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Access to Venture Capital fund  for small enterprises
Access to Venture Capital fund  for small enterprises
Access to Venture Capital fund  for small enterprises
Access to Venture Capital fund  for small enterprises
Access to Venture Capital fund  for small enterprises
Access to Venture Capital fund  for small enterprises
Access to Venture Capital fund  for small enterprises
Access to Venture Capital fund  for small enterprises
Access to Venture Capital fund  for small enterprises
Access to Venture Capital fund  for small enterprises
Access to Venture Capital fund  for small enterprises
Access to Venture Capital fund  for small enterprises
Access to Venture Capital fund  for small enterprises
Access to Venture Capital fund  for small enterprises
Access to Venture Capital fund  for small enterprises
Access to Venture Capital fund  for small enterprises
Access to Venture Capital fund  for small enterprises
Access to Venture Capital fund  for small enterprises
Access to Venture Capital fund  for small enterprises
Access to Venture Capital fund  for small enterprises
Access to Venture Capital fund  for small enterprises
Access to Venture Capital fund  for small enterprises
Access to Venture Capital fund  for small enterprises
Access to Venture Capital fund  for small enterprises
Access to Venture Capital fund  for small enterprises
Access to Venture Capital fund  for small enterprises
Access to Venture Capital fund  for small enterprises
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Access to Venture Capital fund for small enterprises

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A major hurdle faced by most of the entrepreneurs is lack of access to funding. This session will focus on how to get access to quality funding and funding avenues available to agri-startups. It will …

A major hurdle faced by most of the entrepreneurs is lack of access to funding. This session will focus on how to get access to quality funding and funding avenues available to agri-startups. It will discuss the modalities involved in obtaining funding assistance, more specifically, on understanding what a potential investor looks for in an agribusiness venture.

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  • 1. Access to Venture Capital Funding for Small Enterprises Hemendra Mathur SEAF India Agribusiness Fund NIABI, 2012www.seaf.com
  • 2. Contents The Opportunity About SEAF India Agribusiness Fund How to approach Potential Investors ?www.seaf.com
  • 3. The Opportunitywww.seaf.com
  • 4. Indian Agribusiness – Poised for Growth Agriculture and food processing contribute:  25% to GDP; 13% of Indias exports; 60% of employment Potential for substantial improvements in productivity with improved infrastructure Rapid growth in consumption and investment as rural and urban incomes increase Significant scope for consolidation and increasing strategic interest  Investment by large Indian corporates such a Reliance, Bharti, Aditya Birla, Tata  Entry of many multinationals such as Wal-Mart, Metro, Carrefour, Tesco, Hershey’s, Okla. Foods, Lamaze, Total Produce, DANONE, Yakult, Del Monte, Tyson Foods, Barry Callebaut, In Bev, Anheuser Busch, Sodexho, Dr. Oetkar has given boost to food and agribusiness sector• Significant development impactwww.seaf.com
  • 5. India’s production advantages Milk Largest Producer 109 Mn T Cattle / buffaloes Largest in the world 283 million F &V #2 in the world Fisheries 205 Mn T Marine: 2.9 Mn T Inland : 4.6 Mn T Food Grains #2 in the world Tea (234 Mn T) Largest Producer (0.9 Mn T) Sugarcane Goat & Sheep # 2 in the world 182 million (274 Mn T)Source: FAO/NHB/Department of Animal Husbandry/Department of Agriculture and Cooperationwww.seaf.com
  • 6. Food demand evolving with economic progress Diet / functional / organic foods North America, Japan, Western Europe, Australia Convenience Eastern foods Europe India, China,Dairy, Meat, Bakery,Confectionery Latin America Processed FoodBeverages Outsourcing (PFO) Carbohydrate Africa – Sub-saharan staples Surviving Variety, Quality, Convenience, High Technology Hygiene Health Food Service www.seaf.com
  • 7. ..demand pattern shifting in favour of value added (high margin category) 2001 2015 18% 23% 4% 4% 2% 2% 14% 4% 5% 17% 7% Source: NSSO, SEAF Analysiswww.seaf.com
  • 8. Consumption driven by income….. Growing middle class, estimated at 350 million consumers, which will increase to 650 million consumers by 2015 Distribution of Households by Income Group (million households) Income in USD per year (PPP) 2001-02 2006-07 2009-10* 2014-15* < 1900 24 17 12 7 1900 – 2600 33 20 14 7 2600 – 5200 74 82 81 73 5200 – 25000 46 76 95 127 > 25000 2 5 9 20 Source: NCAER for 2001-02 and 2006-07 estimates * 2009-10 and 2014-15 are industry estimateswww.seaf.com
  • 9. ..and Increasing number of young & working population Growth Rate of 15-24 years and 25-59 years age group India Mexico Netherlands UK Japan US -6% -5% -4% -3% -2% -1% 0% 1% 2% 3% 4% 15-24 yrs 25-59 yrs Source: NCAER and industry estimates www.seaf.com
  • 10. …and health consciousness, nuclearisation, urbanisation, mediaexposure, export demand Health consciousness  Positioning on health platform - dairy, edible oil, fruit juices, organic foods  Consumer willing to pay premium for health benefits Increasing number of small nuclear families with time pressures  Over 50% in urban India  Over 20% of women in urban middle class are working Urbanization – high concentration of target customers  Top 10% towns have 60% of urban population  Over 60 cities with more than one million population  Will improve capital and labour productivity Media exposure  76% of Urban and 33% of Rural India reached by TV  About 60 million cable TV connections Indian exports of food products (approx USD 15 bn) growing at 17% per annum for last 5 yearswww.seaf.com
  • 11. Government is facilitating reforms to develop demand drivenagribusiness Backward and Forward Linkages  Estimated investment of USD 2 bn in 2006-2011 for developing a demand-driven supply chain for fruits and vegetables with a target of doubling production to 300 mn tonnes Taxation  Progressive reduction in excise duties on food products Credit Inflow  Lending to food processing classified as priority sector  Agricultural credit increased from USD 17.8 bn in 2004 to USD 60.0 bn in 2009 Legislative reforms  Model Law: to enable contract farming and direct sourcing – Implemented in most states  Integrated Food Law: convergence in the laws dealing with food to facilitate single window clearance – In the process of implementation  Warehouse Receipt System: to encourage commodity trading - Implemented  Futures trading: to enable transparency in price discovery - Implemented  Infrastructure- 50 mega food parks planned with an investment of USD 23 mn per food park - Process started  World-class institute dedicated to food processing – National Institute for Food Technology, Entrepreneurship and Management, near Delhi - Implementedwww.seaf.com
  • 12. Challenges remain.. Fragmentation in the supply chain Hand Cart Vendor Village Market Wholesaler Sub- Commission Commission Wholesaler Roadside Farmer Agent Agent Vendor Consumer Retailer Trader / Transporter Supermarket Contract F&V Marketing Company Intermediate Final Cultivation Processor Processor The markups by each participant in the chain cause the farmer to receive approximately 35% of the price paid by the consumer for delivered product Source: Industry estimateswww.seaf.com
  • 13. Challenges which affect productivity… Low productivity -lack of quality inputs and adequate technology Inefficient Dependence Marketing on Monsoons Systems ORGANIZATION & SUPPLY CHAIN EFFICIENCY WILL LEAD TO Poor SCALE & GROSS MARGIN Small Land Processing IMPROVEMENT Holdings Infrastructure Limited Poor Access to Infrastructure Credit Lack of forward and backward linkageswww.seaf.com
  • 14. SEAF India Agribusiness Fundwww.seaf.com
  • 15. Overview Small Enterprise Assistance Funds (SEAF) established in 1989 Invests growth capital together with technical assistance to SMEs in emerging markets 125 employees with a network of 20 offices located across 5 continents. 26 funds (20 currently active) across 30 countries with aggregate committed capital of $600 million. $380 million invested in 344 SMEs worldwide, with 186 exits since inception. Over 105 agribusiness investments. Exits from 40 investments in active funds have realized IRR of 27% (3.0x capital).www.seaf.com
  • 16. Our current global investment networkSEAF’S GLOBAL FOOTPRINT includes 30 countries on 5 continents.www.seaf.com
  • 17. Background The only dedicated fund for investment in SMEs in the agribusiness sector in India Investment focus on companies in the food value chain  with strong management, demonstrated track having innovative and superior technology for productivity improvement and value additionwww.seaf.com
  • 18. Investment Focus – Agribusiness and Food Processing Food retail / Inputs Post-Harvest Logistics Processing services• Seeds • Supply Chain • Cold storage • Dairy • Food retail• Agrochemicals Organizer • Reefer • Bakery • Restaurant chains• Farm machinery transport • Edible oils • Suppliers to food• Cattle / Poultry Feed • Fruits & vegetable based retail / food• Packaging products services• Ingredients • Processed Meat & Poultry • Sugar / ethanol / co-gen • Spices • Confectionery • Beverages • Ready to eat / convenience foods • Organic foodswww.seaf.com
  • 19. Investment Criteria• Growth potential, scalability and clear focus on value addition• Management with integrity, track record and demonstrated execution capability• Capability to attain market leadership• Innovative, differentiated or superior technology• Strengths in supply chain management• Strong developmental impactwww.seaf.com
  • 20. Post Investment -Systematic Value Added to Achieve Scaled GrowthStandard forms of MARKETING & - Develop marketing plansbusiness technical STRATEGY - Support marketing teamssupport typicallyprovided by SEAF: GLOBAL - Introduce global business networks NETWORKING - Support export and import strategies OPERATIONS - Cooperatively identify areas for improvement ASSISTANCE - Assist in R & D / commercialization of technology - Facilitate visits by outside experts - Identify new sources of financing ADDITIONAL - Leverage relationships with local banks FINANCING - Provide negotiation and contracting support - Business planning and budgeting FINANCIAL - Accounting and management information systems CONTROL - Facilitate hiring and training of CFO - Design of effective incentive structures CORPORATE - Board of Directors oversight GOVERNANCE - Legal structurewww.seaf.com
  • 21. How to approach the potential investors?www.seaf.com
  • 22. Typically 5 step process Understanding your business and Capital requirements Approaching Investors Due Diligence & Negotiation Shareholder Agreement Post Investment Monitoring & Exitwww.seaf.com
  • 23. Understanding your Business / Capital requirementWhat is your business? Define clear boundaries of your business Define the market need that you are addressing / intend to address with your product/ serviceWhat are your growth plans? Define clear vision and goals for your enterprise for at least five years What does this growth mean for the top-line/ bottom-line? How do you intend to achieve this growth?How much resources you need? What is the kind of infrastructural investment required? What is the likely manpower required? How much working capital shall be needed? What sourcing model shall work? Which suppliers shall work?Why do you need capital? Capital Expenditure New geography, new product, infrastructure investments Working capital Commercialising new product/ servicewww.seaf.com
  • 24. Approaching the Investor Identify relevant Investors Evaluate & Short list Understand general requirements of the investors Prepare Pitch Bookwww.seaf.com
  • 25. Due Diligence / Negotiation Discussions between investment manager & promoter/ promoters Evaluation of business & financial plan Plant visits by investor Discussion on & validation of key findings Presentation to Investment Committee by Investment manager Valuation Negotiations and preparation of term sheet Drafting of shareholder agreement including investors right and obligation Signing of shareholder agreementwww.seaf.com
  • 26. Post –Investment Monitoring/ Exit Working with investors for the first time – please understand VC interest and alignment Transition from “Individual Control” to “Board Control” Increased time spent on shareholder communication Pressure of business plan growth projections Corporate Governance and Transparency in books of Accounts Work together to find a buyer for investor stake Provide a profitable exit to the investorwww.seaf.com
  • 27. Thank you .www.seaf.com

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