www.edventures1.com | training@edventures1.com | +91-9787-55-55-44
Venture Capital
An Introduction to
www.edventures1.com | training@edventures1.com | +91-9787-55-55-44
Agenda for the next 2 hours
• Introductions
• What is V...
www.edventures1.com | training@edventures1.com | +91-9787-55-55-44
Edventures1
• A Learning and
Development organisation
•...
www.edventures1.com | training@edventures1.com | +91-9787-55-55-44
Facilitator – Pradeep Yuvaraj
• Goal for the session
• ...
www.edventures1.com | training@edventures1.com | +91-9787-55-55-44
Where do I get money from?
• To start new business
• Gr...
www.edventures1.com | training@edventures1.com | +91-9787-55-55-44
Possible sources: Non-equity
• Personal funds
• Persona...
www.edventures1.com | training@edventures1.com | +91-9787-55-55-44
Sources: Equity
• Angels
• The “4Fs” – Friends,
Family ...
www.edventures1.com | training@edventures1.com | +91-9787-55-55-44
Hero of the day: Venture Capital
www.edventures1.com | training@edventures1.com | +91-9787-55-55-44
What is Venture Capital
• Type of Equity investment
• A...
www.edventures1.com | training@edventures1.com | +91-9787-55-55-44
In other words
… It is the business of employing capita...
www.edventures1.com | training@edventures1.com | +91-9787-55-55-44
Why take risk?
www.edventures1.com | training@edventures1.com | +91-9787-55-55-44
Why is it better than all other sources
• Spirit of par...
www.edventures1.com | training@edventures1.com | +91-9787-55-55-44
Who become VC’s?
• Individuals
• Corporations
• Private...
www.edventures1.com | training@edventures1.com | +91-9787-55-55-44
How a VC company runs?
• General partners (GPs) manage ...
www.edventures1.com | training@edventures1.com | +91-9787-55-55-44
Venture Capital Economics
VC Fund IX, L.P.
LP 1 GP
LP 2...
www.edventures1.com | training@edventures1.com | +91-9787-55-55-44
Venture Capital Economics
VC Fund IX, L.P.
LP 1 GP
LP 2...
www.edventures1.com | training@edventures1.com | +91-9787-55-55-44
When will VC’s Fund?
• Seed Capital
–Only ideas
–No pro...
www.edventures1.com | training@edventures1.com | +91-9787-55-55-44
Startup Capital
• Product development
completed
• Sampl...
www.edventures1.com | training@edventures1.com | +91-9787-55-55-44
Early stage
• 2-3 years in business
• Management in pla...
www.edventures1.com | training@edventures1.com | +91-9787-55-55-44
Expansion capital
• Company is established
• Next level...
www.edventures1.com | training@edventures1.com | +91-9787-55-55-44
Late stage/Mezzanine
• Impressive sales and
revenues
• ...
www.edventures1.com | training@edventures1.com | +91-9787-55-55-44
Other types
• Restructuring
• Bridge capital
• Turnarou...
www.edventures1.com | training@edventures1.com | +91-9787-55-55-44
The process
1
• Business Plan
• Unsolicited Vs referred...
www.edventures1.com | training@edventures1.com | +91-9787-55-55-44
The process….
4
• Second, third… meetings
• Decisional ...
www.edventures1.com | training@edventures1.com | +91-9787-55-55-44
Fundraising time line
0 1 2 3 4 5 6 7 8 9 10 11 12 13 1...
www.edventures1.com | training@edventures1.com | +91-9787-55-55-44
After funding
• Monitoring
– Board seat
– Financial Per...
www.edventures1.com | training@edventures1.com | +91-9787-55-55-44
Fundraising Lessons
• Network to gains access to VCs
• ...
www.edventures1.com | training@edventures1.com | +91-9787-55-55-44
Believe In Your Idea!
“The wireless music box has no
im...
www.edventures1.com | training@edventures1.com | +91-9787-55-55-44
Believe In Your Idea!
“Many of our stockholders have as...
www.edventures1.com | training@edventures1.com | +91-9787-55-55-44
Attributes of a Successful
Entrepreneur
• Problem solve...
www.edventures1.com | training@edventures1.com | +91-9787-55-55-44
Closing thoughts…
• Focus on the long-run
–What goes ar...
www.edventures1.com | training@edventures1.com | +91-9787-55-55-44
Entrepreneurship…
• Entrepreneurship is a lifestyle cho...
www.edventures1.com | training@edventures1.com | +91-9787-55-55-44
Discussions…
www.edventures1.com | training@edventures1.com | +91-9787-55-55-44
• +91-97-87- 55- 55- 44
• training@edventures1.com
• ww...
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Venture capital

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Venture capital

  1. 1. www.edventures1.com | training@edventures1.com | +91-9787-55-55-44 Venture Capital An Introduction to
  2. 2. www.edventures1.com | training@edventures1.com | +91-9787-55-55-44 Agenda for the next 2 hours • Introductions • What is Venture Capital • Why VC? • Types of Funding • Process • What VC’s Look for • Exit strategy • Discussions
  3. 3. www.edventures1.com | training@edventures1.com | +91-9787-55-55-44 Edventures1 • A Learning and Development organisation • Experimentors • Over 100 years of combined experience
  4. 4. www.edventures1.com | training@edventures1.com | +91-9787-55-55-44 Facilitator – Pradeep Yuvaraj • Goal for the session • Rules for the session • About
  5. 5. www.edventures1.com | training@edventures1.com | +91-9787-55-55-44 Where do I get money from? • To start new business • Grow a business • Put a new factory • Revive a dying company
  6. 6. www.edventures1.com | training@edventures1.com | +91-9787-55-55-44 Possible sources: Non-equity • Personal funds • Personal debt • Grants and awards • Customer pre-sales • Venture leasing • Receivables financing • Business loans • In-kind contributions • Joint ventures or
  7. 7. www.edventures1.com | training@edventures1.com | +91-9787-55-55-44 Sources: Equity • Angels • The “4Fs” – Friends, Family Father in law and Fools • Corporate direct investment
  8. 8. www.edventures1.com | training@edventures1.com | +91-9787-55-55-44 Hero of the day: Venture Capital
  9. 9. www.edventures1.com | training@edventures1.com | +91-9787-55-55-44 What is Venture Capital • Type of Equity investment • Above average or High returns • Story of the man with the idea and the man with the money
  10. 10. www.edventures1.com | training@edventures1.com | +91-9787-55-55-44 In other words … It is the business of employing capital ‘patiently’ to ‘maximize returns’ while managing risks in a relatively high-risk venture Versus Simply ‘minimising risks’ for a surer fixed return
  11. 11. www.edventures1.com | training@edventures1.com | +91-9787-55-55-44 Why take risk?
  12. 12. www.edventures1.com | training@edventures1.com | +91-9787-55-55-44 Why is it better than all other sources • Spirit of partnership • Risk - Reward sharing • Active participation and value addition • Long term perspective • Investment and not assistance • Returns linked to performance • Expects high returns
  13. 13. www.edventures1.com | training@edventures1.com | +91-9787-55-55-44 Who become VC’s? • Individuals • Corporations • Private firms
  14. 14. www.edventures1.com | training@edventures1.com | +91-9787-55-55-44 How a VC company runs? • General partners (GPs) manage the fund • Capital comes from institutional “limited partners” (LPs) • Singularly focused: ROI • GPs get an annual fee • Once LPs get investment back, GPs get a portion of the profits • LPs get the remaining profits
  15. 15. www.edventures1.com | training@edventures1.com | +91-9787-55-55-44 Venture Capital Economics VC Fund IX, L.P. LP 1 GP LP 2 LP 3 Portfolio Company 1 Portfolio Company 2 Portfolio Company 3 Portfolio Company 4 Portfolio Company 5 LP 4 $100 Management $10 Portfolio Company 10 Portfolio Company 9 Portfolio Company 8 Portfolio Company 7 Portfolio Company 6 $10 $10 $10 $10 $10 $10 $10 $10 $10 2%
  16. 16. www.edventures1.com | training@edventures1.com | +91-9787-55-55-44 Venture Capital Economics VC Fund IX, L.P. LP 1 GP LP 2 LP 3 Portfolio Company 1 Portfolio Company 2 Portfolio Company 3 Portfolio Company 4 Portfolio Company 5 LP 4 $180 Portfolio Company 10 Portfolio Company 9 Portfolio Company 8 Portfolio Company 7 Portfolio Company 6 $100 $25 $40 $35 $20
  17. 17. www.edventures1.com | training@edventures1.com | +91-9787-55-55-44 When will VC’s Fund? • Seed Capital –Only ideas –No product –Small amounts –Capital used • Market research • Sample Product • Set-up costs
  18. 18. www.edventures1.com | training@edventures1.com | +91-9787-55-55-44 Startup Capital • Product development completed • Sample is already available • Initial marketing has been done • <2 years
  19. 19. www.edventures1.com | training@edventures1.com | +91-9787-55-55-44 Early stage • 2-3 years in business • Management in place • Sales on rise • VC could increase sales • Improve productivity • Improve efficiency
  20. 20. www.edventures1.com | training@edventures1.com | +91-9787-55-55-44 Expansion capital • Company is established • Next level of growth • Enter new markets • Specialized VC’s
  21. 21. www.edventures1.com | training@edventures1.com | +91-9787-55-55-44 Late stage/Mezzanine • Impressive sales and revenues • Broken even/profitable • Second level of management • Capacity increase • Ramp up marketing
  22. 22. www.edventures1.com | training@edventures1.com | +91-9787-55-55-44 Other types • Restructuring • Bridge capital • Turnaround • Acquisition • Merger
  23. 23. www.edventures1.com | training@edventures1.com | +91-9787-55-55-44 The process 1 • Business Plan • Unsolicited Vs referred 2 • Initial evaluation by Associate • Follow up evaluation by partner 3 • First meeting/assessment of team • Preliminary due diligence
  24. 24. www.edventures1.com | training@edventures1.com | +91-9787-55-55-44 The process…. 4 • Second, third… meetings • Decisional commitment 5 • Term sheet issued • Detailed Due diligence 6 • Negotiations • Documentation – Closing/funding
  25. 25. www.edventures1.com | training@edventures1.com | +91-9787-55-55-44 Fundraising time line 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Business Plan Submissions Investor Presentations Term Sheet Negotiations Final Documentation Funding Budget 4-5 months, or more
  26. 26. www.edventures1.com | training@edventures1.com | +91-9787-55-55-44 After funding • Monitoring – Board seat – Financial Performance • After 3-7 years: Exit – IPO – Sale back – M&A – Sale to strategic investors
  27. 27. www.edventures1.com | training@edventures1.com | +91-9787-55-55-44 Fundraising Lessons • Network to gains access to VCs • Don’t get hung-up on confidentiality • Be persistent • Be humble yet confident, and always courteous and professional • Embrace and learn from rejection • Be greedy in the long-run (any % of something > 100% of nothing!)
  28. 28. www.edventures1.com | training@edventures1.com | +91-9787-55-55-44 Believe In Your Idea! “The wireless music box has no imaginable commercial value.” – David Sarnoff Associates, in rejecting a proposal for investment in the radio in the 1920s “We don't like their sound, and guitar music is on the way out.” – Decca Recording Co., rejecting the Beatles in 1962
  29. 29. www.edventures1.com | training@edventures1.com | +91-9787-55-55-44 Believe In Your Idea! “Many of our stockholders have asked me about this new invention by Alexander Graham Bell called the telephone. While we think it’s an interesting curiosity, there’s never going to be a market for that technology, and therefore we have declined the offer to take a license.” – Chairman of Western Union, in its annual report from the late 1800s “Who the hell wants to copy a document on plain paper?” – National Inventors Council, as told in 1940 to Chester Carlson, founder of XEROX
  30. 30. www.edventures1.com | training@edventures1.com | +91-9787-55-55-44 Attributes of a Successful Entrepreneur • Problem solver • Decisive • Leader & motivator • Humble • Passionate • Persistent • Optimistic • Professional • High integrity • Critical path doer • Impatient / bias toward action (with analysis) • Rejoices in others’ victories • Focused on the long- term goal
  31. 31. www.edventures1.com | training@edventures1.com | +91-9787-55-55-44 Closing thoughts… • Focus on the long-run –What goes around comes around –Friendships last longer than jobs –Don’t let greed blind the objective • Make the most of the experience –Listen & learn –Failure or rejection is what you make of it
  32. 32. www.edventures1.com | training@edventures1.com | +91-9787-55-55-44 Entrepreneurship… • Entrepreneurship is a lifestyle choice – Balance your risk & return – Seize opportunities – Life’s short, have fun
  33. 33. www.edventures1.com | training@edventures1.com | +91-9787-55-55-44 Discussions…
  34. 34. www.edventures1.com | training@edventures1.com | +91-9787-55-55-44 • +91-97-87- 55- 55- 44 • training@edventures1.com • www.edventures1.com
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