Venture capital BD

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<p>What is Venture Capital/Private Equity?</p> <p>Venture Capital</p> <p> By Md.Masud Hossen</p> <p>1</p> <p>Agenda</p> <p>Concept Definition Origin And DevelopmentCharacteristicsFeatures StagesEligibility To Seek Venture Capital FundingThe Venture Capital Investment ProcessSouth Asian Venture Capital Scenario</p> <p>2</p> <p>Cont.</p> <p>Bangladeshs ScenarioVenture Capital Fund In BangladeshAdvantages Of Venture CapitalDisadvantages Of Venture FinancingRecommendations</p> <p>Concept Of Venture Capital </p> <p>Venture capital is the capital invested in a business where the chances of success are uncertain. </p> <p>It is term to describe the financing of startup and early stage business as well as businesses in turn around situations</p> <p>4</p> <p>Definition</p> <p>Venture capital is a subset of private equity and refers to equity investments made for the launch, early development, or expansion of a business</p> <p>Venture capital means fundsmade available forstartupfirmsandsmall businesses with exceptionalgrowthpotential.</p> <p>Cont.</p> <p>wealth available for investment in new or speculative enterprises Venture Capital is defined as long-term equity investment in novel technology based projects with display potential for significant growth and financial return. - According to 1995 Finance Bill</p> <p>Origin And Development Of Venture Capital Concept</p> <p> VC concept is a US origin concept. </p> <p>Organized VC fund was started in 1946 when American research and development corporation (ARD), a publicly traded, closed-end investment company was formed.</p> <p>In 1958 for computer maker digital equipment corp was provided with start-up financing by ARD.</p> <p>ARD was eventually profitable, providing its original investors with a 15.8% annual rate of return over its 25 year as an independent firm</p> <p>Characteristics</p> <p>Long time horizon</p> <p>Lack of liquidity</p> <p>High risk</p> <p>Equity participation</p> <p>Participation in management</p> <p>8</p> <p>Features Of Venture Capital</p> <p>Venture capital is usually in the form of equity or mix of equity debt. Commercial success of funded venture is not tested and hence VC is a risk investment.If successful, VCs can get extraordinary returns.VC is not just a fund provider but also is involved in managing the envisaged growth of the firm.VC are interested in capital gains and cash gains.</p> <p>9</p> <p>Stages of Financing</p> <p>1. Seed Money: Low level financing needed to prove a new idea.2. Start-up: Early stage firms that need funding for expenses associated with marketing and product development. 3. First-Round: Early sales and manufacturing funds. 4. Second-Round: Working capital for early stage companies that are selling product, but not yet turning a profit .</p> <p>10</p> <p>5. Third-Round: Also called Mezzanine financing, this is expansion money for a newly profitable company 6. Fourth-Round: Also called bridge financing, it is intended to finance the "going public" process </p> <p>11</p> <p>Risk in each stage</p> <p>Financial Stage</p> <p>Period (Funds locked in years)</p> <p>Risk Perception</p> <p>Activityto be financed</p> <p>Seed Money</p> <p>7-10</p> <p>Extreme</p> <p>For supporting a concept or ideaor R&amp;D for product development</p> <p>Start Up</p> <p>5-9</p> <p>Very High</p> <p>Initializing operations or developing prototypes</p> <p>First Stage</p> <p>3-7</p> <p>High</p> <p>Start commercials production and marketing</p> <p>12</p> <p>Financial Stage</p> <p>Period (Funds locked in years)</p> <p>Risk Perception</p> <p>Activityto be financed</p> <p>Second Stage</p> <p>3-5</p> <p>Sufficiently high</p> <p>Expand market and growing working capital need</p> <p>Third Stage</p> <p>1-3</p> <p>Medium</p> <p>Market expansion,acquisition &amp; product development for profit making company</p> <p>Fourth Stage</p> <p>1-3</p> <p>Low</p> <p>Facilitating public issue</p> <p>13</p> <p>Eligibility To Seek Venture Capital Funding</p> <p>Strength and motivation of management teams</p> <p>Clarity on product development strategies</p> <p>Carefully defined target markets with possibility to scale-up in a big way</p> <p>Innovation quotient in proposed product or idea</p> <p>14</p> <p>VC investment process</p> <p>Deal origination</p> <p>Screening</p> <p>Due diligence (Evaluation)</p> <p>Deal structuring</p> <p>Post investment activity</p> <p>Exit plan</p> <p>15</p> <p>South Asian Venture Capital Scenario</p> <p> South Asia includes venture capital managers based in Bangladesh, India, Pakistan, Nepal and Sri Lanka. Compared to other regions in Asia, there are more South Asia-based fund managers with vehicles in market currently targeting infrastructure and real estate investments.</p> <p> In 1973 a committee on development of small and medium enterprises highlighted the need to foster venture capital as a source of funding new entrepreneurs and technology in the south Asian region. </p> <p>16</p> <p>Annual South Asia-Based venture capital Fundraising, 2007 -2013 (As at August 2013)</p> <p>Bangladeshs Scenario</p> <p>Asian Tiger Capital Partners is one of the first financial institutions in Bangladesh focusing on private equity and venture capital. </p> <p>Buoyed by the inclusion of Bangladesh in J P Morgans Frontier Five group of countries and also Goldman Sachs Next Eleven group,Asian Tiger Capital Partnershave launched themselves in Bangladesh complete with a Bengal tiger as logo. </p> <p>Cont</p> <p>It is stated earlier that a systematic problem exists within the major segments of the financial system in Bangladesh in catering to the financing needs of SMEs. Therefore, it is argued that the venture capital industry may be developed as an additional financial intermediary for catering to the financing and non-financing needs of the SMEs, as it can participate in the management of the investee firms actively and exercise those are</p> <p>due diligence processparticipative management approachinformation asymmetry and transactions costsbounded rational</p> <p>Venture Capital Fund In Bangladesh</p> <p>Venture Investment Partners Bangladesh Limited (VIPB)</p> <p>BD Venture Limited </p> <p>ADVANTAGES OF VENTURE CAPITAL</p> <p>provide large sum of equity finance.Venture Capitalist are rewarded by business success &amp; the capital gain. Able to bring wealth and expertise to your companyThe Venture Capitalist also has a wide network of contacts. Providing additional funds. </p> <p> DISADVANTAGES OF VC</p> <p>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 feesInvestors become part owners of your business - founder loss of autonomy or control</p> <p>Recommendations</p> <p>The company will invest in small and medium size enterprises across the country, with a special focus on promising rural ventures. Each firm must have annual revenue of at least TK 4.0 Million. Venture capitalists will help companies grow, but they eventually seek to exit the investment in three to seven years.Venture capitalists may be generalist or specialist investors, depending on their investment strategy. Venture capitalists can be generalists, investing in various industry sectors</p> <p>Cont.</p> <p>Investment made on development of management and employees through training, improving skills. Avoid venture capitalist in interference in Business activity. Increasing market facilities. Provide more infrastructure facilities.</p> <p>THE END</p> <p>Quarries??????????????????</p> <p>?</p>