This document provides guidance on how to get registered as a venture capital fund in India with the Securities and Exchange Board of India (SEBI). It outlines the application process and documents required, including a Form A application, memorandum and articles of association or trust deed, investment management agreement, details on the sponsor/settlor, trustees, investment manager, and investment strategy. Once all requirements are met, including fit and proper person criteria, and fees are paid, SEBI will grant registration as a venture capital fund. The process depends on the applicant providing all necessary information in a timely manner.

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SECURITIES AND EXCHANGE BOARD OF INDIA
INVESTMENT MANAGEMENT DEPARTMENT
Division of Funds – Venture Capital
-------------------------------------------------------------------------------------------------------
HOW TO GET REGISTERED AS A VENTURE CAPITAL FUND
The Applicant for grant of registration as a Venture Capital Fund under SEBI (Venture
Capital Funds) Regulations, 1996 should make an Application to SEBI in Form A along
with all the necessary documents.
Generally on receipt of Application, the applicant will receive a reply from SEBI within 21
working days. The time taken for registration however, depends on how fast the
requirements are complied with by the applicant.
The applicant is advised to go through the SEBI (Venture Capital Funds) Regulations,
1996 for checking the eligibility criteria and such other details which may help expedite
the registration process. As an integral part of the registration process, the applicant will
submit:
1. Form A along with the Application fees of Rs.1,00,000 and documents as under:
a) Copy of Memorandum and Articles of Association in case the applicant is set up
in the form of a Company (Reg. 4(a) )
or
Copy of Registered Trust Deed in case the applicant is set up in the form of a
trust (Reg. 4(b) )
or
Copy of Main objective of constitution in case the applicant is set up in the form
of a body corporate. (Reg 4(c) )
b) Copy of Investment Management Agreement (only if applicable).
Apart from the above documents/declarations as required under the Form A, the
applicant will also be required to submit the details/information as under:
2. Details of the Sponsor/Settlor.
2.1 Write up on the activities of the Sponsor/Settlor, its shareholding pattern/profile of
the directors. Incase of an individual, please state whether the individual is a
director/employee of any entity registered with SEBI.
2.2 State whether, the Sponsor/Settlor has floated venture capital funds previously,
which are registered with SEBI. If so details. Also state whether they (Sponsor
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2. or their directors) were refused a certificate by the Board or its certificate has
been suspended under regulation 30 or cancelled under regulation 31.
2.3 State whether the Sponsor/Settlor is registered with SEBI, RBI or any other
regulatory authority in any capacity along with the details of its registration.
2.4 State whether any of its group companies are registered with SEBI, RBI or any
regulatory authority along with the details of its registration.
2.5 State whether Sponsor/Settlor or its holding company is listed on any of the
recognized stock exchanges in India. If so details thereof.
2.6 State whether the Sponsor/Settlor or its directors are involved in any litigation
connected with the securities market and any order passed against them for
violation of securities laws. If so, details.
3. Details of the Trustees/Trustee Company
3.1 Write up on the activities of the Trustee Company/ Profile of Trustees.
3.2 Shareholding pattern and the write up on profile of the Directors
3.3 State whether the Trustee Company is registered with SEBI, RBI or any other
regulatory authority in any capacity along with the details of its registration.
4. Details of the Investment Manager/Investment Advisor/Asset Management
Company (AMC).
4.1 Write up on the activities of the Investment Manager/Investment Advisor/AMC.
4.2 Shareholding pattern along with the profile of the Directors.
4.3 State whether the Investment Manager/Advisor/AMC is registered with SEBI,
RBI or any other regulatory authority in any capacity, along with the details.
4.4 Details of Key Personnel/Management Team. Also state whether they are also
the employees of any SEBI registered entity. If so details.
5. State whether, the applicant is registered with SEBI in any capacity or has applied for
registration in any other capacity with SEBI.
6. List of all the associates registered with SEBI along with their Registration No. Please,
refer to Reg. 2(aa) of SEBI (Venture Capital Funds) Regulations, 1996 for the
definition of the “associate company”.
7. Investment Strategy :
Disclose in detail the investment strategy of the fund (Reg. 12 (a)).
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3. Investment strategy should disclose the investment style or pattern, preferred
sectors/industries for investment, proposed corpus, the class of investors, life cycle of
the fund and any other information.
8. Declarations to be submitted by the applicant:
8.1 An undertaking under Regulation 11(3) of SEBI (Venture Capital Funds)
Regulations, 1996.
8.2 Undertaking under Third Schedule to SEBI (Venture Capital Funds) Regulations,
1996.
8.3 Declaration in respect of “Fit and Proper Person” criteria as per regulation 4 A of
the SEBI (Venture Capital Funds) Regulation. 1996 and as specified under
Schedule II of the Securities and Exchange Board of India (Intermediaries)
Regulation 2008.
Grant of Certificate of Registration
Once all requirements including the Fit and Proper Person criteria have been complied
with and on intimation from SEBI for payment of Registration fees of Rs.5,00,000 as per
Second Schedule to Regulations, SEBI will grant the applicant, certification of
registration as a SEBI Registered Venture Capital Fund.
Please note the following::
• “The applicant” means the entity seeking registration as a Venture Capital Fund
• Application which is incomplete or without the necessary documents/
information/declarations would not be accepted and would be treated as not filed.
However, an intimation to this effect will be addressed to the applicant within a
reasonable period of time
• Applications involving policy decisions or other considerations, might get delayed in
processing and in getting registration approvals.
• Documents/annexures submitted along with the application need to be numbered
and duly signed.
• In case of an Authorized signatory, please submit an authorization letter from the
Directors of the Fund.
• The application in Form A along with all the necessary information as enumerated
above will be addressed to The DGM, Division of Funds-Venture Capital, Investment
Management Department, and forwarded to our T&A Division, SEBI Plot No. C4-A,
“G’ Block, Bandra Kurla Complex, Bandra (East), Mumbai – 400051. Such
applications will be submitted along with the demand draft of Rs.1,00,000 towards
application fees paid in favour of SEBI, Mumbai.
---------------------------X----------------------------
FIRST SCHEDULE – FORMS
FORM A
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4. SECURITIES AND EXCHANGE BOARD OF INDIA
(VENTURE CAPITAL FUNDS) REGULATIONS, 1996
(SEE REGULATION 3)
APPLICATION FOR GRANT OF CERTIFICATE OF REGISTRATION
AS VENTURE CAPITAL FUND
SECURITIES AND EXCHANGE BOARD OF INDIA
Plot No. C4-A, “G’ BLOCK, BANDRA KURLA COMPLEX,
BANDRA (EAST), MUMBAI – 400051
INDIA
INSTRUCTIONS:
i. This form is meant for use by the company or trust (hereinafter referred to as the applicant)
for application for grant of certificate of registration as venture capital fund.
ii. The applicant should complete this form, and submit it, along with all supporting
documents to the Board at its head office at Mumbai.
iii. This application form should be filled in accordance with these regulations.
iv. The application shall be considered by the Board provided it is complete in all respects.
v. All answers must be legible.
vi. Information which needs to be supplied in more detail may be given on separate sheets
which should be attached to the application form.
vii. The application must be signed and all signatures must be original.
viii. The application must be accompanied by an application fee as specified the Second
Schedule to these regulations.
1. Name, address of the registered office, address for correspondence, telephone
number(s), fax number(s), telex number(s) of the applicant and the name of the
contact person.
•
2. Please indicate to which of the following categories the applicant belongs.
(i) a company established under the Companies Act, 1956 (1 of 1956)
(ii) a trust set up under the Indian Trusts Act, 1882 (2 of 1882)
•
3. Date and place of incorporation or establishment and date of commencement of
business (enclose certificate of incorporation, memorandum and articles of
association or trust deed in terms of which incorporated or established).
•
4. (a) Details of members of the Board of Trustees or directors of the trustee company,
as the case may be, in case the applicant has been set up as a trust.
(b) Details of members of the Board of Directors of the venture capital fund in case
the applicant has been set up as a company.
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5. •
5. Please state whether the applicant, his partner, director or principal officer is
involved in any litigation connected with the securities market which has an adverse
bearing on the business of the applicant; or has at any time been convicted for any
moral turpitude or at any time has been found guilty of any economic offence. In
case the applicant is a trust, the above information should be provided for the
members of the Board of Trustees or of the above mentioned persons connected
with the Trustee Company.
If yes, the details thereof.
•
6. Please also state whether there has been any instance of violation or non-
adherence to the securities laws, code of ethics/conduct, code of business rules, for
which the applicant, or its parent or holding company or affiliate may have been
subject to economic, or criminal, liability, or suspended from carrying out its
operations, or the registration revoked temporarily.
•
7. Details of asset management company, if any. (enclose copy of agreement with the
asset management company).
•
8. Declaration statement (to be given as below).
We hereby agree and declare that the information supplied in the application,
including the attachment sheets, is complete and true.
AND we further agree that, we shall notify the Securities and Exchange Board of
India immediately any change in the information provided in the application.
We further agree that we shall comply with, and be bound by the Securities and
Exchange Board of India Act, 1992, and the Securities and Exchange Board of India
(Venture Capital Fund) Regulations, 1996, and Government of India guidelines /
instructions as may be announced by the Securities and Exchange Board of India
from time to time.
We further agree that as a condition of registration, we shall abide by such
operational instructions/directives as may be issued by the Securities and Exchange
Board of India from time to time.
For and on behalf of...................................
(Name of the applicant)
Authorised signatory .................. ................
(Name) (Signature)
Date:
Place:
Disclaimer | Acknowledgement
All text and media on these pages are © Copyright, Securities and Exchange Board of India. All rights reserved
http://www.sebi.gov.in/vc/vcregistration.html[12-10-2010 14:01:58]

6. SMOOTH RIDE TO
SMOOTH RIDE TO
VENTURE
CAPITAL
VENTURE CAPITAL
How to Get VC Funding
for Your Business
PANKAJ SAHAI
PANKAJ SAHAI

7. How to Get VC Funding for Your Business
SMOOTH RIDE TO
Have you got a great business idea but not enough money to translate into a reality?
Have you got a small ongoing venture that can grow truly big if only you had the
money? Is your venture at too early a stage such that banks won’t fund you? In
all such cases, you can grow your venture, create immense wealth and realise all
your entrepreneurial dreams by using venture capital to fund your business.
This is the first comprehensive handbook of venture capital funding for Indian
entrepreneurs. It deals with the whole gamut of issues related to the complex,
multi-dimensional subject of venture capital in a simple and engaging manner.
Using first person narrative, it explains lucidly all the concepts and intricacies
VENTURE CAPITAL
of the venture capital raising process and guides the entrepreneur step-by-step,
revealing the secrets of success at every stage of the process:
How is venture capital different from other sources of financing?
How does the VC make money by investing in my business?
How should I create my business plan to present to the VC?
How will the VC value my business?
How should I negotiate with the VC?
How can I protect my interests once a VC funds my business?
What legal agreements will I have to sign with the VC?
How and when will the VC exit from my business? Would I have
to pay him to do so?
This authoritative handbook is a must for ambitious entrepreneurs, business
managers, management consultants, business advisers and finance professionals
alike.
PANKAJ SAHAI is a New Delhi based management consultant, entrepreneur
PANKAJ SAHAI
coach, mentor and adviser. He is the founder of VentureAhead.com, an
entrepreneur support and coaching portal, an enabling marketplace for
ventures in need of strategic capital and partners. Previously, he worked, in
responsible positions in India and overseas, with multinationals like Price
Waterhouse, Ernst & Young, Schlumberger and Citibank, before becoming
part of the core entrepreneurial team of shareholder-directors at IIS Infotech Ltd, a software
services start-up, which was subsequently sold to FI Group Plc. (now Steria–Xansa).
Pankaj Sahai is a Chartered Accountant (India) and a Chartered Management Accountant
(United Kingdom).
Rs. 495
INVESTMENT
www.visionbooksindia.com

8. PANKAJ SAHAI is a management consultant, entrepreneur
coach, mentor and adviser. He is an entrepreneurial manage-
ment professional possessing the repertoire of skills to start,
grow and exit business ventures. He works through a network
of professional relationships, and uses his hands-on entrepre-
neurial experience of start-ups, financial and legal expertise,
abiding interest in HR and psychology, knowledge of venture
mechanics and understanding of the sweat and tears of entre-
preneurship, to provide professional advisory services to ven-
tures at various stages of growth.
Previously, he worked in responsible positions, in India and
overseas with multinationals like Price Waterhouse, Ernst &
Young, Schlumberger and Citibank before moving into the en-
trepreneurship domain by joining the core management team of
shareholder-directors at IIS Infotech Ltd., a software services
start-up which was subsequently sold to FI Group Plc (now
Steria-Xansa). After exiting, he founded VentureAhead.com, an
entrepreneur support and coach portal, an enabling marketplace
for ventures in need of strategic capital and partners. He is also
the founder of VentureFeedback.com, an online surveys and
tests portal which enables small businesses and others to con-
duct market and HR surveys and tests conveniently and eco-
nomically.
He is a Chartered Accountant (India) and a Chartered Man-
agement Accountant (United Kingdom). Before earning his
professional qualifications, he did his schooling from St.
Columba’s High School and then studied at Shri Ram College
of Commerce and obtained the Bachelor of Commerce (Hon’s.)
degree from Delhi University. He lives in New Delhi. He may
be contacted at pankajsahai@gmail.com or +91 98110 21090.

10. www.visionbooksindia.com
Disclaimer
This book contains the author’s subjective opinion and views about the
subject matter under consideration. It is not intended to be a substitute for
professional advice. The readers are advised to seek definitive professional
advice suitable for their specific needs before acting on the views ex-
pressed in this book. The author and publisher cannot be held responsible
for any loss incurred as a result of specific investment or planning or other
decisions made by the reader as a result of reliance placed on the views
and opinions expressed in this book.
ISBN 10: 81-7094-748-0
ISBN 13: 978-81-7094- 748-6
© Pankaj Sahai, 2010
ALL RIGHTS RESERVED. No part of this publication may be reproduced,
stored in a retrieval system, or transmitted by any means, electronic,
mechanical, photocopying, recording, or otherwise, without the prior
written permission of the publisher and the copyright holder.
First Published in 2010 by
Vision Books Pvt. Ltd.
(Incorporating Orient Paperbacks and CARING Imprints)
24 Feroze Gandhi Road, Lajpat Nagar-III
New Delhi-110024, India.
Phone: (+91-11) 2983 6470
Fax: (+91-11) 2983 6490
e-mail: visionbk@vsnl.com
Cover Design by hutchdesign.org
Cover @ Vision Book Pvt. Ltd.
Printed at
Rashtra Rachna Printers
C-88, Ganesh Nagar, Pandav Nagar Complex
Delhi 110092, India.

11. How to Get VC Funding for Your Business
PANKAJ SAHAI

12. This book is dedicated to my parents,
Late B. M. Sahai, “the wise one”
and
Shakuntla Sahai, “the super mom”
For teaching me by example to how to
navigate life happily,
carrying family and friends alongside.

13. Contents 5
Contents
Preface 7
Ground Zero
Venture Capital Raising Plan 11
Part I
How the Venture Capital Industry Works
1. What is Venture Capital? 19
2. How the Venture Capital Industry Operates 27
3. How VCs Make Money 33
4. Are All VCs the Same? 42
5. The VC Investment Process 51
Part II
Assessing Your Readiness for Venture Capital
6. Do I Need Venture Capital? 59
7. Getting Over the Fear of the VC 64
8. To What Kind of Business do VCs Provide Money? 70
9. The Process of Raising Venture Capital 74
Part III
Preparing
Preparing for the VC
10. Hiring Advisers 83
11. Doing an Internal Review of Your Business 92
}

14. 6 Smooth Ride to Venture Capital
12. Doing a Growth Audit 105
13. Determining the Strategic Direction of Your Business 111
14. Building Your Board of Directors and Advisory Board 130
15. Understanding Ownership, Dilution and Rounds of Financing 139
16. Determining the Valuation of Your Business for VC Funding 155
17. Creating Your Funding Plan 171
18. Creating Your Business Plan 175
19. Creating the Elevator Pitch and the VC Presentation 210
Part IV
Negotiating and Structuring the Deal
20. Selecting and Meeting the VC 219
21. Preparing to Negotiate with the VC 228
22. Negotiating the Term Sheet 235
23. Managing the Due Diligence 263
24. Closing the Deal 270
Part V
Managing the VC Relationship
25. Getting Along with the VC 279
26. Exiting Profitably 291
Part Vi
Appendices
Appendix 1: History of Venture Capital in the US 301
Appendix 2: Venture Capital Industry in India 305
Appendix 3: Corporate Venture Capital 310
Appendix 4: Glossary of VC Terminology and Slang 314
Appendix 5: Recommended Reading 330
Index 334