GROWING PROCESS.
  7. 7. INVESTMENT PROCESSINVESTMENT PROCESS Deal Origination Screening Evaluation Deal Structuring Post Investment Activity Exit Plan
  8. 8. Features of Venture CapitalFeatures of Venture Capital Long Time Horizon Lack Of Liquidity High Risk High Tech Equity Participation Capital Gains. Participation In Management.
  9. 9. ORGANIZATIONAL STRUCTURE OF VENTUREORGANIZATIONAL STRUCTURE OF VENTURE CAPITAL INVESTMENTCAPITAL INVESTMENT Portfolio Companies Value creation Generate deal flow Screen opportunities Harvest investments Negotiate deals Monitor and advise General Partners Venture Capital Fund Pension plan Endowments Life insurance Corporations Individuals Limited Partners Effort and 1% of capital Annual Management Fee 2-3% Carried Interest 20- 30% of Gain 99% of Investment Capital Capital Appreciation 70-80% of Gain Investment Capital and Effort Financial Claims
  10. 10. ADVANTAGESADVANTAGES Provides large sum of finance and expertise Mentoring and guidance Alliances Facilitate exit Business and management consultations Additional resources Encourages new breed of entrepreneur
  11. 11. DISADVANTAGESDISADVANTAGES Pricing/ Negotiations. Intrusions. Control/ demand of the board of the company. Industry specific. Bring enormous pressure to profit quick Long and complex process. Requirement of professional business plan.
  12. 12. Problems faced by VCProblems faced by VC Requirement of an experienced management team Requirement of an above average rate of return on investment. Longer payback period. Uncertainty regarding the success of the product in the market. Questions regarding the infrastructure details of production. Skills and Training required. Time period
  13. 13. VENTURE CAPITAL INDUSTRY IN INDIAVENTURE CAPITAL INDUSTRY IN INDIA Risk Capital & Technology Finance Limited. IDBI Venture Capital Fund. Technology Development And Information Company Of India Limited.(TDICI) Indus Venture Capital Fund. Small Industrial Development Bank Of India.(SIDBI) Gujarat Venture Finance Limited.