Date post: | 15-Sep-2014 |
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Presented to – Dr.Premraj Alva
Group Leader – Abhijeet Sankapal
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Roll no.
Name Topic
91 Prathamesh Shirsat
92 Ketan Sawant
93 Swapnali More
94 Ruchita Gurav
95 Nikhil Kalamkar
96 Premanand Maharana
97 Abhijeet Sankapal (Group Leader)
98 Manisha More
99 Raghav Gupta
100 Priyanka Dabholkar2
Meaning – VC is long term risk capital to finance high technology projects which involve risks but at the same time has strong potential for growth .venture capitalist pool their resources including managerial abilities to assist new entrepreneurs in early years of project.
Definition – “A financing institution which joins an entrepreneur as a co-promoter
in a project & share the risks & rewards of enterprise ”
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In the 1920's & 30's, the wealthy families of and individuals investors provided the start up money for companies Eg. Eastern Airlines and Xerox
VC funds set up was the one by the Rockfeller Family which started a special fund called VENROCK in 1950
General Doriot, a professor at Harvard Business School, in 1946 set up the American Research and Development Corporation (ARD)
ARD's approach was a classic VC ARD's investment in Digital Equipment Corporation (DEC) in 1957 was a watershed in the history of VC financing
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Form of equity participation High risk & high potential projects Commercialization of new idea / new
technologies Joins entrepreneur as co- promoter Continuous involvement Disinvestment option VC is not injection of funds Investment in small/medium scale enterprises
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Advantages to investing public –
1.Reuce risk & stop mal practices of management
2.Venture funds equipped with necessary skills will able to study prospects of business
3.Venture fund having representatives on BOD of company.
Advantages to promoters –
1.Success of IPO – 10 Underwrites , Brokers & Investors
2.Statutory Formalities– sanctions, underwriting , brokers arrangement
3.Cost & expenses – IPO of equity shares 10% to 15% of nominal value of issue ,recurring cost & Stock exchange listing fee.
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General- 1.Reduce time between technological
innovation & commercial exploitation 2.developing new process/ products . 3.Cushion to support business borrowings 4.Channelise investment in new high tech
business / exist of sick unit 5.Economy development 6.VC firms serves as intermediary 7.Sharing responsibility
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General Business Strategy Advice Develop a Financing Plan Refine the Business Plan Marketing Advice and Strategies Develop Contingencies
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Financial
Stage
Period
Risk Perceptio
n
Activity to be financed
Seed Money
7-10 ExtremeFor supporting a concept or idea or R&D for
product development
Start Up 5-9 Very HighInitializing operations or developing
prototypes
First Stage
3-7 HighStart commercials production and marketing
Second Stage
3-5 Sufficiently high
Expand market and growing working capital need
Third Stage
1-3 Medium
Market expansion, acquisition & product development for profit making company
Fourth Stage
1-3 Low Facilitating public issue10
Deal origination-the VC investor creates a pipeline of deals or investment opportunities that he would consider for investing in. Deal may originate in various ways. referral system, active search system, and intermediaries.
Screening-VCFs, before going for an in-depth analysis, carry out initial screening of all projects .
Due Diligence-Due diligence is the industry jargon for all the activities. The venture capitalists evaluate the quality of entrepreneur before appraising characteristics of the product, market or technology
1. Preliminary evaluation 2. Detailed evaluation
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Deal Structuring- In this process, the venture capitalist and the venture company negotiate the terms of the deals, that is, the amount, form and price of the investment
Post Investment Activities- 1.direction of the venture 2.day-to-day operation of the venture 3. install a new management team Exit- 1. Initial Public Offerings (IPOs)
2. Acquisition by another company3. Purchase of the venture capitalist's
shares by the promoter, or4. Purchase of the venture capitalist's
share by an outsider
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Introduction - The Indian Private Equity and Venture Capital Association was established in 1993 and is based in New Delhi , the capital of India IVCA is a member based national organization that represents Venture capital and Private equity firms, promotes the industry within India and throughout the world and encourages investment in high growth companies
History of Venture Capital in India-
1. Venture Capital functions were run by development financial institutions such as the IDBI ICICI Bank, and State Financial corporations. Publicly raised funds were the main source of Venture Capital
2. Year 1988 marked the establishment of the Technology Development and Information Company of India Ltd.promoted by the ICICI and UTI & was immediately followed by the Gujurat Venture Finance Ltd.
3. In the year 1996, Security Exchange Board of India introduced the Foreign Venture Capital and Private Equity Funds investing in India
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Year No. of VC Funds
2001 77
2002 78
2003 81
2004 86
2005 105
2006 146
2008 160
2013 333
The Growth of Venture Capital Funds In India In the year 2000, SEBI
registered 13 more VC funds & their number increases to 32 .The SEBI has permitted VC funds to invite in real estate. This has open the doors for organized debt & equity instrument in real estate sector . VC firm invited $ 117 million over 27 deals in India during 6 months Ending june 2009.
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The guidelines issued by the Govt. of India were meant to encourage private promoters. their holding could not exceed 20% of the equity of such a joint effort The guidelines of funding relatively new projects
with no proven record in market acceptability. Section 372 of the Companies Act prohibits
investment in a single company beyond 10% of the paid up
capital of a company Indian educational system fails to march laboratory
research with commercial application. Lack of entrepreneurial tradition
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Venture capital funds, as the position stands today mostly operate from metropolitan town The venture capital has not been given tax incentives Section 372 of the Companies Act places
restrictions on inter-corporate investments. Section 369,309 and 387 of the Companies Act
place restrictions on the remuneration of managing directors, directors and managers.
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Finance-The venture capitalist injects long-term equity finance, which provides a solid capital base for future grow
Business Partner-share the risks and rewards. Mentoring-The venture capitalist is able to
provide strategic, operational and financial advice to the company
Alliances-The venture capitalist also has a network of contacts in many areas that can add value to the company
Facilitation of Exit-Venture capitalists are experienced in the process of preparing a company for an initial public offering (IPO) of its shares onto the stock exchanges
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Product Risk: The products concerned may have little or no track record in the markets as they are largely untested and usually have high obsolescence rates.
Entrepreneur risk: another of the disadvantages of venture capital funding is that it is difficult to evaluate the new management and new business application without any prior track record
Concentration risk: Focusing on small market, which can relate to either the product or in geographical terms, raises exposure to sectoral downturn
Technology risk: hard to assess new technology on small set of products
Duration risk: Generally a longer long-gestation period for funding is needed.
Asset risk: Due to a high percentage of fixed assets with high obsolescence, along with a high fraction of human capital, there is a lack of collateralizable assets, which is one of the drawbacks in venture capital funding
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Debt-business loans, government-backed Small Business Administration (SBA) loans, and factoring loans
Friends and family Angel investors-like venture capitalists in that
they invest in early-stage companies to get a large return on investment
Crowdfunding- Crowdfunding is a great way to pre-sell your product before it’s ready to ship to customers
Growing organically-When you grow your company organically, you take out only what you need to survive and put the rest of your profits back into the company as an investment.
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Introduction – A committee on technology
innovation & Venture capital headed by former
finance secretary Nitin Desai was appointed by
Planning Commission in 2006 to suggest measures to rise the flow of VC funds.
Suggestions- To set up an Early Stage Venture Fund (ESVF)
through public-private partnership (PPP). To provide fiscal incentive by way of set-off against
taxable income for those individuals who invest in start up
To extend same fiscal incentive to those who invest in domestic venture capital funds with corpus less than Rs.250 cr.
To create Limited Liability Corporations(CLCs)25
To extend applicability of such LLCs & the proposed Limited Liability Partnership (LLP) structure to
VC funds. To grant tax exemption of capital gain for
registered VCF’s on exit To remove the restriction on investment of
25% in single VC undertaking by domestic & foreign VCF’s
To remove the minimum capitalization requirement of Indian subsidiaries of SEBI registered foreign VC investors.
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Intro- Druva provides integrated data protection and governance solutions for enterprise laptops, PCs, smartphones and tablets. Its headquarters located in Sunnyvale, caliotnia & pune. It’s a private company Founded in 2007, Druva is one of the fastest growing backup/storage startups
Case Study Druva Software, a Pune-based start-up that makes
proprietary backup software solutions for laptops, has raised $5 million in Series A funding (funding that follows seed funding) from Sequoia Capital India and Indian Angel Network (IAN).
The money will be used to expand the three-year old company’s marketing and sales footprint overseas, including in Europe and the US. So far, it has relied largely on Web-based channels to sell its products in those markets.
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80 per cent of data is duplicated,”. Druva, therefore, developed a software that would allow companies to cut out this duplication and enable laptops to work faster as well as increase storage capacity
Druva had earlier raised seed funding from the Delhi-based Indian Angel Network and Hong Kong-based Accord International.
Druva was developing a continuous data protection product, which is the next level of back-up technology, we decided to fund them,” says Rehan Yar Khan, who represents IAN on the Druva board.
Some of the company’s earliest clients include
NASA and the US Marine Corps. Druva Phoenix,
Khan says, is now beginning to gain traction in
the market
Jaspreet SinghCo-founder and CEO28
Source: 5 July 2010
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Source – Thomson Reuters
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