March Frames Venture

7/28/2019 March Frames Venture

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Saurabh Srivastava

Chairman - Infinity Venture FundPresident Indian Venture Capital Association

Venture Capitalfor

Media & Entertainment


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Equity Financing for new concepts & ideas - Risk

Capital

Available for sectors withhigh-growthpotential

Ideal forknowledge / technology / creativitybased

industries

Vibrant Venture Capital ecosystem drives US

leadership in technology, creativity

Value add orSMARTmoney

What is Venture Capital

Media & Entertainment has al l the ingred ients to m ake it attract ive

for Ventu re Capital Financing


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Who Invests in Venture Capital

High networth individuals with appetite for high risk

/ reward paradigm

Institutions diversifying investment portfoliosInsurance companies, pension funds, banks, etc.

Funds of funds

Governments acting as catalysts


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How does the Venture Capital model work

Investors invest money in a fund (usually a Trust)

The fund has a fixed life (usually 5+2 years)

Asset management company manages investmentsfor the Trust

The AMC charges the fund an annual operating costof approx. 2.5% per annum

The fund has invests in several companies which areIPOd/ acquired

The upside is shared between the AMC and investorsapprox 25:75 subject to a minimum invested return


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The VC Model

Fund

(Trust)

75%upside toinvestors

AMC25% of upside

Opn. costs

Advice

Co. 1 Co. 2 Co. 3 Co. 4

IPO SOLD

25%Upside to

FundManagers


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How the Value Creation Model works

A typical Venture Capital Fund may invest in 20 companies

Typically, 10 will fail, 4 will succeed and 6 may be okay

Venture Capital funds do not avoid risk but manage it

By balancing the portfolio

Focusing on the people and the ideas

Mentoring, Coaching, adding value

All new ventures are high risk

Reducing perceived risk does not reduce real risk

Number of failures is hard to control

To balance, the ones that win must win big

Hence each investment must be structured for high returns


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Fund Economics

Fund of Rs. 110 Crore (20 Investments @ Rs. 5 crores)

Operating Costs : ( - )Rs. 10 crores

10 Companies fail : ( - )Rs. 50 crores

03 Companies limp along : ( - )Rs. 05 crores

02 Companies chug along : ( + )Rs. 05 crores

02 Companies do great : ( +) Rs, 150 crores

02 Companies are stars : ( + )Rs. 500 crores

TOTAL : Rs. 600 crores

This is an IRR of 40%


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Source: MSDW research and Venture Source

(US$Bn)

US Venture Capital Funding since 1985

010

20

30

40

50

60

70

80

90

100

1985 1987 1989 1991 1993 1995 1997 1999 2001


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Asian Venture Capital Market Monitor

Source: AVCJ

7.4

4.9

16.6

9.1

17.2

9.1

6.8

4.9

0

2

4

6

8

10

12

14

16

18

20

USD Billion

1998 1999 2000 1H-2001

$ Raised $ Invested


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Private Equity/VC Investment in Asia - 2001

8$ 7.20Thailand

2$ 8.16Philippines

12$ 16.69New Zealand

1$ 22.00Sri Lanka

13$ 35.54Malaysia

4$ 177.24Taiwan

23$ 262.81Hong Kong

11$ 393.18China

81$ 547.83Australia

26$ 964.92Singapore

19$1,054.18South Korea

91$1,104.90India

39$1,858.38Japan

Number of DealsAmt. Invested($min)

Country

Sourc e : AVCJ


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Venture Capital Investments in India

Sour ce: IVCA/AVCJ

20 80150

500

1,2001,100

1,500

0200400

600800

1,0001,200

1,4001,600

1997

1998

1999

2000

2001

2002

20

03*(

est)


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Over 70 VC/Private Equity funds operating in India today .

90% are global funds rest Indian funds

Profile of majority of VCs are Investment banking ..a few

from industry

Cumulative funds under management over the past 3 years: $ 5.6 billion ; over 50% is focussed on IT/Telecom

Cumulative investments in past 3 years : $ 3 billion..

Several New Funds Announced in year 2001 targeting India

Venture Capital in India - The Good News


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Venture Capital in India..a qualitative look

Predominant sources of Capital are TIE members , Select

Corporates , Singapore government entities like NSTB, GIC

, Temasek, Vertex, etc

Amongst Private Equity players Warburg Pincus, Capital

International, Citibank , ING etc active . Watching on the

sidelines are Morgan Stanley, J P Morgan, 3i , ..

Large Fund of Funds like Harbour Vest, Pantheon ..still

watching India

Other investors watching India include large pensionfunds , University endowments


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Where is it happening?

Expansion

18%

Late Stage

23%

Early Stage

44%

Seed

15%

Seed and Ear ly Stage cons t i tute 59% o f cu rrent investment act iv i ty

Funding by Investment Stages

Source: Nasscom


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Information

Technology

18%

Healthcare

7%

Manufacturing

17%

Telecom

31%

Internet19%

Others8%

IT & Telecom con st i tute 49% of current inv estment act iv i ty

Funding by Sector

Source: Meri l l Lynch

Private Equity Investment - By Sector

C &


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VC Investments in Media & Entertainment

Ideal for Venture Capital investments

Embodies Creativity, IP

Potential for high Risk / Reward

World Class Industry

High Growth potential in all areas Films

Television Music

Radio

Live Entertainment

Distribution

Infrastructure

Content / Technology

Huge Domestic market

Globalisation has only just commenced

Media & Entertainment


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Three principal market drivers are:

Despite the recent slowdown in the US economic growthand concerns about its effects on other markets, the long-term picture for entertainment and media spending remainsbright

The ability of global media players to distribute theirproduct/content throughout the world will make mediacompanies stronger and better able to provide advertiserswith effective platforms to reach consumers

Digital technology and the expansion of broadband Internet

access will transform virtually all entertainment and mediasegments by opening up new distribution outlets. TheInternet will prove to be an effective companion totraditional media, rather than a feared competitor

Media & EntertainmentGlobal Market Drivers

I t t i US


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Investments in US

Year No of Investments Value(USD)

1999-2000 254 1.9 bn2000-2001 671 7.7 bn

2001-2002 480 5.2 bn.

M di & E t t i t PE/VC D l D


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Films Distribution

Shringar Films

Broadcasting & Software

NDTV

TV 18

SAB TV

Vijay TV

Aaj Tak

Technology Media Group

Sony Entertainment Television

UTV Interactive

Media & Entertainment - PE/VC Deals Done

M di & E t t i t PE/VC D l D


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Cable Television & Distribution

Indus Ind Media

Music

Easy Buy Music

Radio

Film Software & Animation

Pentamedia

Media & Entertainment - PE/VC Deals Done

In th e US this secto r has attracted US$ 320mn in Q4 2001

In Concl sion


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In Conclusion

Venture Capital can transform and globalise theIndian Entertainment industry

Bollywood, not Hollywood, could rule the roost

Tremendous opportunity for Venture, Wealth &Employment Creation


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T H A N K Y O [email protected]

March Frames Venture

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