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Venture capital is a means of equity financing for early-stage, high-potential companies. Venture capitalists invest funds professionally in specific sectors and bring management and technical expertise to help companies go public or get acquired. They typically seek returns of 25% or more and fund companies through various rounds from seed money to bridge financing before an IPO. While angel investors provide smaller deals to very early startups motivated by helping them succeed, venture capitalists represent institutional investors seeking profit and security by funding high-growth companies through commercialization. The concept of venture capital was introduced in India in 1987 by government organizations and has since become a trend for financing there.

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49 views9 pages

Final

Venture capital is a means of equity financing for early-stage, high-potential companies. Venture capitalists invest funds professionally in specific sectors and bring management and technical expertise to help companies go public or get acquired. They typically seek returns of 25% or more and fund companies through various rounds from seed money to bridge financing before an IPO. While angel investors provide smaller deals to very early startups motivated by helping them succeed, venture capitalists represent institutional investors seeking profit and security by funding high-growth companies through commercialization. The concept of venture capital was introduced in India in 1987 by government organizations and has since become a trend for financing there.

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Venture Capital

Source of Finance
What is Venture Capital?
• Venture capital is a means of equity financing for early-stage,
high-potential, rapidly growing private companies.

• Venture Capital firms invest funds on a professional basis,


often focusing on a limited sector of specialization (eg -ICT,
Infrastructure, Health/Life Sciences, Clean Technology, etc.). 

• The goal of Venture Capital is to build companies so that the


shares become liquid (through IPO or acquisition) and provide
a rate of return to the investors (in the form of cash or shares)
that is consistent with the level of risk taken. 

• Most venture capital investments are done in a pool format.


Who is a Venture Capitalist?

• A venture capitalist is a person or investment firm that makes


venture investments, and these venture capitalists are expected
to bring managerial and technical expertise as well as capital to
their investments.

• A venture capital fund refers to 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.

• Generally, venture capitalists are looking for returns of 25 percent


and up.
Venture Capital Funding Process

• Seed Money: Low level financing needed to prove a new idea.


• Start-up: Early stage firms that need funding for expenses
associated with marketing and product development.
• First-Round: Early sales and manufacturing funds.
• Second-Round: Working capital for early stage companies that
are selling product, but not yet turning a profit.
• Third-Round: Also called Mezzanine Financing, this is
expansion money for a newly profitable company .
• Fourth-Round: Also called bridge financing, 4th round is
intended to finance the "going public" process.
VC v/s Angel Investors
Points of Differentiation Angel investor Venture Capitalist

 Definition Angel investors, alone or in Venture capital typically comes


organized groups, are usually from institutional investors and high
wealthy individuals, often with a net worth individuals and is pooled
successful entrepreneurial record, together by dedicated investment
who invest their own money. firms.

-SMALLER DEALS below 1 -LARGE DEAL


million
Risk High Risk takers Venture capitalists are more
Motivated motivated by profit and so they're
Desire to see the plan successful going to be looking to invest in
businesses that will offer security
and a high return on their
investments.
Focus/Stage of development Typically earlier stage of business Earlier stage.
Expanding the company  But VC funds invest with the purpose
of taking the company to the IPO
stage and beyond.
The focus is usually high growth
companies .
Risk Of Venture Capital
• Taking VC is as good as taking in new co-owners of your
business thus increasing 3rd party Governance.

• Increased control of Venture Capitalist.

• Increased commitment to stated strategy .

• Less control and rigidity over Decision Making.

• People don’t like when you ‘mess’ with their money. The
investors are going to do anything in their power to secure this
investment.
Venture Capital in India
• This concept was introduced in India in 1987.

• It was operated by “Industrial Development bank of India.

• In the same year “Industrial credit and Investment


Corporation of India” also started venture capital
activity.

•Trend in India
Bibliography

• www.indiavca.org

• www.pluggd.in

• www.sramanamitra.com

• www.nenonline.org

• www.entrepreneur.com
Thank You

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