VENTURE CAPITAL

Presented By Suhail Rajani Yogesh Varnekar Paulami Chetna

WHAT IS VENTURE CAPITAL?

Venture- new business idea Capital- Funding given for starting the business It is

Risky Capital Given to industries with long development cycles Which do not have access to conventional sources of funding like public equity, debentures or business loans

Examples of business funded by venture capitalist: dot.com business, Micro finance, software firms, food chains, small transport business, biotechnology firms, plastics etc

ORIGIN OF VENTURE CAPITAL

Year of Origin: 1920's & 30's

The wealthy families and individuals investors provided the start up money for companies that would later become famous.
Eastern Airlines and Xerox are the more famous ventures they financed. In its early years VC may have been associated with high technology, over the years the concept has undergone a change and as it stands today it implies pooled investment in unlisted companies.

ORIGIN IN INDIA

Origin: 1987 Operated by IDBI (Industrial Development Bank of India) ICICI started operations

NEED FOR VENTURE CAPITAL

Debt capital is expensive

Banks reluctance to fund new companies

Getting loan is difficult because small enterprises are considered risky

Raising equity Capital requires the company to have established operations

Venture capital against this provides Long term equity finance Business partner-capital, managerial and technical advice Sources human capital, strategic partners, contacts in international market Additional rounds of funding if required

STAGES OF FUNDING FOR A FIRM

Revenue
Expansion Maturity

IPO acquisition

Rapid Growth
Banks Gestation Rollout Prototype Inception Founders Venture Capital Firms and other corporate investors

Time

Stages of Venture capital financing STAGES OF VENTURE CAPITAL FINANCING

Seed Stage- Business Plan, High Risk, Start up Capital Startup financing- sophisticated angel capital First -stage financing

Company is 2 to 3 years old Reach Break even points Sales are moving upwards Management is in place Rapid growth in sales Funding expansions

Second stage financing

Mezzanine or Bridge financing- Preparing company for IPO usually 6

months IPO (Initial Public Offering)

STRUCTURE OF VENTURE CAPITAL FUND

VENTURE CAPITAL FUND

VENTURE CAPITALIST GENERAL PARTNERS Those who invest investors money in to growing companies

INVESTORS LIMITED PARTNERS

Pension funds, Mutual funds, HNIs who invest in the funds

HOW CAN ONE SETUP VENTURE CAPITAL FIRM

Hi I am Mr. Adventurous wanting to set up a venture capital firm can u please guide me through ?

SEBI VENTURE CAPITAL FUNDS REGULATION (1996)

REGULATION

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ELIGIBILITY CRITERIA a) If application is made by a company Memorandum of Association having its main objective to carry on the business of Venture capital funds Prohibited by MOA to invite public to subscribe to its securities Director, principal, employee not involved in any litigation connected with the securities market having a adverse bearing on the business of the applicant Director, employee or the principal not been convicted of any offence of moral turpitude or an economic offence It is fit and a proper person

CONTINUED

b) If application is made by a trust The instrument of trust is in the form of a deed and has been duly registered under the provisions of the Indian Registration Act, 1908 (16 of 1908) The main object of the trust is to carry on the activity of a venture capital fund The directors of its trustee company, if any, or any trustee is not involved in any litigation connected with the securities market which may have an adverse bearing on the business of the applicant The directors of its trustee company, if any, or a trustee has not at any time, been convicted of any offence involving moral turpitude or of any economic offence The applicant is a fit and proper person.

c) If Application is made by a body corporate

It is set up or established under the laws of the Central or State Legislature. The applicant is permitted to carry on the activities of a venture capital fund. The applicant is a fit and proper person. The directors or the trustees, as the case may be, of such body corporate have not been convicted of any offence involving moral turpitude or of any economic offence. The directors or the trustees, as the case may be, of such body corporate, if any, is not involved in any litigation connected with the securities market which may have an adverse bearing on the business of the applicant.

d) The applicant has not been refused a certificate by the Board or its certificate has not been suspended under regulation 30 or cancelled under regulation 31.

TOP FIVE VCs in India

As of August 2009

INVESTOR Sequoia Capital India

Ventureast Intel Capital Helion Venture Partners DFJ India

Number of investments 53
32 23 22 17

VENTURE CAPITAL-ICICI VENTURES

Year of Origin: 1987

ICICI Venture is one of the largest and most successful private equity firms in India with funds under management to the tune of USD 2 billion ICICI Venture, over the years has built an enviable portfolio of companies across sectors including pharmaceuticals, Information Technology, media, manufacturing, logistics, textiles, real estate etc thereby building sustainable value.

Private Equity India Advantage Fund Series 3 (IAF Series 3) USD 400 million India Advantage Fund Series 2 (IAF Series 2) USD 810 million India Advantage Fund Series 1 (IAF Series 1) USD 245 million ICICI Emerging Sector Fund / Others USD 692 million

Real Estate India Advantage Fund (Real Estate Series 1) USD 562 million Mezzanine Fund India Advantage Fund (Mezzanine Series 1) USD 51 million