Module 4

Securitisation, Venture capital

Meaning
⚫ Process of liquidating the illiquid long
term assets to smaller securities.
⚫ Eg. Long term hire purchase is converted
into small value shares which can be
traded.
⚫ Cyclical process
⚫ Long term assets removed from balance
sheet and they are replaced with liquid
cash.
⚫ Recycling of funds at a reasonable cost.
⚫ Credit risk diversification
Definition Securitisation
⚫ It is a structured process in which loans
and receivables are packed, underwritten
and sold in the form of asset backed
securities.
⚫ Acc to Scott and Andersen, It is the process
in which the assets of the financial
institutions or banks are removed from the
balance sheet of the lending institutions
and are funded by investors who purchase
the negotiable financial instrument with
recourse or without recourse.
How it works?
Stages
⚫ Identification
⚫ Transfer
⚫ Issue
⚫ Redemption
⚫ Credit rating
Types
⚫ Pass through and pay through certificates
⚫ Pref stocks
⚫ CPs.
Venture capital Concept
⚫ It is an investment in a new venture which lacks
stability.

⚫ A VC joins a start up entrepreneur and shares the risks

associated with it.

⚫ Start up companies with a growth potential requires an

amount of investment. Investors who are having
surplus funds will like to invest their money in such
businesses with a long-term growth perspective. This
capital is known as venture capital and the investors are
called venture capitalists.

⚫ The venture itself is risky and the investments are risky

as they are illiquid, but they are capable of giving very
high returns if invested in the right venture. The
returns to the venture capitalists depend upon the
growth of the company. Venture capitalists have the
power to influence major decisions of the companies
they are investing in as it is their money.
Meaning
⚫ VC is a long term risk capital to finance
high technology projects which involve risk
but strong potential to grow
⚫ VC pool their resources and also provide
managerial assistance
⚫ Once company starts making profit they
exit
Definition of a vc company
⚫ VC company is a FI which joins an
entrepreneur as a co promoter in a project
and shares the risks and rewards of the
enterprise.
Features
⚫ Equity
⚫ High risk
⚫ Commercialisation
⚫ Co promoter
⚫ Cont. Involvement
⚫ Dis investment
⚫ Manage
⚫ Small and medium enterprises
Steps
⚫ 1. Deal Origination
⚫ 2. Screening
⚫ 3. Evaluation
⚫ 4. Deal Negotiation
⚫ 5. Post Investment Activity
⚫ 6. Exit Plan
Process
VC and Business Angels
⚫ Individual vs. fund 
Business angels are individuals, often successful business
people, who are using their own funds to invest in businesses.
Venture capitalists manage the pooled money of others in a
professionally-managed fund.
⚫ Early-stage vs. established businesses 
Angel investors and venture capital funds focus on businesses
in different life cycles. Business angels invest in early-stage
business and startups. VCs are less interested in early-stage
businesses and prefer more established businesses.
⚫ Invested amount 
Business angels operate individually and sometimes in angel
groups or angel networks. The amount they invest is less.
Capital provided by venture capital funds are more.
⚫ Role in the business 
Both receive shares of the company when investing.
Venture capitalists often require a seat on the board, where
business angels will function more as a mentor, to coach and
advice the entrepreneurs running the business.
venture capitalists will exercise more control over the business
than angel investors.
The State Of Indian Startup Ecosystem Report
of 2020: INC42plus
⚫ Indian startups have raised $63 Bn across
400 deals between 2014 to H1 2020
⚫ There are nearly 849 VC funds and 2,751
angel investors investing in India
⚫ Sequoia Capital
⚫ Blume ventures
⚫ Accel Partners
⚫ Premji Invest
⚫ HR Fund
⚫ Tiger Global
⚫ SAIF partners
Tiger Global
Deals: 97
Notable Investments: Urban Company,
Flipkart, Moglix, OPEN, Ninjacart, Razorpay
Key Sectors: Internet, Software, Consumer,
Financial Technology
Stage: Growth, Late Stage, Private Equity,
Post- IPO: Tiger Global Management is an
investment firm that deployed capital
globally in both public and private markets.
The company is said to have invested in
nearly 442 companies across the globe with 7
designated funds. It has also witnessed 64
exits since its inception in 2001.
Stanford University report
There’s almost 90% of the investment deals
that are somewhere between breaking even
and making loss.
Thank You