1. Venture Capital

2. Introduction
 Venture Capital – as a name suggest it implies
capital provided to start a new venture
 For a small entrepreneur with enthusiasm and
dynamism but inadequate or lack of finance,
venture capital or seed capital is a boom making it
a launching pad for financial growth

3. Contd..
 VC invested usually in companies with very little
track record.
 The investment is in new, small companies and the
investor – investee relationships is more intimate
then in case of opening equity financing
 There is no short term liquidity for the venture
capital investments.

4. Origin of Venture Capital
 The concept of VC started in US. in 1946 American
Research and Development ( AR & D) was
formed as the first venture organization which
financed nearly for 11 years about 100 companies
and made 35 times its investments
 Most famous of them is Apple computer, which
started in US in 1977 with capital provided by an
Arthur Rock & Co.

5. Contd..
 VC also includes supplying funds for product development and
marketing expenditure
 To extend bridge finance prior to an IPO
 VC broadly implies an investment of long term, equity finance
in high risk projects with high reward possibilities .
 VC essentially provides finance to businesses promoted by
individuals. Group of individuals who have sound project ideas
but lack financial resources to implement them.

6. Vision of VC
 Vision of VC is focused on new projects, seed
capital , technology and innovations
 VC aims at
 Fuels ambitions and dreams
 Breathes life into promising business ventures
 Inspires enterprises to script thrilling success.

7. Features of VC
a. It is a high risk venture. The success rate in developed
economies like USA is around 60%, whereas in a developing
country like ours, the success rate is expected to be around
20%-30%.
b. It finances high-tech projects.
c. The development period is long. The benefit or profit from the
venture capital investment will start accruing only after an
average period of 4 to 5 years.
d. Venture capitalist also makes available to the assisted units the
managerial and marketing assistance.

8. Contd..
 When the assisted company has reached a
certain stage of profitability, the venture
capitalist sells his shares in the stock market
at a hefty premium. He thus makes good
profit as well as gets his locked up funds
released for redeployment in some other
ventures.

9. Contd..
 Provision to have conditional loans which
doesn’t bear interest charges, rather it carries
royalty linked to sales generated by the
company after commercialization. The rate of
royalty is fixed depending upon the profitability
of the business and the fund’s requirement of a
reasonable return
 It is a long term investment and return are in
form of capital gains

10. Forms of VC

11. Functions of VC
 It provides finance as well as skills to new enterprise
and new ventures of existing firm based on high
technology
 It provides seed capital to finance innovations in pre
start stage
 In development stage they develop a business plan
which will detail the market opportunity, the product
and financial needs
 VC helps the firm to move the exploitation stage, i.e.
launching the innovation

12. Contd..
 VC role is just not restricted to supplier of funds but
that of an active partner with total investment in the
assisted project
 It act as a generate and launching new business and
method in stimulating existing firms to achieve
optimum performance.
 Their duty also expands to the level of checking
whether firm has proper and adequate commercial
banking

13. Contd..
 VC assistance provided by the financial
institutions is in the form of project loans, equity,
conditional loans, a comprehensive techno
commercial support and guidance service
including technology information service

14. Classification of VC Funds
 Incubators
 Hardcore technocrat who works with an entrepreneur
to develop a business idea. Prepare a company for
subsequent round of growth and funding.
 E ventures and infinity are examples in India
 Angel Investors
 They are experienced industry bred individual with
high net worth.

15. Contd..
 They take active participation in day to day
routine activities.
 They provide first round of financing to young /
start up company or a company with unstable
financial record
 Example: Sailesh Mehta, Vinod Dham, Kanewal
Rekhi etc

16. Contd..
 Venture Capitalists
 VCs are organizations raising funds from numerous
investors and hiring experienced professional managers
to deploy the same
 Insist on detailed business plan, invest into proven ideas
and business, provide brand value to the investee.
 They sow the capital, take care of it and when grow sell,
take the profit and get out of the business

17. Contd..
 Private Equity Players
 They are established investment bankers. Typically
invest into proven/ established businesses
 Have financial partner approach
 Example: ICICI Ventures

18. Advantages of VC
 Economy oriented
 Investor oriented
 Entrepreneur oriented

19. Thank You