Venture Capital

ANNAMALAI.V(13AD03)

ELANGO.S(13AD10)

NIKKITHA.C(13AD24)

SIVAKUMAR.G(13AD35)

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Venture Capital

• 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 are professional investors , who

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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Forms of Venture Capital

investments

Debt• Loan contract

between the business

and the venture capital

firm high interest rates

Equity• Venture capital firm

purchases an

ownership share of the

business generally in

the form of private

placement stock

Preferred stock• The favored type of venture

capital investment provides

interest yields and seniority

to capital in the event that the

firm fails, but with an equity

interest if the firm succeeds.

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Features of Venture Capital

• High tech areas.

• Long term start up.

• Return is possible only when share ofcompany is sold at market price.

• Also participate in management affairs ofbusiness.

• Reduce uncertainties.

• Encourages, nurture and help the entrepreneurgrow.

• Act as co-partner.2/12/2015 4

The Process

2/12/2015 5Source: Tiger olfactory Network (Beijing)

Exit

IPO Promoters buyback Trade saleBuy back of equity by

company

Post investment activities

Deal structuring

Evaluation

Screening

Deal origination

Venture Capital Process

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Venture Capital Exit Options

7

Initial public offer(IPOs)

Mergers & Acquisition

Sharesbuy back

Sale to Other Strategic Investor

sales in OTC market

management buy outs

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IPO

• Also called as Stock Market launch.

• Involves a private company offering its shares

to the public for purchase for the first time.

• Referred to as taking a company public.

• The original investors in the private company

can make fortunes because the new stock is

worth much more than their original

investments.

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Mergers & Acquisitions

• A merger is a combination of two companies to form

a new company.

• An acquisition is the purchase of one company by

another in which no new company is formed.

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Shares Buyback

• The promoters buy back VC stake at

predetermined price and keep the ownership

control with him.

• VC consider it as an exit option only when

promoters are in position to mobilise funds for

buy back of equity held by the venture

investors.

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Sales to other Strategic Investors

• VC sells his stake to the strategic buyer who

already owns a business or has plans to enter

target industry.

• The benefit is typically liquidity because if VC

sell the company to a strategic acquirer he/she

might be able to sell most or all of their stock.

• The acquirer may or may not retain the

management team, and may or may not make

substantial changes in the company's operations,

staff, and business lines.2/12/2015 11

Sales in OTC Market• OTC(Over-The-Counter) can be used to refer to stocks

that trade via a dealer network as opposed to on a

centralized exchange.

• OTC markets are typically bifurcated into the customer

market – where dealers trade with their clients such as

corporations and institutions – and the interdealer

market, where dealers trade with each other.

• The price a dealer quotes to a client may very well

differ from the price it quotes to another dealer.

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Management Buyouts• A transaction where a company’s management team purchases

the assets and operations of the business they manage.

• A management buyout (MBO) is appealing to professional

managers because of the greater potential rewards from being

owners of the business rather than employees.

• The financing required for an MBO is usually a combination of

debt and equity that is derived from the buyers, financiers and

sometimes the seller.

• The advantage of MBO is that as the existing managers are

acquiring the business, they have a much better understanding of

it and there is no learning curve involved.

• Another advantage is that the company’s debt load may be

lower, giving it more financial flexibility.2/12/2015 13

Reliance Venture Asset Management Ltd.

• Launched in 2006.

• A corporate venture capital company based

in Mumbai.

• Promoted by the Reliance ADA Group.

• Ranked 30th in the Red Herring Top 100

Global Venture Capital Firms in 2009-2010.

• Focus is both - on established as well as

emerging or disruptive technologies and

business model.2/12/2015 14

Mission:

• To help build businesses that not only deliver

outstanding financial value but also emerge as

category leaders.

Vision:

• To build a global enterprise for all our

stakeholders.

• A great future for our country.

• To give millions of young Indians the power to

shape their destiny.

• The means to realize their full potential.

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Investment ProcessStage 0- Business Plan Submission

The business plan should contain the following:

• A two page Executive Summary

• 5 – 6 slides covering business offering, team, top level financials, market

opportunity and competitive advantage

Stage 1- Initial Meeting with Entrepreneur / Team

20-25 slides presentation, which clearly covers the following:

• Product / Solution Offering

• Market Opportunity

• Management Team

• Technology Overview

• Business Model

• Product / Solution roadmap

• Financials

• Competition Analysis2/12/2015 16

Stage 2- Investment Opportunity Evaluation

• Detailed Business Case

• Face to face meetings with key personnel

• Formal Presentation to broader team

• Identifying key hires and organization structure

• Develop mutually agreed upon milestones

Stage 3- Post Investment Roadmap

• Working closely to initiate and augment the business.

• Regularly monitor the progress and issues, if any.

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Sequans Communications

• Founded in 2003.

• A leading developer and supplier of single-

mode LTE chipset solutions that are highly

cost and power efficient.

• Two distinct LTE product lines:1) Streamrich LTE for feature-rich mobile computing and

home/portable router devices

2) Streamlite LTE for cost-sensitive M2M devices and the

Internet of Things.

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RVAM & Sequans Communications • RVAM entered venturing along with investors like

Alcatel Lucent, Motorola, Societe General Asset

Management, Swiss Com, CDC Enterprises, Add

Partners, Cap-Decisif, Kennet Venture Partners,

Vision Capital and I-Source Gestion, in 2007 with an

average of about $2 per share.

• RVAM exits in Sequans Communications in 2011 by

entering in IPO in New York Stock Exchange.

• RVAM sold its share for about $8 giving a return of

close to $6 a share.

• Share price as on 29 sept. 2014 is $2.03

2/12/2015 19Source: www.livemint.com

• Revenue of $93.7 million in 2011 increased

37% over 2010 revenue.

• Revenue of $5.1 million increased 13%

compared to the first quarter of 2014.

• Its value at the time of exit was 285.95M

• Its valve as on 26 sept 2014 is 94.77M

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2/12/2015 20Source: www.marketwatch.com

2/12/2015 21Source: www.nasdaq.com

Share price of Sequans Communications

2/12/2015 22Source: www.ycharts.com

Value of Sequans Communications

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