Venture capital
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Transcript of Venture capital
What is venture capital? Venture capital means funds made availablefor startup firms and small businesses withexceptional growth potential.
Venture capital is long term risk capital to finance high technology projects which involve risk but at the same time has strong potential for growth.
Definition
The SEBI defined Venture Capital fund in its regulation 1996 as ‘a fund established in the form of a company or trust which raises money through loans, donations, issue of securities or units as the case may be & makes or proposes to make investments in accordance with the regulations’.
FEATURES OF VENTURE CAPITAL
Long term investment:
Lack of liquidity:
High risk return:
Private equity:
Wide scope:
Equity participation:
ADVANTAGES OF VENTURE CAPITAL
provide large sum of equity finance.
Venture Capitalist are rewarded by business success & the capital gain.
Able to bring wealth and expertise to your company
The Venture Capitalist also has a wide network of contacts.
Providing additional funds.
DISADVANTAGES OF VC
Lengthy and complex process (needs detailed business plan, financial projections and etc.)
In the deal negotiation stage, you will have to pay for legal and accounting fees
Investors become part owners of your business - founder loss of autonomy or control
Problems facing by VC
Requirement of an experienced management team.
Requirement of an above average rate of return on investment.
Longer payback period.
Uncertainty regarding the success of the product in the market.
Questions regarding the infrastructure details of production.
Skills and Training required.
Time Period.
Interference in Business:
Top cities attracting VC investments:
CITIES SECTORS
Mumbai Software services, BPO, Media, Computer graphics, Animations, Finance & Banking
Bangalore IT & Bio-technology
Delhi Software services, Telecom
Chennai IT , Telecom
Hyderabad IT & ITES, Pharmaceuticals
Pune Bio-technology, IT , BPO
VC industry wise segmentation
6.94
7.73
11.5
4.32
27.954.82
11.43
12.92
3.369.03
Percentage
IT & ITES
Energy
Manufacturing
Media & Ent.
BFSI
Shipping & logistics
Eng. & Const.
Telecom
Health care
VC funding in India
VCFs in India can be categorized into following five groups:
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:- Can bank 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
Remedies taken for VC Reduce the rules and regulations of SEBI.
Investment made on development of management and employees through training, improving skills.
Avoid venture capitalist in interference in Business activity.
Increasing market facilities.
Provide more infrastructure facilities.