VentureFundsinIndia FINALE

8/11/2019 VentureFundsinIndia FINALE

1/33


2/33

Idea + VC=Fortune FormulaMost investors offer three tips for start up

entrepreneurs:

Have solid business plan,A competent team

Understand the expectations of venture capitalist

clearly

Some of the well known fortune formulas are:-

Hotmail ,Amazon.com,Google,eBay

2


3/33

Alternative Methods to Fund

Growth

Proprietors own capital

Arranging debt finance

Seeking an equity partner(PE & VC alternative

Angel Investors)

3


4/33

Stages of a business

Early stage

Growth stage

Late stage

PIPE

Buyout

4


5/33

Indian Investment in 2006

Stage of

Company No. of Deals

Amount

(US$M)

Early Stage 59 236

Growth Stage 42 393

Late Stage 104 3663

PIPE 61 1314

Buyout 11 1125

Others 22 769

Source: Venture Capital Association

5


6/33

Private Equity Non-public ownership equity securities that are

not listed on a public exchange.

Encompasses both

-Early Stage(Seed & growth capital)

-Later Stage(Buy-out expansion)

Can include Mezzanine,FOFs,SecondaryInvesting

6


7/33

PE Investment

Venture Capital

Buy Out

Special Situation

7


8/33

VentureCapitalFund

A venture capital fund is a pooled investment

vehicle that primarily invests the financial

capital of third-party investors in enterprises that

are too risky for the standard capital markets or

bank loans.

8


9/33

Venture capitalis a type of PE capitaltypically provided by professional, outside investors tonew, growth businesses.

-high risk

-above average returns.

It may be for

-early stage

-development/expansion

-purchase of a company

9


10/33

The Origin

1920s &30s-Start up money by wealthy

investors & individuals (Eastern Airlines,

Xerox)

1946-ARD by General Doriot(MIT)

1950-Venrock by Rockfeller family

1957-Digital Equipment Corporation

10


11/33

Venture Capital in India

ICICI, IDBI,State Financial Corporations ,PvtSector,Debt funding

7thfive year plan

Recognition for VC 1988 TDICI promoted by ICICI & UTI

1stPvt VC Fund-Credit Capital Venture Fund

(BOI,ADB & CDC)

State Financial Institutions

1. GVFL

2. APIDC 11


12/3312


13/33

Goals of VC

(High quick return)

Build companies

Liquidity of shares

Return to the investors

13


14/33

Lifecycle

Fund raising

Investing

Divesting and

Distribution

14


15/33

Lifecycle

Concept/Inc

eption stage

Growthstage

Maturity

Period/Time 15


16/33

Advantages

Long-Term Equity Finance

Business Partner

Practical Advice & Assistance

Network of Contacts

Additional Funds

16


17/33

Structure

Limited Partnership

General Partners(1%)

Limited Partners(100%-General Partners

Investment)

Fixed Maturity(10 yrs extendable upto 3

more yrs)

17


18/33

Structure in India

As defined in Regulation 2(m) ofSEBI(Venture Capital Funds) Regulation,

1996 venture capital fund means a fund

established in the form of a company ortrust which raises money through

loans,donations issue of securities or units

as the case may be, and makes or proposesto make investments in accordance with

these regulations.


19/33

Management

Venture Capitalist

Active

Investors

Limited voting rights

19


20/33

Types

Seed/Expansion Stage

Particular Industry/Sector Focused

Organised

-Angel(HNI)

-VC Subsidiaries-Pvt VC Firms

On the basis of promoters

-Central Govt controlled

-State Govt controlled

-Public Sector Banks

-Foreign Banks or Pvt Sector companies

20


21/33

Fund Managers(General

Partners)

Hired-help Middlemen

Compensation

Fixed Management Fee(2/3% of Funds

Invested)

Carried Interest(20% of Funds Profits)

21


22/33

Investors in VF(Institutional

investors and Wealthy individuals)

Pension Funds

Insurance Companies

University Endowments

Foundations

22


23/33

Methods of Venture

Financing

Equity

Conditional Loan

Income Note

Participatory Debentures

23


24/33

The Venture Capital Investment

Process

1. Deal origination

2. Screening

3. Due diligence (Evaluation)

4. Deal structuring

5. Post-investment activity

6. Exit

24


25/33

Exit

1. Initial Public Offerings (IPOs)

2. Acquisition by another company

3. Purchase of the venture capitalist's

shares by the promoter, or

4. Purchase of the venture capitalist's share

by an outsider

5. Winding up/Liquidation

25


26/33

Regulation-SEBI Venture Capital

Funds Regulations, 1996

Registration

Application fee-Rs.25000

Registration fee-Rs.500000 for grant of

certificate

90 Funds registered with SEBI at present

(APIDC,SICOM,Canbank,GVCL)

26


27/33

Some Issues

Entrepreneurs apprehension

-Management control

-Sidelining the idea

-Change of leadership team

Change of VCs itself

27


28/33

VC major investment sectors

in India

Information Technology

Retail Industry

Food(Yo China by Matrix VF)

Alternative Energy

Education & Health Services

28


29/33

VC & Banks

Screening

Consultants

Active Governance

29


30/33

1160 937591 470

16502200

7500

5648

0

1000

2000

30004000

5000

6000

7000

8000

2000 2001 2002 2003 2004 2005 2006 2007(1st

half)

Trend of VC in India

Value(US$ millions)

280

11078 56 71

146

299

161

050

100150200

250300350

No. of Deals

Source: Venture Capital Association 30


31/33

Source: Venture Capital Association

31


32/33

32


33/33

THANK YOU !!!

VentureFundsinIndia FINALE

Documents

Transcript of VentureFundsinIndia FINALE