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Group discussion & Personal Interview

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Group discussion & Personal Interview, prepare for placement, grooming, personality development.

Group discussion & Personal Interview, prepare for placement, grooming, personality development.

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  • 1. Venture Capital Finance
  • 2. Why companies need financing?
    • For start-ups or growing companies, as well as those facing a major change, financing is one of the key business issues.
    • New capital is needed e.g. for
    • 1. Financing of product development
    • 2. Financing of market penetration
    • 3. Financing of investments
    • 4. Working capital financing to secure operative continuity
    • 5. Maintaining liquidity to be able to cover daily payments
  • 3. What is a Venture Capital ?
    • Venture Capital can be defined as the “ Long-term equity investments in the business which display a potential for significant growth and financial return”.
    • “ Venture ” is a course of proceeding associated with risk , the outcome of which is uncertain.
    • “ Capital ” means resources to start the business.
  • 4. Venture Capital
    • Venture Capital is generally regarded as a Risk Capital .
    • Basically, Professionally and/or technically qualified entrepreneurs venturing into high-tech areas are eligible for venture capital support.
  • 5. Objective of Venture Capital Investment
    • To generate substantial capital appreciation through investment in early stage companies capable of achieving rapid growth.
  • 6. Features of Venture Capital Investment
    • Supporting Entrepreneurial Talent by providing finance.
    • Providing Business Management Skills.
    • A return in the form of Capital Gains.
  • 7. Activities Eligible for Support
    • Evaluation of new process or product on a commercial scale.
    • Technological upgradation leading to lesser material consumption, cost reduction, improved international competitiveness, energy conservation and innovative indigenous technology.
  • 8. Activities Eligible for Support
    • Adaptation of imported technology appropriate to Indian conditions with indigenous efforts.
    • Commercial exploitation of laboratory proven technology at recognised research laboratory and university subsequent to successful implementation of venture on pilot scale.
    • Risky ventures in technology development and long gestation technology development projects.
  • 9. Process of acquiring Venture Capital financing
    • Thorough and selective assessment of potential investment targets made by the venture capital investor.
    • At the first stage, the assessment of the investment request is based on a business plan made by the company.
    • This is the stage where most of the projects (about 90 %) of all proposed projects are rejected.
    • The initial assessment is made relatively rapidly and therefore the company should pay attention to two aspects:
      • The business plan should be carefully prepared
      • The contact targeted to the correct investors.
  • 10. Ten Questions Your Business Plan Should Answer From The VC’s Point Of View
    • 1. Where is the company now?
    • 2. What is your product or service?
    • 3. What is your market?
    • 4. How will you reach the market?
    • 5. Who will you be competing against?
    • 6. How will your product be produced?
    • 7. Who are the people?
    • 8. What are your financial projections?
    • 9. How much money will you need?
    • 10. What are the risks?
  • 11. Process of acquiring Venture Capital financing
    • The central issues considered by the venture capital investor at this stage are:
    • Is the company able to conduct profitable and growing business operations?
    • Do the company executives have the necessary qualities to manage the business in the various development stages?
    • Will the investor be able to obtain the desired return through an increase in the company's net worth?
  • 12. Process of acquiring Venture Capital financing
    • During the stage of the assessment process, the investor determines the value of the company. Once the entrepreneur and the investor have agreed on the value, the investor's future share of the company is determined.
    • The entry valuation of investor will depend on factors such as investors return expectations, proportion of the company that the management will give up to attract the investments and the view of the opportunity for new concept, product or service
  • 13. Stages in Venture Capital Financing
    • Venture Capital supports the early stage of a company’s life cycle.
    • However, the timing of investment may be at seed stage , early development stage or turn-around stage .
  • 14. Stages of Investments
    • Early stage companies may have proprietary
    • technology or intellectual property that has the potential to be exploited on a global scale. The technology or lead product is usually beyond proof of principle stage
    • Mid-stage companies may have strong pipeline of technologies and products, which has been developed by research and management teams with scientific and commercial credibility
    • Later stage companies have operational and corporate finance skills ideally positioned and company may need investments to precipitate consolidations. Companies at this stage are within 12 to 18 months of an IPO.
  • 15. Stages of VC Financing ENTREPRENEURS’ CAPITAL CONTRIBUTION BUSINESS ANGELS/ 3 F’S 1 st STAGE OF FINANCING 2 nd STAGE OF FINANCING BRIDGE FINANCING IPO Seed- Financing Start-up Stage Early Growth Rapid Growth Transition Period Corporate Restructurings TIME  Growth Value
  • 16. Seed stage financing
    • The venture is still in the idea formation stage and its product or service is not fully developed. The usually lone founder/inventor is given a small amount of capital to come up with a working prototype.
    • It is spent on marketing research, patent application, incorporation, and legal structuring for investors.
    • It's rare for a venture capital firm to fund this stage. In most cases, the money must come from the founder's own pocket, from the "3 Fs" (Family, Friends, and Fools), and occasionally from angel investors.
  • 17. First -stage financing
    • The venture has finally launched and achieved initial traction. Sales are trending upwards. .A management team is in place along with employees
    • The funding from this stage is used to fuel sales, reach the breakeven point., increase productivity, cut unit costs, as well as build the corporate infrastructure and distribution system. At this point the company is two to three years old
  • 18. Second -stage financing
    • Sales at this point are starting to snowball. The company is also rapidly accumulating accounts receivable and inventory.
    • Capital from this stage is used for funding expansion in all its forms from meeting increasing marketing expenses to entering new markets to financing rapidly increasing accounts receivable.
    • Venture capital firms specializing in later stage funding enter the picture at this point
  • 19. Mezzanine or Bridge financing
    • At this point the company is a proven winner and investment bankers have agreed to take it public within 6 months.
    • Mezzanine or bridge financing is a short term form of financing used to prepare a company for its IPO. This includes cleaning up the balance sheet to remove debt that may have accumulated, buy out early investors and founders deemed not strong enough to run a public company, and pay for various other costs stemming from going public.
    • The funding may come from a venture capital firm or bridge financing specialist. They are usually paid back from the proceeds of the IPO.
  • 20. Initial Public Offering (IPO)
    • The company finally achieves liquidity by being allowed to have its stock bought and sold by the public. Founders sell off stock and often go back to square one with another startup.
    • Please note that some companies have more financing stages than shown above and others may have fewer. Very few reach the bridge and IPO stages. It all depends on the individual company .
  • 21. VC’s contribution to entrepreneur
    • Through the VC’s expertise and network the portfolio companies could gain access to:
    • follow-on capital through venture capital ties
    • knowledge of partnership opportunities in multiple markets
    • in-depth operational and management experience’
    • access to high-quality management teams
    • ties to the investment banking community
  • 22. VC’s contribution to entrepreneur
    • In addition to money, professional VC as a shareholder bring strong industry, operational, financial and investment banking skills to the partnership with the target company
    • VC adds the most value by assisting in the creation of the best possible team to manage and supervise the target company
    • Management assessment is one of the major tasks to be carried out by the venture capital before deciding to invest
  • 23. Types of Venture Capital financing
    • Equity Participation
    • - Generally doesn’t exceed 49% of the total equity.
    • - Overall control remains with the entrepreneur.
    • - Venture Capitalists earn Capital Gains when the shares are ultimately disposed off, say after 5 to 8 years.
  • 24. Types of Venture Capital financing
    • Conditional Loan
      • Royalty Charges
      • - Normally ranges between 2 – 15% as the cost of
      • financing
      • Interest Payments
      • - High interest rate around 20 – 25%
      • These Payments are made once the firm secure its
      • commercial confidence, strength and viability in the market.
  • 25. Types of Venture Capital financing
    • Income Notes
      • It is a compromise between conventional loan and conditional loans.
      • To pay both interest and royalty on sales but at substantially low rate.
    • Participating Debentures
      • Operation below minimum level – No interest
      • Operation above minimum level – low interest rate
      • Operation in full swing – High interest rate
  • 26. Important Players in India
    • Risk Capital Technology Finance Corporation Ltd. (RCTC) (Subsidiary of IFCI)
    • Venture Capital Fund (Set up under long-term fiscal policy of Govt. of India)
    • Indus Venture Capital Fund (Private Venture Capital Fund)
    • Gujarat Venture Finance Ltd. (GVFL) (promoted by Gujarat Industrial Investment Corporation, IDBI, World Bank, SFLS and Private Bodies)
  • 27. Important Players in India
    • Credit Capital Venture Fund (promoted by International Financial Agencies)
    • State Bank Venture Capital Fund (promoted by SBI Merchant Banking subsidiary and SBI Capital Market)
    • Can Bank Venture Capital Fund (promoted by Canara Bank)
    • Grindlays Bank Venture Capital Fund (promoted by Grindlays Bank)
  • 28. Thank You

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