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  • 1. An Introduction to
    Venture Capital
  • 2. 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. Edventures1
    A Learning and Development organisation
    Experimentors
    Over 100 years of combined experience
  • 4. Facilitator – Pradeep Yuvaraj
    Goal for the session
    Rules for the session
    About
  • 5. Where do I get money from?
    To start new business
    Grow a business
    Put a new factory
    Revive a dying company
    ?
  • 6. 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. Sources: Equity
    Angels
    The “4Fs” – Friends, Family Father in law and Fools
    Corporate direct investment
  • 8. or
    Hero of the day: Venture Capital
  • 9. 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. 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
  • 11. Why take risk?
  • 12. 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. Who become VC’s?
    Individuals
    Corporations
    Private firms
  • 14. 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. 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
  • 16. 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
  • 17. When will VC’s Fund?
    Seed Capital
    Only ideas
    No product
    Small amounts
    Capital used
    Market research
    Sample Product
    Set-up costs
  • 18. Startup Capital
    Product development completed
    Sample is already available
    Initial marketing has been done
    <2 years
  • 19. Early stage
    2-3 years in business
    Management in place
    Sales on rise
    VC could increase sales
    Improve productivity
    Improve efficiency
  • 20. Expansion capital
    Company is established
    Next level of growth
    Enter new markets
    Specialized VC’s
  • 21. Late stage/Mezzanine
    Impressive sales and revenues
    Broken even/profitable
    Second level of management
    Capacity increase
    Ramp up marketing
  • 22. Other types
    Restructuring
    Bridge capital
    Turnaround
    Acquisition
    Merger
  • 23. The process
  • 24. The process….
  • 25. 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
  • 26. After funding
    Monitoring
    Board seat
    Financial Performance
    After 3-7 years: Exit
    IPO
    Sale back
    M&A
    Sale to strategic investors
  • 27. 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. 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
  • 29. 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
  • 30. Entrepreneurship…
    Entrepreneurship is a lifestyle choice
    Balance your risk & return
    Seize opportunities
    Life’s short, have fun
  • 31. Discussions…
  • 32. Thank You!
    +91-97-87- 55- 55- 44
    • training@edventures1.com
    • 33. www.edventures1.com