PREPARED BY:
NEHA (003)SHILPA (004)
Meaning
Funds made available for start up funds small businesses with exceptional growth potential.
Financial support to young, rapidly growing companies/individual that have potential to develop into significant economics contributors by the businessman/group to create a product or service which has a unique idea.
VC
Characteristics
Investment In Innovative Projects.High Risk.Participation In Management.Long Term Horizon.Lack Of LiquidityFinance To Smaller, Less Mature
Companies, New And Rapidly
Growing Companies.
To bridge the gap between CAPITAL and KNOWLEDGE.
Maximum utilization of available resources.
NEED FOR VENTURE CAPITAL
Advantages
• Injects long term equity finance
1
• The VC is a business partner, sharing both the risks and rewards
2
• The VC’s provide practical advice and assistance
3
• The VC may be capable of providing additional rounds of funding
4
•
VCs are experienced in the process of preparing a company
• for an IPO of its shares onto the stock exchanges or overseas
• like NASDAQ, facilitate a trade sale.
5
Founder loss of autonomy or control
Benefit from such financing can be realized in long run only.
Disadvantages
1
2
Lengthy and complex process 3
Stages of Financing
Seed stage
BRIDGE STAGE
THIRD STAGESECOND STAGESTART UP STAGE
SEED STAGE
To prove a concept
Prototype developed and fully
tested
Manufacturing funds
Expansion/ maturity
For going public process
Approval
Evaluation
Screening
VC investment
process
Market
Expected Return
Decision
ProductEntreprene-
urial(managerial
)
Product
Expected Risk
VC investment process
Methods of venture financing
Methods
Equity
Conditional loan
Income note
Other financing methods
Management teamsMarket trendsBarriers to successTimely exits
RISKS OF VENTURE CAPITAL INVESTMENTS
Initial public offer(IPOs) Trade sale Shares buy back Mergers and
Acquisition s
Exit Route
Critical factors for the success of VC
The regulatory, tax and legal environment
Resource raising, investment, management and exit should be simple
Should have global exposure and investment opportunities
Infrastructure in the form of incubators and R&D need to be promoted using government support
Why it is hard to find a VC !!!
How do contact a VC ?
Introductions are best:
• Attorney• Accountant• Banker• Angel Investor• Industry Executive
The concept of VC was formally introduced in India in 1987 by IDBI.
The government levied a 5 per cent cess on all know-how import payments to create the venture fund.
ICICI started VC activity in the same year
Later on ICICI floated a separate VC company - TDICI
Development of VC in INDIA
1) Those promoted by the Central Government controlled development
finance institutions. For example:
- ICICI Venture Funds Ltd. - IFCI Venture Capital Funds Ltd (IVCF) - SIDBI Venture Capital Ltd (SVCL)
2) Those promoted by State Government controlled development finance institutions. For example:
- Punjab Infotech Venture Fund - Gujarat Venture Finance Ltd (GVFL) - Kerala Venture Capital Fund Pvt Ltd.
3) Those promoted by public banks. For example:
- Canbank Venture Capital Fund - SBI Capital Market Ltd
VC funds in India
4)Those promoted by private sectorcompanies. For example:
- IL&FS Trust Company Ltd - Infinity Venture India Fund
5)Those established as an overseas venture capital fund. For example:
- Walden International Investment Group - HSBC Private Equity -Management Mauritius Ltd
VC can help in the rehabilitation of sick
units.
VC can assist small ancillary units to upgrade
their technologies
VCFs can play a significant role in
developing countriesProvide financial
assistance to people coming out of universities,
technical institutes, etc
Future Prospects of VC in INDIA
CASE
ON
VIRGINIA CAPITAL PARTNERS
Virginia Capital's private equity group invests from $500,000 to $10 million in growing companies in the South Atlantic U.S.
Focus on industries where our partners have considerable prior success: health care, media, communications, insurance, consumer and business services and specialty insurance.
Virginia Capital's funds are used to start, grow or buy businesses.
INVESTMENT CRITERIA
START UPShared tower sites: Virginia Capital assembled a group of investors to start and expand the business into one of the leading tower companies in the U.S.
GROWTHPhysicians practice: Management used their capital to accelerate the growth of the core business and expand the company's online presence. This expanded the publication's distribution, increased advertising, and developed trade shows designed exclusively for practice management.
ACQUISITIONS
PRA International: Virginia Capital and a group of like-minded institutional investors provided capital for management to consummate this expansion plan which assembled one of the largest clinical research organizations in the U.S.
GEOGRAPHIC EXPANSION Hunt Assisted Living: Virginia Capital and a group of
other investors provided Hunt Assisted Living with the capital to expand its geographic footprint to include operations in Virginia, North Carolina, and South Carolina
RECAPITALIZATION Mid Atlantic DQ: Virginia Capital purchased a
controlling interest and subsequently provided additional growth capital to double the size of the business.
RESTRUCTURE
CASE
A family-owned enterprise was struggling after its founder's death. The surviving family members had attempted to operate the business, but they discovered that the founder had neglected to maintain the company's fixed assets, leaving a considerable capital expenditure need. In addition, competitors had made inroads during the founder's illness. Despite their best efforts, the company was foundering.
Virginia Capital purchased the business, recruited new leadership in the wake of the family's departure and provided capital to improve the facilities and regain the company's formerly dominant market position.
Thank You
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