Venture capital BD

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Venture capital BD

  1. 1. Venture Capital By Md.Masud Hossen
  2. 2. Agenda Concept Definition Origin And Development Characteristics Features  Stages Eligibility To Seek Venture Capital Funding The Venture Capital Investment Process South Asian Venture Capital Scenario
  3. 3. Cont…. Bangladesh’s Scenario Venture Capital Fund In Bangladesh Advantages Of Venture Capital Disadvantages Of Venture Financing Recommendations
  4. 4. Concept Of Venture Capital  Venture capital is the capital invested in a business where the chances of success are uncertain.  It is term to describe the financing of startup and early stage business as well as businesses in “ turn around” situations
  5. 5. Definition Venture capital is a subset of private equity and refers to equity investments made for the launch, early development, or expansion of a business Venture capital means funds made available for startup firms and small businesses with exceptional growth potential.
  6. 6. Cont…. wealth available for investment in new or speculative enterprises “ Venture Capital is defined as long-term equity investment in novel technology based projects with display potential for significant growth and financial return.” - According to 1995 Finance Bill
  7. 7. Origin And Development Of Venture Capital Concept • VC concept is a US origin concept. • Organized VC fund was started in 1946 when American research and development corporation (ARD), a publicly traded, closed-end investment company was formed. • In 1958 for computer maker digital equipment corp was provided with start-up financing by ARD. • ARD was eventually profitable, providing its original investors with a 15.8% annual rate of return over its 25 year as an independent firm
  8. 8. Characteristics Long time horizon Lack of liquidity High risk Equity participation Participation in management
  9. 9. Features Of Venture Capital  Venture capital is usually in the form of equity or mix of equity debt.  Commercial success of funded venture is not tested and hence VC is a risk investment.  If successful, VCs can get extraordinary returns.  VC is not just a fund provider but also is involved in managing the envisaged growth of the firm.  VC are interested in capital gains and cash gains.
  10. 10. Stages of Financing 1. Seed Money: Low level financing needed to prove a new idea. 2. Start-up: Early stage firms that need funding for expenses associated with marketing and product development. 3. First-Round: Early sales and manufacturing funds. 4. Second-Round: Working capital for early stage companies that are selling product, but not yet turning a profit .
  11. 11. 5. Third-Round: Also called Mezzanine financing, this is expansion money for a newly profitable company 6. Fourth-Round: Also called bridge financing, it is intended to finance the "going public" process
  12. 12. Risk in each stage Financial Stage Period (Funds locked in years) Risk Perception Activity to be financed Seed Money 7-10 Extreme For supporting a concept or idea or R&D for product development Start Up 5-9 Very High Initializing operations or developing prototypes Start commercials
  13. 13. Financial Stage Period (Funds locked in years) Risk Perception Activity to be financed Second Stage 3-5 Sufficiently high Expand market and growing working capital need Third Stage 1-3 Medium Market expansion, acquisition & product development for profit making company
  14. 14. Eligibility To Seek Venture Capital Funding  Strength and motivation of management teams  Clarity on product development strategies  Carefully defined target markets with possibility to scale- up in a big way  Innovation quotient in proposed product or idea
  15. 15. VC investment process Deal origination Screening Due diligence (Evaluation) Deal structuring Post investment activity Exit plan
  16. 16. South Asian Venture Capital Scenario South Asia includes venture capital managers based in Bangladesh, India, Pakistan, Nepal and Sri Lanka. Compared to other regions in Asia, there are more South Asia-based fund managers with vehicles in market currently targeting infrastructure and real estate investments. In 1973 a committee on development of small and medium enterprises highlighted the need to foster venture capital as a source of funding new entrepreneurs and technology in the south Asian region.
  17. 17. 31 31 24 23 22 22 4 5.4 7.2 4.3 2.8 3.4 2 0.9 0 5 10 15 20 25 30 35 2007 2008 2009 2010 2011 2012 2013YTD No.of Funds Closed Aggregate Capital Raised ($bn)
  18. 18. Bangladesh’s Scenario  Asian Tiger Capital Partners is one of the first financial institutions in Bangladesh focusing on private equity and venture capital.  Buoyed by the inclusion of Bangladesh in J P Morgan’s “Frontier Five” group of countries and also Goldman Sach’s “Next Eleven” group, Asian Tiger Capital Partners have launched themselves in Bangladesh complete with a Bengal tiger as logo.
  19. 19. Cont… It is stated earlier that a systematic problem exists within the major segments of the financial system in Bangladesh in catering to the financing needs of SMEs. Therefore, it is argued that the venture capital industry may be developed as an additional financial intermediary for catering to the financing and non-financing needs of the SMEs, as it can participate in the management of the investee firms actively and exercise those are……  due diligence process  participative management approach  information asymmetry and transactions costs  bounded rational
  20. 20. Venture Capital Fund In Bangladesh • Venture Investment Partners Bangladesh Limited (VIPB) • BD Venture Limited
  21. 21. ADVANTAGES OF VENTURE CAPITAL  provide large sum of equity finance.  Venture Capitalist are rewarded by business success & the capital gain.  Able to bring wealth and expertise to your company  The Venture Capitalist also has a wide network of contacts.  Providing additional funds.
  22. 22. DISADVANTAGES OF VC  Lengthy and complex process (needs detailed business plan, financial projections and etc.)  In the deal negotiation stage, you will have to pay for legal and accounting fees  Investors become part owners of your business - founder loss of autonomy or control
  23. 23. Recommendations  The company will invest in small and medium size enterprises across the country, with a special focus on promising rural ventures. Each firm must have annual revenue of at least TK 4.0 Million.  Venture capitalists will help companies grow, but they eventually seek to exit the investment in three to seven years.  Venture capitalists may be generalist or specialist investors, depending on their investment strategy. Venture capitalists can be generalists, investing in various industry sectors
  24. 24. Cont….  Investment made on development of management and employees through training, improving skills.  Avoid venture capitalist in interference in Business activity.  Increasing market facilities.  Provide more infrastructure facilities.
  25. 25. Quarries??????????????????

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