The document discusses venture capital, which provides financing to new companies with high growth potential. It defines venture capital and outlines its key features, including supporting entrepreneurial talent, providing management skills, and involving high-risk, high-return financing. The document then details the typical venture capital process of deal origination, screening, evaluation, deal structuring, and various exit options. It also reviews the advantages and disadvantages of venture capital, major venture capital funds in India, and SEBI regulations of venture capital.

1. Presentation
Submitted to:- Submitted by:-
Mr. Amit Garg Kapil Rajput
MBA 3rd sem
Roll No:- 815
On
Venture Capital

2. Venture Capital
 Venture capital is early stage financing of new and
young enterprises seeking to grow rapidly. Venture
capitalist finances high and new technology based
enterprises where the banks or financial institution
generally support proven technology with established
markets.
 Venture capital is also described as unsecured risk
financing. Venture capitalist directly purchases equity
shares of entrepreneur and participates in the
management of entrepreneur business.

3. FEATURES OF VENTURE CAPITAL
 Supporting of Entrepreneurial Talent by
Providing Finance
 Providing Business Management Skills
 Consist of High Risk and High Return
Based Financing
 Reduces the Financial Burden of The
Business Concern at The Initial Stage.
 A Return In Form of Capital Gain

4. Venture Capital Process
Deal origination
Screening
Evaluation
Deal structuring
Exit
IPO Promoters buyback Trade sale
Buy back of equity by
company
Post investment activities

5. Venture Capital Process
 Deal origination : there are various VCF which have
originated from India as well as foreign countries. It is
essential for venture capital firm to have continuous
source of deals in order to survive and grow in market.
 Screening : VC firm carry out initial screening of all the
project on the basis of some broad criteria. VCF usually
prefer investing in technology related industry which
involves development at large scale. E.g. Software
industry, information technology, pharmaceuticals, bio
technology, agriculture and allied industries. They ensure
success rate of project before investing on the same.

6.  Evaluation : as VCF investment huge amount of
money in entrepreneurs business and bare high risk
and as entrepreneur is new entrant to the business,
venture capitalist go in for detailed evaluation of
entrepreneurs business in for of screening business
plan, evaluating management team of company,
understanding credibility of entrepreneur of
business.
 Deal structuring : once the venture capitalist has
evaluated the proposal and found it to be viable,
then VC and entrepreneur enter into contract which
is known as deal structuring. Which includes details
relating to a) VC right to control business b) board
members c) right to replace management in case of
poor performance d) buyback agreement and
acquisition e) earn out agreements etc.

7.  Post investment activities : success of VC activity
largely depends on envisaging efficient mechanism from
investment and successful implementation of
disinvestment. VC are supposed to plan exit from
venture at the time of investment. The proposed exit plan
have least plan and confirm to statutory compliance.
 Initial public offer : benefits of disinvestment through
IPO results in improved marketability, improved liquidity,
better prospectus for capital gains and widely known
status of the VC as well as market control through public
share participation.

8.  Promoters buy back : the promoters buy back VC stake at
predetermined price and keep the ownership control with him.
VC consider it as an exit option only when promoters are in
position to mobilise funds for buy back of equity held by the
venture investors.
 Trade sale : VC may also disinvest his holdings through offer
for sale to public. In this trade sale VC sells his stake to the
strategic buyer who already owns a business or has plans to
enter target industry.
 Buy back of equity by company : as per the companies
amendment act companies have been allowed to buy back
their own equity shares. Even though the VC may not intent to
exit through this route, he may consider as the venture has
been failed to achieve high growth , below average
performance of company.

9. Advantages of Venture Capital
 They can provide large sum of equity
finance
 Able to bring wealth and expertise to your
company
 Easier to secure future funding from other
sources
 The business is not obligated to repay the
money

10. Disadvantages of Venture Capital
 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

11. Venture capital funds in India
VCFs in India can be categorized into following five groups:
 Those promoted by the Central Government controlled
development finance institutions. For example:
- ICICI Venture Funds Ltd.
- IFCI Venture Capital Funds Ltd (IVCF)
- SIDBI Venture Capital Ltd (SVCL)
 Those promoted by State Government controlled
development finance institutions.
For example:
- Punjab InfoTech Venture Fund
- Gujarat Venture Finance Ltd (GVFL)
- Kerala Venture Capital Fund Pvt Ltd.

12.  Those promoted by public banks. For example:
- Can bank Venture Capital Fund
- SBI Capital Market Ltd
 Those promoted by private sector companies. For
example:
- IL&FS Trust Company Ltd
- Infinity Venture India Fund
 Those established as an overseas venture capital fund.
For example:
- Walden International Investment Group
- HSBC Private Equity
management Mauritius Ltd

13. Rules by SEBI
VCF are regulated by the SEBI (Venture Capital
Fund) Regulations, 1996.
The following are the various provisions:
A venture capital fund may be set up by a company
or a trust, after a certificate of registration is granted
by SEBI on an application made to it. On receipt of
the certificate of registration, it shall be binding on
the venture capital fund to abide by the provisions
of the SEBI Act, 1992.

14.  A VCF may raise money from any investor,
Indian, Non-resident Indian or foreign, provided
the money accepted from any investor is not
less than Rs 5 lakhs. The VCF shall not issue
any document or advertisement inviting offers
from the public for subscription of its security or
units
 SEBI regulations permit investment by venture
capital funds in equity or equity related
instruments of unlisted companies and also in
financially weak and sick industries whose
shares are listed or unlisted

15.  At least 80% of the funds should be invested in
venture capital companies and no other limits
are prescribed.
 SEBI Regulations do not provide for any
sectoral restrictions for investment except
investment in companies engaged in financial
services.

16. REASONS FOR GROWTH OF VENTURE
CAPITAL
 High Technology
 Human Resource Capital
 Scientific & Technical Research
 Government Initiative
 SEBI Initiative

17. How does the Venture Capital work?
 Venture capital firms typically source the majority of
their funding from large investment institutions.
 Investment institutions expect very high ROI
 VC’s invest in companies with high potential where
they are able to exit through either an IPO or a
merger/acquisition.
 Their primary ROI comes from capital gains
although they also receive some return through
dividend.

18. Venture capital industry wise segmentation
6.94
7.73
11.5
4.32
27.95
4.82
12.92
11.43
3.36
9.03
Percentage
IT & ITES
Energy
Manufacturing
Media & Ent.
BFSI
Shipping & logistics
Eng. & Const.
Telecom
Health care
Others

19. Top cities attracting venture capital
investments
CITIES SECTORS
MUMBAI Software services, BPO, Media, Computer
graphics, Animations, Finance & Banking
BANGALORE All IP led companies, IT & ITES, Bio-technology
DELHI Software services, ITES , Telecom
CHENNAI IT , Telecom
HYDERABAD IT & ITES, Pharmaceuticals
PUNE Bio-technology, IT , BPO