Venture Capitalist Ppt
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The greatest difficulty in the world is not for people to accept new ideas, but to make them forget old
VENTURE CAPITAL
WHAT IS VC IS IT JUST THE STORY OF THE MAN WITH FUNDING? THE idea AND THE MAN WITH THE MONEY ?
06/27/09
Indian Institute Of Planning & Management
2
VC FUNDING IS … IT IS THE BUSINESS OF EMPLOYING CAPITAL ‘PATIENTLY’ TO ‘MAXIMISE RETURNS’ WHILE MANAGING RISKS IN A RELATIVELY HIGH-RISK VENTURE VERSUS SIMPLY ‘MINIMISING RISKS’ FOR A SURER FIXED RETURN 06/27/09
Indian Institute Of Planning & Management
3
Cont….
06/27/09
Venture capitalists are typically very selective in deciding what to invest in; as a rule of thumb, a fund may invest in one of four hundred opportunities presented to it. Funds are most interested in ventures with exceptionally high growth potential, as only such opportunities are likely Indian Institute Of Planning & Management
4
Development In India The 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” was also 06/27/09
Indian Institute Of Planning & Management
5
VC Mainly Looks at? Promoter’s Integrity,
Relevant Experience, Drive Level. Uniqueness Of Their IDEA Focus On/ Commitment To Their IDEA High Entry Barriers Competitive Advantages Good Market Size & Growth Rates 06/27/09
Indian Institute Of Planning & Management
6
Cont…. Writing a business plan is a process in which the entrepreneur is forced to think about all aspects of the business Write it yourself Focus on The people, the opportunity / business model, Risk and reward Write down the exit options (the investor wants to get money out of it as well) but don’t 06/27/09
Indian Institute Of Planning & Management
7
Types of Venture Capital Firms
06/27/09
Depending on your type business, the venture capital firm you approach will differ. For instance, if you're an internet [start-up company], funding requests from a more manufacturing-focused firm will not be effective. Doing some initial research on which firms to approach will save time and effort. When approaching a VC firm, consider their portfolio: Business Cycle: Do they invest in budding or established businesses? Industry: What is their industry focus? Investment: Is their typical investment Indian Institute Of Planning & Management
8
Cont….
06/27/09
Targeting specific types of firms will yield the best results when seeking VC financing. The National Venture Capital Association segments dozens of VC firms into ways that might assist you in your search. It is important to note that many VC firms have diverse portfolios with a range of Indian Institute Of Planning & Management
9
The Investment Process Deal Flow Generation Assessment & Selection Deal making
Monitoring
Exit 06/27/09
Indian Institute Of Planning & Management
10
Revenue Stream For VC Personal savings -- one can
06/27/09
fund the business from personal savings or by raising personal loans offering one’s personal property as collateral security. Bootstrapping – One can start the business venture with the limited available funds, and then use the profits to further develop the business. Indian Institute Of Planning & Management
11
Cont… All the above three options are meant for wealthy individuals who may not strictly need external sources for business funding. There is a fourth way to raise money to start a business and this is known as venture capital. Venture capital is particularly suited if the intending entrepreneur needs 06/27/09
Indian Institute Of Planning & Management
12
Cont…. Venture capital investment firms raise and pool together money from institutional investors and other high net worth individuals. These venture capital funding firms quite often provide managerial and technical expertise apart from funds for the business. The venture capital company 06/27/09
Indian Institute Of Planning & Management
13
Trends In VC Funding There are typically six stages
2.
06/27/09
of financing offered in Venture Capital, that roughly correspond to these stages of a company's development. Seed Money: Low level financing needed to prove a new idea (Often provided by "angel investors") Indian Institute Of Planning & Management
14
Cont.... 2. Start-up: Early stage firms that need funding for expenses associated with marketing and product development 3. First-Round: Early sales and manufacturing funds Capital for a venture that has successfully passed the initial start-up phase. The business plan has been written and the product is 06/27/09
Indian Institute Of Planning & Management
15
Cont…. 4. Second-Round: Working
06/27/09
capital for early stage companies that are selling product, but not yet turning a profit Usually provided by venture capital firms and (investment) banks Often used for marketing purposes and growth of the Indian Institute Of Planning & Management
16
Cont…. 5. Third-Round: Also called
06/27/09
Mezzanine financing, this is expansion money for a newly profitable company Sometimes another round of financing is necessary before being profitable. In other cases the money is used by profitable companies to be able to Indian Institute Of Planning & Management
17
Cont…. 6. Fourth-Round: Also called bridge financing, 4th round is intended to finance the "going public" process Subsidies Dependent on the laws and regulations in a specific country, (start-up) companies can often apply for subsidy by the public sector Loans 06/27/09
Indian Institute Of Planning & Management
18
Venture Capital Decision Making
Given the complexities of venture financial statement analysis, determining when a “trend” indicates a “problem requiring action” can be quite complicated. As a result, VCs rely upon a combination of “past experience” and “pattern matching” to determine how best to interpret and respond to different situations. Past Experience. In analyzing any one particular company, VCs rely heavily upon prior experience. One venture investor characterized monitoring portfolio companies in a similar fashion to looking at
06/27/09
Indian Institute Of Planning & Management
19
Cont…. Pattern Matching. In addition to relying upon past experience and “sense”, venture investors rely heavily upon pattern matching. Pattern matching has been described by one VC as “putting the different tiles together to see the whole picture.” Examples of different “tiles” VCs would consider in forming an opinion would include: Activity within the portfolio can help an investor better understand whether or not an issue, facing one company is affecting other ones of a 06/27/09
Indian Institute Of Planning & Management
20
N A H Presented T By: K U O Y 06/27/09
B.Vigneshw V.Prathik ar V.Srinivas S. A.JashwanthA.Kiran Kumar Manoj T.Raghu Indian Institute Of Planning & Management
21
VENTURE CAPITAL
WHAT IS VC IS IT JUST THE STORY OF THE MAN WITH FUNDING? THE idea AND THE MAN WITH THE MONEY ?
06/27/09
Indian Institute Of Planning & Management
2
VC FUNDING IS … IT IS THE BUSINESS OF EMPLOYING CAPITAL ‘PATIENTLY’ TO ‘MAXIMISE RETURNS’ WHILE MANAGING RISKS IN A RELATIVELY HIGH-RISK VENTURE VERSUS SIMPLY ‘MINIMISING RISKS’ FOR A SURER FIXED RETURN 06/27/09
Indian Institute Of Planning & Management
3
Cont….
06/27/09
Venture capitalists are typically very selective in deciding what to invest in; as a rule of thumb, a fund may invest in one of four hundred opportunities presented to it. Funds are most interested in ventures with exceptionally high growth potential, as only such opportunities are likely Indian Institute Of Planning & Management
4
Development In India The 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” was also 06/27/09
Indian Institute Of Planning & Management
5
VC Mainly Looks at? Promoter’s Integrity,
Relevant Experience, Drive Level. Uniqueness Of Their IDEA Focus On/ Commitment To Their IDEA High Entry Barriers Competitive Advantages Good Market Size & Growth Rates 06/27/09
Indian Institute Of Planning & Management
6
Cont…. Writing a business plan is a process in which the entrepreneur is forced to think about all aspects of the business Write it yourself Focus on The people, the opportunity / business model, Risk and reward Write down the exit options (the investor wants to get money out of it as well) but don’t 06/27/09
Indian Institute Of Planning & Management
7
Types of Venture Capital Firms
06/27/09
Depending on your type business, the venture capital firm you approach will differ. For instance, if you're an internet [start-up company], funding requests from a more manufacturing-focused firm will not be effective. Doing some initial research on which firms to approach will save time and effort. When approaching a VC firm, consider their portfolio: Business Cycle: Do they invest in budding or established businesses? Industry: What is their industry focus? Investment: Is their typical investment Indian Institute Of Planning & Management
8
Cont….
06/27/09
Targeting specific types of firms will yield the best results when seeking VC financing. The National Venture Capital Association segments dozens of VC firms into ways that might assist you in your search. It is important to note that many VC firms have diverse portfolios with a range of Indian Institute Of Planning & Management
9
The Investment Process Deal Flow Generation Assessment & Selection Deal making
Monitoring
Exit 06/27/09
Indian Institute Of Planning & Management
10
Revenue Stream For VC Personal savings -- one can
06/27/09
fund the business from personal savings or by raising personal loans offering one’s personal property as collateral security. Bootstrapping – One can start the business venture with the limited available funds, and then use the profits to further develop the business. Indian Institute Of Planning & Management
11
Cont… All the above three options are meant for wealthy individuals who may not strictly need external sources for business funding. There is a fourth way to raise money to start a business and this is known as venture capital. Venture capital is particularly suited if the intending entrepreneur needs 06/27/09
Indian Institute Of Planning & Management
12
Cont…. Venture capital investment firms raise and pool together money from institutional investors and other high net worth individuals. These venture capital funding firms quite often provide managerial and technical expertise apart from funds for the business. The venture capital company 06/27/09
Indian Institute Of Planning & Management
13
Trends In VC Funding There are typically six stages
2.
06/27/09
of financing offered in Venture Capital, that roughly correspond to these stages of a company's development. Seed Money: Low level financing needed to prove a new idea (Often provided by "angel investors") Indian Institute Of Planning & Management
14
Cont.... 2. Start-up: Early stage firms that need funding for expenses associated with marketing and product development 3. First-Round: Early sales and manufacturing funds Capital for a venture that has successfully passed the initial start-up phase. The business plan has been written and the product is 06/27/09
Indian Institute Of Planning & Management
15
Cont…. 4. Second-Round: Working
06/27/09
capital for early stage companies that are selling product, but not yet turning a profit Usually provided by venture capital firms and (investment) banks Often used for marketing purposes and growth of the Indian Institute Of Planning & Management
16
Cont…. 5. Third-Round: Also called
06/27/09
Mezzanine financing, this is expansion money for a newly profitable company Sometimes another round of financing is necessary before being profitable. In other cases the money is used by profitable companies to be able to Indian Institute Of Planning & Management
17
Cont…. 6. Fourth-Round: Also called bridge financing, 4th round is intended to finance the "going public" process Subsidies Dependent on the laws and regulations in a specific country, (start-up) companies can often apply for subsidy by the public sector Loans 06/27/09
Indian Institute Of Planning & Management
18
Venture Capital Decision Making
Given the complexities of venture financial statement analysis, determining when a “trend” indicates a “problem requiring action” can be quite complicated. As a result, VCs rely upon a combination of “past experience” and “pattern matching” to determine how best to interpret and respond to different situations. Past Experience. In analyzing any one particular company, VCs rely heavily upon prior experience. One venture investor characterized monitoring portfolio companies in a similar fashion to looking at
06/27/09
Indian Institute Of Planning & Management
19
Cont…. Pattern Matching. In addition to relying upon past experience and “sense”, venture investors rely heavily upon pattern matching. Pattern matching has been described by one VC as “putting the different tiles together to see the whole picture.” Examples of different “tiles” VCs would consider in forming an opinion would include: Activity within the portfolio can help an investor better understand whether or not an issue, facing one company is affecting other ones of a 06/27/09
Indian Institute Of Planning & Management
20
N A H Presented T By: K U O Y 06/27/09
B.Vigneshw V.Prathik ar V.Srinivas S. A.JashwanthA.Kiran Kumar Manoj T.Raghu Indian Institute Of Planning & Management
21
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