1. Home Back 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 (Sponsorhttp://www.sebi.gov.in/vc/vcregistration.html[12-10-2010 14:01:58]
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)).http://www.sebi.gov.in/vc/vcregistration.html[12-10-2010 14:01:58]
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 Ahttp://www.sebi.gov.in/vc/vcregistration.html[12-10-2010 14:01:58]
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.http://www.sebi.gov.in/vc/vcregistration.html[12-10-2010 14:01:58]
6. SMOOTH RIDE TOSMOOTH RIDE TO VENTURE CAPITALVENTURE CAPITAL How to Get VC Funding for Your BusinessPANKAJ SAHAI PANKAJ SAHAI
7. How to Get VC Funding for Your Business SMOOTH RIDE TOHave 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 themoney? Is your venture at too early a stage such that banks won’t fund you? Inall such cases, you can grow your venture, create immense wealth and realise allyour entrepreneurial dreams by using venture capital to fund your business.This is the first comprehensive handbook of venture capital funding for Indianentrepreneurs. 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 CAPITALof 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, businessmanagers, management consultants, business advisers and finance professionalsalike. 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 becomingpart of the core entrepreneurial team of shareholder-directors at IIS Infotech Ltd, a softwareservices 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, entrepreneurcoach, 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 networkof 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 venturemechanics 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 andoverseas with multinationals like Price Waterhouse, Ernst &Young, Schlumberger and Citibank before moving into the en-trepreneurship domain by joining the core management team ofshareholder-directors at IIS Infotech Ltd., a software servicesstart-up which was subsequently sold to FI Group Plc (nowSteria-Xansa). After exiting, he founded VentureAhead.com, anentrepreneur support and coach portal, an enabling marketplacefor ventures in need of strategic capital and partners. He is alsothe founder of VentureFeedback.com, an online surveys andtests 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 hisprofessional qualifications, he did his schooling from St.Columba’s High School and then studied at Shri Ram Collegeof Commerce and obtained the Bachelor of Commerce (Hon’s.)degree from Delhi University. He lives in New Delhi. He maybe contacted at firstname.lastname@example.org or +91 98110 21090.
10. How to Get VC Funding for Your Business PANKAJ SAHAI
11. 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.
12. Contents 5 ContentsPreface 7 Ground ZeroVenture Capital Raising Plan 11 Part I How the Venture Capital Industry Works1. What is Venture Capital? 192. How the Venture Capital Industry Operates 273. How VCs Make Money 334. Are All VCs the Same? 425. The VC Investment Process 51 Part II Assessing Your Readiness for Venture Capital6. Do I Need Venture Capital? 597. Getting Over the Fear of the VC 648. To What Kind of Business do VCs Provide Money? 709. The Process of Raising Venture Capital 74 Part III Preparing Preparing for the VC10. Hiring Advisers 8311. Doing an Internal Review of Your Business 92 }
13. 6 Smooth Ride to Venture Capital12. Doing a Growth Audit 10513. Determining the Strategic Direction of Your Business 11114. Building Your Board of Directors and Advisory Board 13015. Understanding Ownership, Dilution and Rounds of Financing 13916. Determining the Valuation of Your Business for VC Funding 15517. Creating Your Funding Plan 17118. Creating Your Business Plan 17519. Creating the Elevator Pitch and the VC Presentation 210 Part IV Negotiating and Structuring the Deal20. Selecting and Meeting the VC 21921. Preparing to Negotiate with the VC 22822. Negotiating the Term Sheet 23523. Managing the Due Diligence 26324. Closing the Deal 270 Part V Managing the VC Relationship25. Getting Along with the VC 27926. Exiting Profitably 291 Part Vi AppendicesAppendix 1: History of Venture Capital in the US 301Appendix 2: Venture Capital Industry in India 305Appendix 3: Corporate Venture Capital 310Appendix 4: Glossary of VC Terminology and Slang 314Appendix 5: Recommended Reading 330Index 334