Venture capital provides funding to startup companies and small businesses with high growth potential. It involves high risk but can provide large sums of equity financing. Venture capital funding stages include seed money, startup funding, first round funding, and later stage funding. It helps attract investment for new businesses and promotes economic growth and innovation. However, it also carries risks and venture capitalists may become business partners. India has various categories of venture capital firms including those promoted by the central government, public banks, and state governments. They typically invest in high tech sectors in major cities like Mumbai, Bangalore, Delhi, and Chennai.

1. VENTURE CAPITAL
FINANCING

2. Venture capital means funds made available for st
artup firms and small businesses with exceptiona
l growth potential.

4.  New ventures
 Continuous Involvement
 High risk
 Mode of Investment
 Objective-Not to get interest but Capital Gai
n

5. 1. Seed Money:
Low level financing needed to prove a new idea.
2. Start-up:
Early stage firms that need funding for expenses
associated with marketing and product develop
ment.
3. First-Round:
Early sales and manufacturing funds.
4. Second-Round:
Working capital for early stage companies that a
re selling product, but not yet turning a profit .

6. 5. Third-Round:
Also called Mezzanine financing, this is ex
pansion money for a newly profitable com
pany
6. Fourth-Round:
Also called bridge financing, it is intended
to finance the "going public" process

7. Financial Stag
e
Period (Funds
locked in year
s)
Risk Perceptio
n
Activity to be
financed
Seed Money 7-10 Extreme
For supporting
a concept or ide
a or R&D for pr
oduct developm
ent
Start Up 5-9 Very High
Initializing oper
ations or develo
ping prototype
s
First Stage 3-7 High
Start commerci
als production a
nd marketing

8. Financial Stag
e
Period (Funds
locked in year
s)
Risk Perceptio
n
Activity to be
financed
Second Stage 3-5 Sufficiently high
Expand market
and growing wo
rking capital ne
ed
Third Stage 1-3 Medium
Market expansi
on, acquisition
& product devel
opment for pro
fit making comp
any
Fourth Stage 1-3 Low Facilitating publ
ic issue

9. Following are the various methods of vent
ure financing:
 Equity
 Conditional loan
 Income note
 Participating debentures

11. Following are the advantages of Venture c
apital financing:
 Provide large sum of equity finance
 Successfully attracting a Venture Capital n
ew business
 Economic Growth
 Promoting innovative ideas will scarce fun
ds

12. Following are the disadvantages of Ventur
e Capital Financing:
 Risky
 Become partner
 Complex Process

13. VCFs in India can be categorized into follo
wing groups:
 Promoted by central government :
- ICICI Venture Funds Ltd.
- IFCI Venture Capital Funds Ltd.
- SIDBI Venture Capital Ltd (SVCL)

14.  Promoted by public banks:
- Canbank Venture Capital Fund
- SBI Capital Market Ltd.
 Promoted by state government :
- Punjab Infotech Venture Fund
- Gujarat Venture Finance Ltd (GVFL)
- Kerala Venture Capital Fund Pvt. Ltd.

15.  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 wher
e they are able to exit through either an IPO or a
merger/acquisition.
 Their primary ROI comes from capital gains altho
ugh they also receive some return through divide
nd.

16. CITIES SECTORS
MUMBAI Software services, BPO, Media, Co
mputer graphics, Animations, Fina
nce & Banking
BANGALORE All IP led companies, IT & ITES, B
io-technology
DELHI Software services, ITES , Telecom
CHENNAI IT , Telecom
HYDERABAD IT & ITES, Pharmaceuticals
PUNE Bio-technology, IT , BPO

17.  The regulatory, tax and legal environment should play an e
nabling role as internationally venture funds have evolved i
n an atmosphere of structural flexibility, fiscal neutrality an
d operational adaptability.
 Resource raising, investment, management and exit should
be as simple and flexible as needed and driven by global tr
ends.
 Venture capital should become an institutionalized industry
that protects investors and investee firms, operating in an
environment suitable for raising the large amounts of risk c
apital needed and for spurring innovation through start-up f
irms in a wide range of high growth areas.

18.  VC can help in the rehabilitation of sick units.
 VC can assist small ancillary units to upgrade
their technologies.
 VCFs can play a significant role in developing
countries in the service sector including touris
m, publishing, health care etc.
 They can provide financial assistance to peopl
e coming out of universities, technical institu
tes, etc thus promoting entrepreneurial spirits
.

20. By sectors -
o Banking & financial services
o Customer services
o Energy
o Engineering
o Hospitality
o Internet
o IT/ITES
o Logistics
o Manufacturing
o Textiles