Venture Capital

Anjana Vivek www.venturebean.com beanie@venturebean.com
www.venturebean.com
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What is VC?
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Investment in High risk projects High return potential projects Equity related instruments Unlisted companies

www.venturebean.com

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com 3 .Types of risk financiers     Regular VCs Corporate VCs Angel investors Incubators www.venturebean.

com 4 .Stages of VCs investment     Seed Stage Early stage Later stage Turnaround www.venturebean.

Stanford.institutes initiatives Less of regulatory hurdles. Harvard etc SBICs most successful Entrepreneriul spirit encouraged.com 5 . ie failure not negative for next round of financing www.US environment     Gap not met by debt recognised in late 1940s Industry .venturebean.

Asia trying to replicate success in US recognising the role played by VC investment in promoting growth of economy www.com 6 .initiatives like NSTB Other countries in Europe.strong US tie Singapore .Other countries    Israel .venturebean.

UTI State governments have their state specific funds.com 7 .Changing patterns      Earlier domestic funds Now more offshore funds Moved towards globalisation with Indian funds investing outside and foreign funds investing inside India Fund of eg SIDBI. KITVEN www.venturebean.e. i.

venturebean. TiE Successful Indians Foreign VCs directly investing in India NRI entrepreneurs tapping Indian VC funds Banks and other institutions also looking at innovative ways to fund SMEs www.Changing trends      Successful entrepreneurs in US turned financiers.com 8 .

VC investment & exit Promoters with Project Initial Meetings Venture Capitalist with Funds Prelimnary Project Review by Venture Capitalist Term Sheet Signed by Venture Capitalist & Promoters Due Diligence Review of Project Promoters Divestment & Exit from Project Mentoring & Monitoring of Project Investment made by Venture Capitalist in Project Legal Documents /Agreement Signed Venture Capitalist www.com 9 .venturebean.

venturebean.com 10 .What a project must have     Potential for high growth High upside potential Potential for extraordinary returns to investor Exit route plan www.

competence. growth expected. USP Market.com 11 .VC looks for     Team – leadership. integrity. domain knowledge Project. opportunity. barriers to competition Exit avenue www.venturebean. product. multidisciplinary.

venturebean. based on past knowledge of promoters and their work experience in the existing or new company  Must discount revenues expected.Business Plans Business plans…  are to be forward looking. account for all expected costs and project expected cash flows www.com 12 .

com 13 .Due diligence reviews        Investment decision based on DDR Business Market Accounting Tax and Legal Technical HR www.venturebean.

venturebean.Term Sheet    Term sheet is a letter of intent and may or may not be legally binding Term sheet terms give a summary of proposed principal terms of investment Term sheet is usually subject to satisfactory completion of due diligence reviews www.com 14 .

venturebean. 400 million Existing holders of equity a b c d e f 15% 15% 10% 10% 5% 5% 15% 25% 15 Stock options pool www. 100 million Type of security Pre-money valuation Post-money valuation Equity shareholding of the company post investment Equity Shares Rs.Term Sheet extract Amount of investment Rs.com VC Investor Limited . 300 million Rs.

Post VC investment    Is a partner in the project Mentors and monitors the project Hand holds through the investment www.venturebean.com 16 .

Post VC investment   Networks on behalf of the investee.com 17 . provides contacts. this depends on VC/entrepreneur relationship www. opens doors… flip side could be perceived as interfering.venturebean.

VC is not silent spectator. no. of investments cannot be too much.venturebean.What a VC does    Each fund manager mentors only a handful of projects While fund size is big. hence project size increases Unlike debt/other investor.com 18 .often is on the Board of investee company www.

venturebean.com 19 . monitoring as the skill sets can be different Others have the same fund manager looking at project from day one of receiving proposal thru exit from investment www.VC investment   Some VCs therefore have separate persons to look at investment and others to look at post investment.

com .venturebean.new materials – Service 20 www.Mature markets  Different VCs may target different industries such as: – IT further split into niche areas – Agri related – Bioinformatics – Manufacturing .

risks spread for a smaller piece of pie Many have dropped out and many coming in . not in the majority Move towards consortium financing.com 21 .Future of VC in India     Industry has not grown to meet needs of a variety of entrepreneurs Too much money chasing too few projects.churn is there. in select industries. as players are to get established www.venturebean.

venturebean.com 22 . legal advisors etc. of course some cities like Bangalore are slowly having a variety of experts in this space www. not completely aware of finer points of such funding The entrepreneurial ecosystem is yet to develop.Future of VC in India     Potential is there. CAs. including others like bank staff. needs to be tapped Lack of appropriately trained persons to manage funds General public.

high risk projects.venturebean.Future VCs in India    There are limited takers for smaller projects Real early stage.com 23 . finding it difficult to raise funding There are issues of exit and other related issues www. high growth.

venturebean. This includes industry groups. including high net worth individuals etc. academic institutions and other groups www.com 24 .Future VCs in India   In the recent times some groups have showed interest in getting together those who need funds on the one hand and those who want to invest on the other.

Evolving scenario      Review of projects includes going back to cash flow Gap between PAT and free cash flow analysed Detailed due diligence review Business perspective and not audit perspective Looking at the India + global story www.venturebean.com 25 .

Evolving scenario    Are we going to see more global Indian brands in the future? Will VCs help us create these brands? Time will tell www.venturebean.com 26 .

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