1. Venture Capitalist’s an Overview
1

2. “VC” - Venture Capitalist is a speculator who is looking at high-risk,
high-return investment in support of business creation and growth.
Pre - Venture Capital
Concept Funding Process
VC
2

3. Typical cycle of a “VC” funding
Revenue
Maturity
Expansion
IPO Acquisition
Rapid Growth Banks
Gestation
Inception Roll Out
Prototype
Venture Capital Firms & Corporate
Founders Investors
Angel Financing
Time
3

4. Stages of a VC funding
Venture Capital Investment Stages
This is the final stage for a VC
In this stage Market expansion,
participation, in this stage the
acquisition & product development for
company will facilitate itself for
profit making company will be the goal
a public issue, this is the low
of the company, this is the medium risk
risk stage.
It is the second stage in the venture stage.
capital cycle. Here in the entrepreneur
has moved closer towards
Amount of Money
establishment of a going concern Mezzanine
The financing of the
initial product Series C This stage is for an established commercial
development production and basic marketing set-up, typically
for market expansion, acquisition, product
development etc, this stage is a significantly
Series B high risk stage.
It is the capital provided for marketing and
meeting the growing working capital needs of an
Series A enterprise that has commenced the production
but does not have positive cash flows . In this stage
the risk factor for a VC is high.
Angels It is also called first stage capital
Investors Early Stage which is provided to entrepreneur
Seed who has a proven product
Stage
Concept/ Business Product First Fully Expansion Ready for
Research Planning Development Commercial Deals Operational IPO Stage of
Startups
4

5. Pre - Venture Capital Funding Process
Initial Venture
Valuation
Idea or Concept Planning Research Business Plan
Models
(Report)
Patent and
Entrepreneur Market Executive First Chicago
Trademark
Characteristic Characteristic Summary Methods
Research
Technical Business Power Point
Discounted
feasibility Model Competition Business
Cash Flow
studies Reviews Plan
Revenue
Competition Technology Elevator Market Value
Model
Review Breakthrough Speech Research
Reviews
Investment
Market Pricing
Due Diligence Stage
Studies Studies
Comparison
5

6. Process of different funding stages ………… Exit stage
Board of directors liquidity event decision tree
IPO or
Seed Capital First Venture Second Round Valuation Merger
IPO
Angel Round Determine Merger
Round Capital Round Financing comparison Decision
Value
tree
Private Board of Venture Fund Venture Fund
Placement Advisors and Research for a Research for a
Reg D Directors fit fit Investment M & A Firm
Building Block
IPO Vs Merger Banker
Exit Process
or First Move Selection
Review
Friends, Develop Portfolio Portfolio
Family & personal Company Company Target
300,000+ contact list Comparisons comparisons Shareholder Merger Check Current Candidate
Value Candidates IPO Markets Screening
Solicit Advisor Angel First Round
Incubator Acquisition Determine Determine
Recommendat Recommendat Recommendat
Selection Option Values Candidates to Financial Value &
ion ion ions
Grow for IPO Needs Negotiate
Deal Structure
Plan to
Locate Local
complete Set Valuation Set Valuation Build Value Vs Poll Investors
Associations Select (3+)
prototype/ser Target Target Liquidity BOD & BOA
of Angels Underwriters
vice Event for best fit
Break-Even Term Sheet Term Sheet
Plan Comparisons Comparisons Tax Analysis Road Show
6

7. Venture process selection criteria
1 2
Distinctive Capabilities
When reading a business plan
Business founders must assume
they look for reasons such as (Cannot be replicated by competitors)
that everything written in their
traps, oversights, TANGIBLE
business plan will be checked by
oversimplifications, hidden
prospective investors
competitors, and upside
 Intellectual property rights
opportunities.  Exclusive licenses
 Statutory monopolies
3 4 INTANGIBLE
A large, rapidly expanding  Strong brands
market and the company's
Their business plan evaluation
marketing strategy a unique
 Leadership
criteria, in order of importance,
brilliant idea or technology that  Tacit knowledge & skills
include: Key personnel:  Teamwork
can be commercialized and
people/management that can
get the job done
protected a business strategy  Organizational culture
that has a strong sustainable  Business processes
competitive advantage  Partnerships
Reproducible Capabilities
(can be replicated by competitors)
5
Synergistic combination of Technical capabilities
your distinctive and Financial capabilities
reproducible capabilities Marketing capabilities
Explicit knowledge
Non-exclusive licenses
7

8. Potential Pros and Cons of Business Angel Investments
Advantages
Angel’s Characteristics Added Bonuses
 Value-adding Investment Characteristics  Leveraging effect
 Geographically dispersed  Seek smaller deals  Give loan guarantees
 More permissive investors  Prefer start-ups & early stage  No high fees
 Invest in all industry sectors
 Like high-tech firms
Business Angels
Disadvantages
No national
Little follow-on Could turn out to
Want a say in firm reputation
money be “devils”
leverage
8

9. Sources of funds for a start up……
100% 3%
7% 10%
90% 20%
7% 10%
80% 8%
10%
5% 15%
70%
Public stock issues
60% 17% Commercial banks
15%
Non Financial Corps
50%
10% Venture Capitalists
40% Business Angels
70% 32%
30% 25% Family & Friends
Personal Savings
20%
8%
10% 18%
10%
0%
First Round Second Round Third Round
9

10. Potential Investor Returns, Timing & Cost Of Capital
Cash Returns, Investment Periods, and Rates of Return
Investment Period
Return
2 yrs 3 yrs 4 yrs 5 yrs 6 yrs 7 yrs 8 yrs
2x 41.4% 26.0% 18.9% 14.9% 12.2% 10.4% 9.1%
3x 73.2% 44.2% 31.6% 24.6% 20.1% 17.0% 14.7%
4x 100.0% 58.7% 41.4% 32.0% 26.0% 21.9% 18.9%
5x 123.6% 71.0% 49.5% 38.0% 30.8% 25.8% 22.3%
6x 144.9% 81.7% 56.5% 43.1% 34.8% 29.2% 25.1%
7x 164.6% 91.3% 62.7% 47.6% 38.3% 32.0% 27.5%
8x 182.9% 100.0% 68.2% 51.6% 41.4% 34.6% 29.7%
9x 200.0% 108.0% 73.2% 55.2% 44.2% 36.9% 31.6%
10 x 216.2% 115.4% 77.8% 58.5% 46.8% 38.9% 33.4%
11 x 231.7% 122.4% 82.1% 61.5% 49.1% 40.9% 35.0%
12 x 246.4% 128.9% 86.1% 64.4% 51.3% 42.6% 36.4%
10

11. Top ten companies in silicon valley who have made profits in the year
2010 – these companies were majorly funded by top VC’s
Profit (In Millions) for last four quarters
$18,000
Voted # 1 Brand in the
$16,000
World overtaking Google in
the recent past
$14,000
$12,000
$10,000
$8,000
$6,000
$4,000
$2,000
$-
11

12. Top segments in silicon valley who have made profits in the year 2010 – these companies are majorly funded
by top VC’s, Computer peripherals have high sales and high profits but when Sales to net profit ration is
compared Bio medical stands out because the sales to profit ration is 28% and computer peripherals at 13%
Net profit Sales (Billions) Net profit (Billions)
$250.00 $30.00
ratio 13%
Net Profit (Billion)
Net profit
Sales (Billion)
$200.00 $25.00
ratio 28%
$20.00
$150.00
$15.00
$100.00
$10.00
$50.00 $5.00
$0.00 $0.00
Sectors Sales (Billions) Net profit (Billions) Net profit ratio
Computers, peripherals $206.15 $25.82 13%
Semiconductor $80.08 $16.16 20%
Software $62.54 $10.40 17%
Networking, telecommunications $56.41 $8.40 15%
Internet services $49.03 $11.80 24%
Non-Technology $18.48 $1.81 10%
Semiconductor manufacturing equipment $17.79 $2.87 16%
Electronic contract services $15.68 $0.21 1%
Bio Medical $13.95 $3.89 28%
Instruments, other high technology $13.26 $1.42 11%
Storage $10.49 $1.95 19%
Total $543.86 $84.73 12

13. Companies who have more profits have huge market capitalization but Bio medical sector has generated
high sales per employees even though their profit and market capitalization is low, this is because these
companies are more based on innovative products.
Market Capitalization Sales per employee
$450 $900
Thousands
$400 $800
$350 $700
$300 $600
$250 $500
$200 $400
$150 $300
$100 $200
$100
$50
$0
$0
13

14. Bottom ten companies in silicon valley who have made losses in the year 2010 – these companies are
majorly funded by top VC’s, the trend shows that these products have a lot of competition and the margins
in these products are really low, piracy is also one of the major factors for attaining huge losses in
Entertainment software industry
Sum of losses (In Millions) for last four quarters
$-
$(50.00)
$(100.00)
$(150.00)
$(200.00)
$(250.00)
$(300.00)
$(350.00)
$(400.00)
$(450.00)
14

15. Technology companies lead pack of market capitalization, it also clearly shows that
high profit margin companies have high market capitalization.
Market value of the company (in millions)
$350,000
$300,000
$250,000
$200,000
$150,000
$100,000
$50,000
$0
15

16. Number of venture firms expected to decline in traditional markets, expected to grow
in emerging markets
Expected Growth in Next 5 Years – Number of VC Firms
United States 4% 4% 68% 24%
United kingdom 22% 8% 59% 10%
Israel 10% 10% 60% 20%
India 21% 65% 6% 9%
Germany 22% 17% 61%
France 6% 11% 72% 11%
China 48% 51% 1%
Canada 28% 6% 47% 19%
Brazil 30% 68% 3%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Increase Significantly (More than 30%) Increasly moderatly (1% to 30%) Remain the same
Decreased slightly (1% to 30%) Decrease Significantly (More than 30%)
• Brazil, China, India respondents see an increase in number of VC firms
• Canada, France, Germany, Israel, UK and U.S. respondents see a decrease in number of VC firms
16

17. Venture capital available for investment in home country over the next
five years
Expected Growth in Next 5 Years– $$ Available for VC Investment
United States 1% 17% 11% 57% 14%
United kingdom 2% 31% 61% 6%
Isreal 10% 10% 70% 10%
India 41% 50% 6% 3%
Germany 39% 17% 44%
France 22% 11% 61% 6%
China 70% 30%
Canada 50% 6% 33% 11%
Brazil 51% 49%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Increase Significantly (More than 30%) Increasly moderatly (1% to 30%) Remain the same
Decreased slightly (1% to 30%) Decrease Significantly (More than 30%)
• Brazil, China, India respondents see an increase
• Canada and Germany respondents were split with approximately half expecting a increase and half expecting a decrease
• France, Israel, UK and U.S. respondents see a decrease
17

18. Investment by sector in the next 5 years
Healthcare services 63% 30% 6%
Finance services 39% 47% 14%
Consumer business 51% 41% 8%
Clean technology 80% 17% 3%
Medical device and Equipment 51% 37% 13%
Biopharmaceuticals 42% 40% 18%
New media/Social Networking 56% 34% 10%
Software 36% 52% 12%
Semiconductors including
17% 44% 39%
electronics
Telecommunications 27% 48% 25%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Increase Remain the same Decrease
• Clean technologies and healthcare services are the hottest industries
• Semiconductor and telecommunication see the biggest slow down in future investments
18

19. Industry investment highlights by country
Top 2 industry sectors countries will be increasing their investment in
Country #1 Increased Investment Sector #2 Increased Investment Sector
Brazil Consumer Business – 92% Clean Technologies – 85%
Canada Clean Technologies – 67% New media/social networking – 50%
China Clean Technologies – 95% Healthcare Services – 92%
France Clean Technologies – 88% Health care Services – 69%
Germany Clean Technologies – 71% New media/social networking – 64%
India Clean Technologies – 90% Healthcare Services – 89%
Israel New media/social networking – 86% Medical device and equipment -67%
United Kingdom Clean Technologies – 85% Healthcare Services – 62%
U.S. Clean Technologies – 72% New media/social networking – 58%
19

20. 2010 Trivia
VC’s
42% of the VC’s felt that U.S. remain
$
Traditional markets Emerging markets
a dominant force in the technology $
industry in light of increased
competition in the venture capital industry
54% of the VC’s felt that they are
very important for the growth of
US economy
Companies converted from VC to IPO
100
86
80 72
57
60
40
20 12 14
6
0
2006 2007 2008 2009 2010 2011
 Limited Partners expected to shift larger allocations to emerging markets
 Cross border investing increases expected to plateau
1st Quarter
 Political, regulatory and market environments causing impediments to venture capital investing
 Despite challenges, VCs remain optimistic about quality of deal flow
20

21. Venture capital investment in US - Internet
Internet VCVC trends & deal volume trends
Internet Investment and Deal Volume Trend Share of Internet VC by Series - Dollars of Funding
Share of internet VC by series
Last Five Quarters Last Five Quarters
272 1%
5% 10%
13%
224 233 233 19% 25%
221 16% 7%
$2,543 10%
23%
28% 24%
40% 27%
$1,618
$1,483 27%
$1,265 $1,253 28% 33% 19%
19%
16%
31%
22% 19% 20%
12%
1% 1% 2% 1% 1%
Q4'09 Q1'10 Q2'10 Q3'10 Q4'10 Q4'09 Q1'10 Q2'10 Q3'10 Q4'10
$ Funding # of Deals Seed Series A Series B Series C Series D Series E +
www.cbinsights.com www.cbinsights.com
VC Investment ($) in Internet by industry 2010 Q410
VC investment in internet Sub -Industry,
Discount
1% Social
18% Advertising, Sales & Marketing
2% 26% Bus. Intelligence, Analytics & Performance Mgmt
1% Video
Gaming
2%
2% Data Storage
2% Data & Document Management
2% Health & Wellness
3% Conferencing & Communication
24% Information Providers & Portals
3% 5% eCommerce enablement
3% 6%
Travel (internet)
Content Management
All Other
21

22. Top 5 acquired & venture capital funding deals in Internet industry at 2010
Bid value
Company Bidder Business description
($ US million)
Acquired deals
Provides electronic payment processing services for Web, call center,
CyberSource Corp. Visa Inc. $1,964
and POS environments
VeriSign Inc.-Identity The identity and authentication business of VeriSign Inc., provides
Symantec Corp. $1,280
Business Internet security services
Develops social gaming software used in social networking sites such as
Playdom Inc. Walt Disney Co $763
Facebook
Provides marketing solution services for discovery, branding and
AdMob Inc. Google Inc. $750
monetization on the mobile web
Internet Brands, Inc. Hellman & Friedman Capital $640 Provides Internet media services to large ticket consumer purchases
Funding
Company Venture Capitalist ($ US Business description
Venture Capital funding deals
million)
US Venture Partners, Grotech LivingSocial is the social commerce leader behind LivingSocial Deals, a
Ventures, Revolution , Lightspeed group buying program that invites people and their friends to save up to
LivingSocial $227
Venture Partners, 90 percent each day at their favorite restaurants, spas, sporting events,
Amazon hotels and other local attractions in major cities.
Twitter is a social networking and micro-blogging service that allows
Twitter Kleiner Perkins Caufield & Byers $200
users to post their latest updates.
Digital Sky Technologies, Battery
Groupon features a daily deal on the best stuff to do, see, eat, and buy
Groupon Ventures, Accel Partners, New $135
in more than 565 cities around the world.
Enterprise Associates
Austin Ventures, Norwest Venture WhaleShark Media, Inc. is the world’s leading marketplace for coupons
Whale Shark Media $90
Partners, Adams Street Partners and deals.
Institutional Venture Partners,
FleetMatics is the leading software provider of GPS-based fleet
FleetMatics Investcorp Technology Partners, New $68
management systems.
World Ventures
22

23. Appendix
23

24. Time Required to Generate 10x to 30x Returns
If the venture has to be successful then yield on capital investments should be 30x on average else at least the business produce10x
The graph below shows venture capital exit times required to generate a minimally acceptable VC fund return from the winning investments.
Additional Years to VC Exit
20
18 Optimum time
to exit
16
14
12
Years
10
8
6
4
2
0
20% 25% 30% 40% 50% 100%
Annual Return on Investment
To achieve a minimally acceptable VC fund return of 20% per year and assuming all of the returns are from 20% of investments
Some companies will create increases in share value faster than 30 or 40% per year, but these are extremely rare. Everyone who has run a
company knows that generating consistent 30 to 40% annual increases in value requires a great deal of hard work and some luck.
24

25. Thank you
25

26. Thank You
For any of your valuable feedback & queries
you could reach, engage and reciprocate
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