Venture capital is a form of private equity financing that provides capital to startup companies and projects exhibiting high growth potential but high risk. This document discusses guidelines for venture capital funds in India, including that they can be set up by public institutions and allow for private sector equity of up to 25%. It also outlines the typical structure of venture capital, including roles like venture partners and principals, and funding stages from seed to growth to exit. Drawbacks of the Indian venture capital industry mentioned include insufficient understanding of it as a commercial activity and inadequate support and legal frameworks from the government.

1. By,
Sreepooja.S.P.

2. •Form of Equity Financing
•Designed for funding high
risk and reward projects
•Direct investment in
securities
•Financing high
technology projects
•Fostering growth and
development
•Evaluation of new
management teams
•In India venture capital is
of recent origin

3. New guidelines to Venture Capital
• Venture capital funds/Companies can be set up by public
sector financial institutions, SBI and scheduled banks.
• Joint ventures between private sector and institutional
promoters are permitted if:
 Private sector holding is 20% or less; and
 Private sector holding is not the largest single holding.
 Minimum fund size is Rs. 10 crores.
 Debt equity ratio should also not exceed 1:1.5
 Foreign equity is permitted up to 25% while NRI to 74% on
non repatriable basis and up to 25% to 40% on repatriable
basis is permitted.

4. Structure of Venture
Capital

5. TYPES
•Business Situation
•Some invest solely in certain
industries.
•Some prefer operating locally while
others will operate nationwide or
even globally.
•VC expectations often vary. Some
may want a quicker public sale of the
company or expect fast growth. The
amount of help a VC provides can
vary from one firm to the next.

6. ROLES
Venture Partners
Principal
Associate
Entrepreneur –inresidence(EIR)

7. FUNDING STAGES IN VC INVESTING

8. FINANCING STAGES IN VC
Seed Funding
Start up
Growth
2nd Round
Expansion
Exit of Venture Capitalist

10. a) Equity Share
Capital
b) Conditional Loan

11. Drawbacks of VC Industry
Insufficient understanding of venture capital as
commercial activity.
Support to the venture capital industry, by the
govt. is inadequate.
Exit options available to the venture capitalist are
limited.
Market limitations hinder the growth of venture
capital industry.
The inadequacy of the legal frame work of venture
capital industry.