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TiE Pune Presentatio on Capital Options by Bharat Phatak
 

TiE Pune Presentatio on Capital Options by Bharat Phatak

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This presentation was made by Bharat Phatak during the breakfast meeting.

This presentation was made by Bharat Phatak during the breakfast meeting.

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  • 991118MB-ZXC488.ppt
  • 6

TiE Pune Presentatio on Capital Options by Bharat Phatak TiE Pune Presentatio on Capital Options by Bharat Phatak Presentation Transcript

  • Funding Alternatives Their Pros & Cons
  • Sources of Funds Equity / Debt
    • Long Term ( 7 Year+)
      • Share Capital
      • ( Public or Private)
      • Retained Earnings
      • Mortgage
      • Debenture
      • Project Finance
      • Subsidies
  • Sources of Funds Debt
    • Medium Term ( 2 to 7 Years)
      • Term Loan
      • Leasing
      • Hire Purchase
    • Short Term ( Less than 2 Years)
      • Cash Credit /Overdraft
      • Trade Credit
      • Deferred Expenses
      • Factoring
    • Indian start-up: Lack of management, aspiration, support
    991118MB-ZXC488.ppt Source: Interviews Employees
      • Idea
      • Money from family/friends or loan
      • Founder = CEO, sales manager
      • First ideas for volume products from professional experience
    1 3 5 0 20 60 100 Year Silicon Valley start-up: Focus on Professional approach from start Employees
      • Idea
      • Assemble multifunctional team
      • Involve VC early
      • Hire professional management
      • Aggressive R&D and marketing activities
    1 3 5 0 20 60 100 Year
  • Equity Capital (Private, Non-Listed)
  • Is a Win/ Win Possible?
    • I have
      • The Idea
      • The Team
      • Execution Capacity
      • Fire in the Belly
    • They have
      • Capital
      • Experience
      • Connections
      • Together,
      • Can We Win?
  • The Entrepreneur - typical thoughts
    • Who will fund me ?
    • I don’t want the VC take control
    • This is too important -I don’t want to get it wrong
    • How did my 23-yr old friend in the US pull off that $25 m deal ?
    • I have 6 months of money left to spend - do I approach a VC now ?
    • I have 1 month of money left-Should I slow down my business?
    • What does business model mean ?
    • Does my business plan make sense ?
    • In which year should I “show” profits/payback ?
    • Is my business plan fundable?
    • What is my business worth ?
    • Which VC to approach first ?
    • How much to dilute?
    • Will the VC steal my idea?
    The Entrepreneur -Typical Thoughts
  • Entrepreneur’s activities
    • Conceptualizing the plan
    • Attracting a core team
    • Building an organization
    • Building the business
    • Beating competition
    • Fund-raising
    • And also
    • Handling mundane day-to-day operations/administrative matters
  • Characteristics of Venture Capital Investment
    • Equity investment
    • Substantial/ Minority equity stakes
    • Not to ‘take-over management’ but to ‘help the company’
    • Board position - desired but not mandatory. Passive / Active investor.
    • Exit is very important - usually 3-5 years
    • Early stage/Expansion stage/ Later Stage
  • What is valuation ?
    • Numerical Models for valuation of a company :
    • Dicounted Cashflow technique (DCF)
    • Price Earnings Capitalised Value Method
    • Net Asset Value approach
    • It is perception about future potential
    • Valuation is mirrored by the ruling share prices in case of listed companies.
  • Steps to maximise the valuation
    • Transparency in Management Style
    • Vibrant, aggressive and growth oriented Business Model
    • Benchmarking with the best/Aiming to be the leader in the Business Segment
    • Broad-based Board of Directors
    • Strong Management Structure/Second Line of Management
  • Steps to maximise the valuation
    • Quality certifications
    • Well laid down systems and procedures
    • Timely delivery of software projects
    • Strategic tie-ups
    • Targeting global markets/Scalability
    • Reputed clients
    • Strong direct presence in the market place
  • Steps to maximise the valuation
    • Brand Building for product companies
    • Employee friendly policies
    • Investor friendly policies
    • Reputed auditors
  • It leads to
    • High valuations in the hope of improved performance
    • Though valuation is future potential but continued mediocre performance cannot sustain high valuations
    • There is a strong co-relation between valuation and performance
  • Series A Milestones 1. Complete Team 2. Complete Product 3.  - Customers (3-4) Series B Milestones 1. Complete Marketing Strategy 2. Sales ramp-up a. Sales force in place b. First Commercial Ship 3. Customer support in place Series C Milestones 1. Sales ramp 2. More customers a. Smoothen out revenue curve b. Create backlog Different Rounds
  • Not Everyone Gets Funded
    • Core Management Team
    • Market Size , Opportunity and scalability .Competitive advantage today or potentially; the potential to change the rules of the game . The opportunity to play globally .
    • “ Wealth”, today or potentially, in the form of brand, intellectual property , methodologies , processes , etc.
    • Clean structure - Most preferred is a single company, no cross-holding, no subsidiary structure. Transparency.
    • Valuations .
    • RoI potential.
    • Coinvestment potential with value add .
    • Exit opportunity.
  • Will Capital Help in gaining & keeping competitive position THE INDUSTRY Jockeying for position among current competitors Threat of new entrants Bargaining power of suppliers Bargaining power of suppliers Threat of substitute products or services Bargaining power of customers
  • Finally
    • Can I get into the Growth Mind Set
    • Smaller Slice of a Larger Pie
    • Let it Happen or Make it Happen?