Venture Capital

AGENDA
What is Venture Capital Characteristics Of Venture Capital Steps involved in Venture Capital Statistics of Venture Capital Advantages & Disadvantages of Venture Capital Indian Companies

Meaning Of Venture Capital

Definition by SEBI
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 and makes or proposes to make investments in accordance with the regulations.

Need of venture Capital

Encouraging entrepreneurs To bridge the gap between Capital and Resources

Characteristics of Venture Capital

High Risk Long time Management Participation Lack of Liquidity Provided at early Stage of the Project Finance to small & New Companies

Approval of Funding to Venture Capitalists

Business Plan Presentation Introductory Meeting Due Diligence Funding

Stages of Financing
Seed Money Start up First Round Second Round Third Round Fourth Round

Risk in each stage

Financial Stage Period (Funds locked in years) 7-10 Risk Perception Activity to be financed For supporting a concept or idea or R&D for product development

Seed Money

Extreme

Start Up

5-9

Very High

Initializing operations or developing prototypes

Start commercials production and marketing

First Stage

3-7

High

Financial Stage

Period (Funds locked in years) 3-5

Risk Perception

Activity to be financed Expand market and growing working capital need Market expansion, acquisition & product development for profit making company

Second Stage

Sufficiently high

Third Stage

1-3

Medium

Fourth Stage

1-3

Low

Facilitating public issue

Advantages & Disadvantages

Advantages 1. Encouragement of new Entrepreneurs 2. New Business Development Disadvantages Long Time High Risk

3. Funding R&D and other Projects for use Lack Of Liquidity of Humans 4. Innovation 5. Industry Wise Development Patience Success ratio is very less

India Venture Capital

First Started in 1987 by IDBI Then by ICICI in the same year and formed a new company TDICI

Indian Venture Capital Association

Estalabished in 1993 - represents venture capital and private equity firms - promotes the industry within India and throughout the world - encourages investment in high growth companies and - supports entrepreneurial activity and innovation

Venture Capital Companies In India

Indian Government has given 5% tax concession for the companies into it. Divided into 5 Groups 1. Central Government controlled development Financial Institutions - IFCI & SIDBI 2. State Government controlled developed Financial Institutions - Punjab InfoTech , Gujarat & Kerala Venture Capital Fund 3. Promoted by Public Banks - SBI Capital Market Limited, CanBank Venture Capital Limited 4. Promoted by Private Sector Companies - TDICI, Infinity Venture India Limited, Reliance Venture & sequoia venture 5. Promoted by Overseas Investments - Walden International Investment & HSBC Private Equity Management Mauritius Ltd.

Top cities attracting venture capital investments

CITIES MUMBAI SECTORS Software services, BPO, Media, Computer graphics, Animations, Finance & Banking All IP led companies, IT & ITES, Biotechnology Software services, ITES , Telecom IT , Telecom IT & ITES, Pharmaceuticals

BANGALORE

DELHI CHENNAI HYDERABAD

PUNE

Bio-technology, IT , BPO

Industry wise Investment

Statistics of Venture Capital

Rules of venture capital in India

Income Tax Act SEBI Regulations

Income tax Regulations

The Income Tax Act provides tax exemptions to the VCFs under Section 10(23FA) subject to compliance with Income Tax Rules. Restrict the investment by VCFs only in the equity of unlisted companies. VCFs are required to hold investment for a minimum period of 3 years. The Income Tax Rule until now provided that VCF shall invest only upto 40% of the paid-up capital of VCU and also not beyond 20% of the corpus of the VCF. After amendment VCF shall invest only upto 25% of the corpus of the venture capital fund in a single company. There are sectoral restrictions under the Income Tax Guidelines which provide that a VCF can make investment only in specified companies.

Rules By SEBI
Venture Capital Funds are regulated by the SEBI (Venture Capital Fund) Regulations, 1996. A venture capital fund may be set up by a company or a trust, after a certificate of registration is granted by SEBI on an application made to it. On receipt of the certificate of registration, it shall be binding on the venture capital fund to abide by the provisions of the SEBI Act, 1992. A VCF may raise money from any investor, Indian, Non-resident Indian or foreign, provided the money accepted from any investor is not less than Rs 5 lakhs. At least 80% of the funds should be invested in venture capital companies and no other limits are prescribed. SEBI Regulations do not provide for any sectoral restrictions for investment except investment in companies engaged in financial services.