International Finance Corporation, defines venture capital

“An equity or equity featured capital seeking investment in new

companies, new products, new process or new services, that offer
the potential of high return on investment”.
E.g., Accel Partners, Atlas venture, Khosla Ventures, Sequioa
Capital, Intel Captial etc.

Private equity is capital that is not noted on a public exchange.

Private equity is composed of funds and investors that directly
invest in private companies, or that engage in buyouts of public
companies, resulting in the delisting of public equity.
Institutional and retail investors provide the capital for private
equity
E.g., Goldman Sachs Capital, The Blackstone Group Inc, JPMorgan
PE Group., KKR & Co. , Bain Capital, etc.
 Private v Venture
s
Equity Capital
1

PE firms buy mature VC’s invest mostly

companies in early stage
companies
 2

PE firms buy
companies across all
industries.

VC’s are focused on

technology, bio-tech and
clean-tech companies.
 3

PE firms almost
always buy 100% of a
company

VC only acquire a
minority stake which is
less than 50%
 4

PRIVATE EQUITY VENTURE CAPITAL

$100million to Below $10

$10billion million

1 million = 10 lakh.
1 billion = 100 crore.
 5

PRIVATE EQUITY VENTURE CAPITAL

Combination of Use Only

Equity + Debt Equity

 6

PRIVATE EQUITY VENTURE CAPITAL

6 TO 10 4 TO 7

EXIT AFTER
 7

PRIVATE EQUITY VENTURE CAPITAL

Depends on the inherent Many failures, some

risk of particular firm and solid returns, a few
industry. spectacular successes.
Venture Capital

1
0
Non-Equity Financing Equity Financing

Angel Financing

Self Finance /
Bootstrapping Venture Capital

Debt /
ivate Equity
Bank Finance Pr

Public
Stock Markets
VC - Funds made available for startups & SB

VC - Money provided by professionals

Venture Capitalists generally:

• Finance new and rapidly growing companies

• Purchase equity securities
• Assist in the development of new products or
services
• Add value to the company through active
participation
  

Investments in
Participation innovative
Long time Equity Lack of projects
Participati High risk in
horizon/ Liquidity management
Investment on
Top cities attracting VC investments:
CITIES SECTORS


Mumbai Software services, BPO, Media,

Computer graphics, Animations,
Finance, Insurance & Banking
Bangalore IT & Bio-technology
Delhi Software services, Telecom
Chennai IT , Telecom
Hyderabad IT & ITES, Pharmaceuticals
Pune Bio-technology, IT , BPO
segmentation
VC industry wise
Percentage
9.03 6.94
3.36 7.73 IT & ITES
Energy
12.92 Manufacturing
11.5
Media & Ent.
BFSI
4.32 Shipping & logistics
11.43 Eng. & Const.
Telecom
4.82 Health care
27.95
Value of private equity and venture capital investments across India from 2015
to 2019
Continuous growth in the startup ecosystem of
the country from 2012-2019
• The number of start-ups in India increased
by 17 per cent each year.
• Funded startups increased faster at 19 per
cent CAGR in the same period.
• 80,000 start-ups in India, only about 8%
are funded.
• Indian VC industry grows by 55% in 2019;
Rs 72,000 crore invested.
• Approx. 1037 deals were recorded.
1
Injects long term equity finance
•
2 The VC is a business partner, sharing both the risks and rewards
•
3 The VC’s provide practical advice and
• assistance
The VC may be capable of providing additional rounds of
4 funding
•
VCs are experienced in the process of preparing a company for
5 an IPO of its shares onto the stock exchanges or overseas like
NASDAQ, facilitate a trade sale.
 Stages of
Financing
First
Seed Round Second Third Forth
Start
Money Round Round Round
Up

Bridge
Working For newel Financing for
To prove a Provided to Manufacturing
concept capital & profitable going public
funds
(15-25L) companies expenses (2- company (2- process
(1-3cr)
(25-60L) 5cr) 10cr) (100cr)

Very high Sufficiently

Extreme risk High risk Medium Low
risk high

Acquisition or Buy-out financing (10-100cr)

 VC
investment
process

Entrepreneurial
Market Product Product
Screening (managerial)

Expected
Expected
Evaluation Return
Risk

Approval Decision
 Equity

Conditional loan
Methods
Participating
Debentures 3

Income note
 Acquisition by
Initial
Initial public
public Promoter another company
Trade sale
offer(IPOs)
offer(IPOs) buy back
 The regulatory, tax and legal environment

Resource raising, investment, management and exit

should be simple

Should have global exposure and investment

opportunities

Infrastructure in the form of incubators and R&D need

to enhanced and to
be promoted using government support
 • Attorney
• Accountant
• Banker
• Angel Investor
• Industry Executive
Introductions are
best: • Business Incubators
• Investors-entrepreneurs Forums
The concept of VC was formally introduced in India in
1987 by IDBI.

The government levied a 5 per cent cess on all know-

how import payments to create the venture fund.

ICICI started VC activity in the same year

Later on ICICI floated a separate VC company - TDICI

1) Those promoted by the Central Government controlled development
finance institutions. For example:
- ICICI Venture Funds Ltd.
- IFCI Venture Capital Funds Ltd (IVCF)
- SIDBI Venture Capital Ltd (SVCL)

2) Those promoted by State Government controlled development finance

institutions.
For example:
- Punjab Infotech Venture Fund
- Gujarat Venture Finance Ltd (GVFL)
- Kerala Venture Capital Fund Pvt Ltd.

3) Those promoted by public banks.

For example:
- Canbank Venture Capital Fund
- SBI Capital Market Ltd
4) Those promoted by private sector
companies.
For example:
- IL&FS Trust Company Ltd
- Infinity Venture India
Fund

5) Those established as an
overseas venture capital
fund.
For example:
- Walden
International
Investment Group
- HSBC Private Equity
management
Mauritius Ltd
VC can help in the rehabilitation of sick units.

VC can assist small ancillary units to upgrade

their technologies

VCFs can play a significant role in developing

countries

Provide financial assistance to people coming

out of universities, technical institutes, etc
 Where VCs are putting their Money

A record of 111 VC-backed M&A deals were

reported with an aggregate value of $5.6
billion in every single year.

*Mergers and acquisitions

*Information-technology sector
BFSI, Telecommunication
*Biotechnology companies
*Medical and health

Source: Thomson Reuters

 Number Of Investments
Investor 2015 2016 2017 2018 2019 Total
Sequoia Capital India 7 12 13 18 3 53
Ventureast 5 11 4 9 3 32
Intel Capital 3 7 4 8 1 23
Helion Venture Partners 0 4 8 8 2 22
DFJ India 0 3 3 9 2 17
Nexus India Capital 0 1 4 9 2 16
NEA IndoUS Ventures 0 0 5 9 0 14
IDG India Ventures 0 0 6 5 0 11
Kleiner Perkins 1 3 0 6 0 10
Norwest Venture Partners
1 3 1 2 3 10
Canaan Partners
0 1 4 4 1 10

Inventus Capital Partners - - - - 3 3

Value Of Investments ($ mn)
Investor 2015 2016 2017 2018 2019 Total
Sequoia Capital India 42 184 114 138 26 504
Intel Capital 19 37 15 53 7 131
Norwest Venture 13.9
8.1 24.1 17.7 92.8 156.6
Helion Venture -
30 30 30 10 100

Nexus India Capital - 7.5 16 45 7 75.5

DFJ India - 13.75 4 33 10 61
Ventureast 7 19 2 17 9 54
NEA IndoUS -
- 24 26 - 50
Canaan Partners - 4 10 12 4 30
Kleiner Perkins 2 8 - 19 - 29
IDG India Ventures - - 14 8 - 22
Inventus Capital -
- - - - -