Gist: -Introduction to Venture CapitalFeatures of Venture CapitalMethodologies and Procedure forVenture Stages of Financing Financial Analysis Types of Venture Capital Benefits of EntrepreneursAdvantages and DisadvantagesCase Study and Conclusion
Introduction & Features: - History Scenario Definition and Features
Why Company needs Financing:- For starts-up or growing companies as well as those facing a major change, financing is one the key business issues. New capital is needed e.g. of Product Market Investment WorkingDevelopment Penetration Finance Capital
The first venture capital Financing in India ICICI Venture Capital. Started in the 1998 by joint venture between ICICI and UTI.UTI Launched venture capital unit scheme(VECAUS-I) to raise finance in 1990.SBI and Canara Bank are also involved in VentureCapital Finance. They provide their equity capitalor conditional loans
Providing seed, start up and first stage financing andalso funding expansion of companies that have alreadydemonstrated their business but so not yet have access tothe public securities market or to credit orientedinstitutional funding sources. - By. Jame Koloski Morries
Features: - Supporting of Entrepreneurial Talent by providing Finance, Providing Business Management Skills, Consist of High Risk and High Return based financing, Reduces the financial burden of the business concern at the initial stage. A Return in form of Capital Gain,
Methodologies and Procedures:- Selection of Investment Stages of Financing Financial Analysis Structuring the Deal Aftercare Valuation of Portfolio Mode of Compensation Quasi-Equity Investment
S • Applied research phase where there is just Idea orT SEED ConceptA CAPITAL • Risk is Extremely HighGE • Commercial Manufacturing CommencedS Start-Up • Risk is very HighOF • Company earns profit but not too Big for IPO Second • Time Scale is shorterF RoundIN • Development CapitalA • Bridge or Expansion Later • Buyouts and Buy-insN Stage • TurnaroundCE
Stages and there characteristics:- Financial Stage Seed Money Start Up First Stage Period Taken 7 to 10 years 5 to 9 years 3 to 7 years Risk Involved Extreme Very High High Activity to be R&D for Initializing Start financed product Operation Commercials development production and Marketing
Financial Second Stage Third Stage Forth Stage StagePeriod Taken 3 to 5 years 1 to 3 years 1 to 3 yearsRisk Involved Significantly Medium Low High Expand Market expansionActivity to be market and acquisition & Facilitating financed growing product Public Issue working development for Capital need profit making company
Financial Analysis:- Conventional The First Revenue Venture Capitalist Chicago Multiplier Method Method Method
Questions while Investing:- 1) Where is the company now? 2) What is the product or service? 3) What is your market? 4) How will you reach the market? 5) Who will be you competing against? 6) How will your product be produced? 7) Who are the people? 8) What are your financial projection? 9) How much money you will need? 10) What are the RISKS?
Generally does not exceed 49% of the total EquityOverall Controls remain with the entrepreneur. Capitalist earn capital gainswhen the shares are disposed off
Royalty • Normally ranges between 2- 15% at the cost of financing.Charges • High interest rate around 20-25%.Interest • This payments are made once thePayment firm secure its commercial confidence, strength and viability in the market.
Income • It is a compromise between conventional loan and Notes conditional Loan • Operation below minimum level – No interestParticipating • Operation above minimum level – Low Interest RateDebentures • Operation in full Swing – High Interest Rate