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Venture capital

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    Venture capital Venture capital Presentation Transcript

    • An Introduction to
      Venture Capital
    • 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
    • Edventures1
      A Learning and Development organisation
      Experimentors
      Over 100 years of combined experience
    • Facilitator – Pradeep Yuvaraj
      Goal for the session
      Rules for the session
      About
    • Where do I get money from?
      To start new business
      Grow a business
      Put a new factory
      Revive a dying company
      ?
    • 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
    • Sources: Equity
      Angels
      The “4Fs” – Friends, Family Father in law and Fools
      Corporate direct investment
    • or
      Hero of the day: Venture Capital
    • 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
    • In other words
      … It is the business of employing capital ‘patiently’ to ‘maximizereturns’ while managing risks in a relatively high-risk venture
      Versus
      Simply ‘minimising risks’ for a surer fixed return
    • Why take risk?
    • 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
    • Who become VC’s?
      Individuals
      Corporations
      Private firms
    • 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
    • Venture Capital Economics
      GP
      LP 3
      2%
      LP 1
      LP 4
      LP 2
      Management
      $100
      VC Fund IX, L.P.
      $10
      $10
      PortfolioCompany 1
      PortfolioCompany 10
      $10
      $10
      PortfolioCompany 2
      PortfolioCompany 9
      $10
      $10
      PortfolioCompany 3
      PortfolioCompany 8
      $10
      $10
      $10
      $10
      PortfolioCompany 4
      PortfolioCompany 7
      PortfolioCompany 5
      PortfolioCompany 6
    • Venture Capital Economics
      GP
      LP 3
      LP 1
      LP 4
      LP 2
      $20
      $180
      VC Fund IX, L.P.
      PortfolioCompany 1
      PortfolioCompany 10
      $100
      $35
      PortfolioCompany 2
      PortfolioCompany 9
      PortfolioCompany 8
      PortfolioCompany 3
      $40
      $25
      PortfolioCompany 4
      PortfolioCompany 7
      PortfolioCompany 5
      PortfolioCompany 6
    • When will VC’s Fund?
      Seed Capital
      Only ideas
      No product
      Small amounts
      Capital used
      Market research
      Sample Product
      Set-up costs
    • Startup Capital
      Product development completed
      Sample is already available
      Initial marketing has been done
      <2 years
    • Early stage
      2-3 years in business
      Management in place
      Sales on rise
      VC could increase sales
      Improve productivity
      Improve efficiency
    • Expansion capital
      Company is established
      Next level of growth
      Enter new markets
      Specialized VC’s
    • Late stage/Mezzanine
      Impressive sales and revenues
      Broken even/profitable
      Second level of management
      Capacity increase
      Ramp up marketing
    • Other types
      Restructuring
      Bridge capital
      Turnaround
      Acquisition
      Merger
    • The process
    • The process….
    • Fundraising time line
      Investor Presentations
      FinalDocumentation
      0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
      Business Plan Submissions
      Term Sheet Negotiations
      Funding
      Budget 4-5 months, or more
    • After funding
      Monitoring
      Board seat
      Financial Performance
      After 3-7 years: Exit
      IPO
      Sale back
      M&A
      Sale to strategic investors
    • 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!)
    • Believe In Your Idea!
      “We don't like their sound, and guitar music is on the way out.”
      • Decca Recording Co., rejecting the Beatles in 1962
      “The wireless music box has no imaginable commercial value.”
      • David Sarnoff Associates, in rejecting a proposal for investment in the radio in the 1920s
    • Believe In Your Idea!
      “Who the hell wants to copy a document on plain paper?”
      • National Inventors Council, as told in 1940 to Chester Carlson, founder of XEROX
      “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
    • 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
    • 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
    • Entrepreneurship…
      Entrepreneurship is a lifestyle choice
      Balance your risk & return
      Seize opportunities
      Life’s short, have fun
    • Discussions…
    • Thank You!
      +91-97-87- 55- 55- 44
      • training@edventures1.com
      • www.edventures1.com