12. What Is Venture Capital
Venture Capital is a financial capital provided to early
satge, high potential, growth startup companies.
The venture capital earns money by owing equity in
the companies it invests in.
13. The concept of VC was formally introduced in India in
1987 by IDBI.
The government levied a 5 per cent cess on all know-
how import payments to create the venture fund.
ICICI started VC activity in the same year
Later on ICICI floated a separate VC company - TDICI
Development of VC in INDIA
13
14. Top Active VC Firms In IndiaTop Active VC Firms In India
1. Helion Venture Partners
Investing in technology-powered and consumer
service businesses, Helion Ventures Partners is a
$605 Mn Indian-focused, an early to mid-stage
venture fund participating in future rounds of
financing in syndication with other venture
partners.
15. ● Investment Structure: Invests between $2 Mn to $10 Mn in each
company with less than $10 Mn in revenues.
● Startups Funded: Yepme, MakemyTrip, NetAmbit, Komli, TAXI
For Sure, PubMatic.
16. Accel PartnersAccel Partners
● Investment Structure: Invests between $0.5 Mn and $50 Mn in its
portfolio companies.
● Startups Funded: Flipkart, BabyOye, Freshdesk, Book My Show,
Zansaar, Probe, Myntra, CommonFloor.
17. Sequoia Capital IndiaSequoia Capital India
● Industries: Consumer, Energy, Financial, Healthcare,
Outsourcing, Technology.
● Startups Funded: JustDial, Knowlarity, Practo, iYogi,
bankbazaar.com
21. With eight investments in the past year in Indian and
international companies, Tata has clearly hit the ground running.
And except for three, all his investments are in internet-based
ventures.
Here is a list of Tata’s personal investments, starting from the
latest.
22.
23. Stages of
Financing
Seed
Money
To prove a
concept
(15-25L)
Extreme risk
Start Up
Provided to
companies
(25-60L)
Very high risk
First
Round
Manufacturing
funds
(1-3cr)
High risk
Second
Round
Working capital
& expenses
(2-5cr)
Sufficiently
high
Third
Round
For newel
profitable
company
(2-10cr)
Medium
Forth
Round
Bridge Financing
for going public
process
(100cr)
Low
Acquisition or buyout financing (10-100cr)
23l
24. Advantages Of Venture CapitalAdvantages Of Venture Capital
ECONOMYECONOMY ENTREPRENEURENTREPRENEUR
INVESTORINVESTOR
25. Economy OrientedEconomy Oriented -
Helps in industrialization of the country
Helps in the technological development of the country.
Generates employment
Helps in developing entrepreneurial skills
26. Investor oriented-Investor oriented-
Benefit to the investor is that they are invited to
invest only after company starts earning profit,
so the risk is less and healthy growth of capital
market is entrusted.
Profit to venture capital companies.
Helps them to employ their idle funds into
productive avenues.
27. Entrepreneur oriented-Entrepreneur oriented-
Finance - The venture capitalist injects long-term equity finance,
which provides a solid capital base for future growth.
Business Partner - The venture capitalist is a business
partner, sharing the risks and rewards.
Alliances - The venture capitalist also has a network of contacts in
many areas that can add value to the company.
28. Why it is hard to find a VC !!!
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29. 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
Provide financial assistance to people coming out of
universities, technical institutes, etc
Future Prospects of VC in INDIA
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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 development.
3. First-Round:
Early sales and manufacturing funds.
4. Second-Round:
Working capital for early stage companies that are selling product, but not yet turning a profit .
5. Third-Round:
Also called Mezzanine financing, this is expansion money for a newly profitable company
6. Fourth-Round:
Also called bridge financing, it is intended to finance the "going public" process
Financial Stage
Period (Funds locked in years)
Risk Perception
Activity to be financed
Seed Money
7-10
Extreme
Idea or R&D for product development
Start Up
5-9
Very High
Initializing operations or developing prototypes
First Stage
3-7
High
Start commercials production and marketing
Financial Stage
Period (Funds locked in years)
Risk Perception
Activity to be financed
Second Stage
3-5
Sufficiently high
Expand market and growing working capital need
Third Stage
1-3
Medium
Market expansion, acquisition & product development for profit making company
Fourth Stage
1-3
Low
Facilitating public issue
Therefore when a venture capital fund evaluates a new business idea, it is looking for the possibilty of a "super normal" return. Many businesses don't pass that filter as they are typical linear growth cash generating businesses that most entrepreneurs think of. And therefore they have to turn down an investment proposal of an entrepreneur who has a perfectly viable business plan.
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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 tourism, publishing, health care etc.
They can provide financial assistance to people coming out of universities, technical institutes, etc thus promoting entrepreneurial spirits
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