VENTURE CAPITAL – Some Views
General Georges Doriot – father of US Venture Capital
“Venture Capital is Patient and Brave Money that seeks
new and growing companies and invests for long haul”
Gombers & Lerner: Venture capital at crossroads
“Independently managed dedicated pools of capital that
focus on Equity or Equity linked investments in a privately
held, high growth companies”
Long-term Equity / QUASI Equity finance in
businesses with high growth and profit potential
Return through capital gains
Risk-reward sharing in nature
Not synonymous to high-tech finance
VENTURE CAPITAL IS NOT
Passive Equity investment support
R&D funding sources
EQUITY / QUASI EQUITY
PAYMENT RELATED TO
WILLING TO ASSUME RISKS
LONG TERM CONSIDERATION
PREFERENCE FOR SMALLER
LARGE AND STABLE
VENTURE CAPITAL IN INDIA
STARTED IN MID EIGHTIES BY THREE ALL INDIA
FINANCIAL INSTITUTIONS AND A PRIVATE COMPANY.
IN 2002 VENTURE CAPITAL FUNDS INVESTED $590.21
MILLION IN INDIAN COMPANIES.
INDUSTRY HUBS :MUMBAI, DELHI, BANGALORE.
IN 2002, INDIA RANKED AS THE SECOND MOST ACTIVE
VC MARKET IN ASIA PACIFIC (EXCLUDING JAPAN).
Major VC Companies in India: ICICI Venture, Gujarat
Venture Finance Limited, UTI ventures, SIDBI Ventures Etc.
Stages of Company Evolution &
Primary External Finance Source
Venture Capital Funds
STAGES OF INVESTMENT
TO GET A COMPANY STARTED.
THE PRODUCT MAY BE IN A R&D PHASE, IT MAY JUST BE
GOES TO COMPANIES, WHICH HAVE A PRODUCT BUT
MUST DO SOMETHING WITH IT.
GOES TO COMPANIES WHICH HAVE USUALLY
PROGRESSED BEYOND A START-UP – USUALLY TO
• ALSO CALLED “SUBSEQUENT ROUND” - FOR PROMOTING
OR SUSTAINING GROWTH. IT MAY ALSO BE A “SAVING
INVESTMENT” OR “BAIL OUT” IF THE COMPANY HAS NOT
PERFORMED UPTO EXPECTATION.
BRIDGE/ MEZZANINE FINANCING
• THIS IS ALSO CALLED “MEZZANINE FINANCING”. THIS
CAPITAL IS GIVEN FOR A SPECIFIC PURPOSE, EG., TO
COVER EXPENSES INCIDENTAL TO THE RECEIPT OF
LARGE PRODUCT ORDER.
Establish fund & Target investment opportunities
Raise Capital for Investment
Generate deal flow. Identify new & Young
companies with high potential
Screen & Evaluate deals
Due diligence & Appraisal
Monitoring & Nurturing
WHAT A VENTURE CAPITALIST LOOKS FOR
Promoter of repute and integrity.
An idea that will address large markets.
Attractiveness of technology and fit.
Upside potential and down side exposure.
Anticipated growth rate.
Age and stage of development.
Additional round of funds.
VALUE ADDITION BY VENTURE CAPITAL
BUILDING UP SYSTEMS & PROCEDURES, LEGAL &
NEGOTIATION FOR TECHNOLOGY TRANSFER & TIE-UPS
KEY PERSONNEL RECRUITMENT & TEAM BUILDING
APPOINTMENT OF EXPERTS & CREATION OF ADVISORY
HELPING COMPANIES PARTICIPATE IN VARIOUS FORUMS
ORGANIZING TRAINING, WORKSHOPS FOR COMPANIES