venLure CaplLal

What |s Venture Cap|ta|]r|vate

Lqu|ty?
venLure caplLal ls a subseL of prlvaLe equlLy and
refers Lo equlLy lnvesLmenLs made for Lhe launch
early developmenL or expanslon of a buslness
Among dlfferenL counLrles Lhere are varlaLlons ln
whaL ls meanL by venLure caplLal and prlvaLe
equlLy
ln Lurope Lhese Lerms are generally used
lnLerchangeably and venLure caplLal Lhus lncludes
managemenL buyouLs and buylns (M8C/M8ls)
1hls ls ln conLrasL Lo Lhe uS where M8C/M8ls
are noL classlfled as venLure caplLal
9rlvaLe equlLy provldes equlLy caplLal Lo
enLerprlses noL quoLed on a sLock markeL
Why compan|es need f|nanc|ng?
or sLarLups or growlng companles as well as Lhose
faclng a ma[or change flnanclng ls one of Lhe key
buslness lssues
new caplLal ls needed eg for
1 lnanclng of producL developmenL
2 lnanclng of markeL peneLraLlon
3 lnanclng of lnvesLmenLs
4 Worklng caplLal flnanclng Lo secure operaLlve
conLlnulLy
3 MalnLalnlng llquldlLy Lo be able Lo cover dally
paymenLs
urlng Lhelr sLarLup growLh and expanslon
sLages Lhe companles are ofLen faced wlLh
Lhe facL LhaL Lhe lncomlng cash flow ls noL
sufflclenL for Lhe operaLlons
1he companys cumulaLlve cash flow ls
negaLlve
1he Llme needed for Lurnlng Lhe company's
cash flow poslLlve varles conslderably
A long producL developmenL sLage and slow
markeL peneLraLlon prolong Lhe negaLlve cash
flow perlod
1he company can have a negaLlve cash flow
for years a slLuaLlon LhaL ls Lyplcal ln hlgh
Lech branches
perat|ve f|nanc|ng
1o brldge Lhe deflclL ln operaLlve flnanclng Lhe
company has Lhe followlng cholce of avallable
measures
1 Lo ensure LhaL Lhe llquldlLy plannlng has been
approprlaLe
2 Lo make Lhe cllenLs pay Lhelr lnvolces on Llme by
offerlng for example dlscounLs for rapld paymenLs
3 Lo lnLenslfy Lhe collecLlon of sales recelvables
4 Lo delay Lhe paymenLs Lo suppllers wlLhln Lhelr Lerms
of paymenL
3 Lo maxlmlze Lhe sales marglns Lo cuL lndlrecL cosLs
Lxterna| f|nanc|ng
Should Lhese measures noL be sufflclenL Lhe
company has Lhe followlng alLernaLlves
Lo acqulre equlLy caplLal (eg venLure caplLal
lnvesLors)
Lo borrow caplLal
@he rocess of acqu|r|ng Venture
Cap|ta| f|nanc|ng
1he acLual venLure caplLal lnvesLmenL made ln a
company ls preceded by a Lhorough and selecLlve
assessmenL of poLenLlal lnvesLmenL LargeLs made
by Lhe venLure caplLal lnvesLor
AL Lhe flrsL sLage Lhe assessmenL of Lhe
lnvesLmenL requesL ls based on a buslness plan
made by Lhe company
1hls ls Lhe sLage where mosL of Lhe pro[ecLs
(abouL 90 ) of all proposed pro[ecLs are
re[ecLed
1he lnlLlal assessmenL ls made relaLlvely
rapldly and Lherefore Lhe company should pay
aLLenLlon Lo Lwo aspecLs
Lhe buslness plan should be carefully prepared
and Lhe conLacL LargeLed Lo Lhe correcL
lnvesLors
A wellprepared buslness plan summary ls Lhe
besL means of aLLracLlng and convlnclng Lhe
lnvesLor
@he rocess of acqu|r|ng Venture
Cap|ta| f|nanc|ng
1he cenLral lssues consldered by Lhe venLure
caplLal lnvesLor aL Lhls sLage are
ls Lhe company able Lo conducL proflLable and
growlng buslness operaLlons?
o Lhe company execuLlves have Lhe necessary
quallLles Lo manage Lhe buslness ln Lhe varlous
developmenL sLages?
Wlll Lhe lnvesLor be able Lo obLaln Lhe deslred
reLurn Lhrough an lncrease ln Lhe companys neL
worLh?
@he rocess of acqu|r|ng Venture
Cap|ta| f|nanc|ng
8esldes Lhe companys buslness plan Lhe
venLure caplLal lnvesLor wlll assess Lhe
compaLlblllLy of Lhe lnvesLmenL requesL
agalnsL lLs own lnvesLmenL sLraLegy
1he declslve lnvesLmenL sLraLegy crlLerla may
be company slze developmenL sLage branch
or geographlcal locaLlon
ConLacLs dlrecLed Lo Lhe correcL lnvesLors aL
an early sLage of Lhe process wlll save Llme
and dlmlnlsh Lhe probablllLy of negaLlve
answers
Should Lhe lnvesLor declde LhaL Lhe
lnvesLmenL requesL meeLs hls crlLerla Lhe
followlng sLep ls a meeLlng arranged wlLh Lhe
company managemenL
Lxperlence has shown LhaL abouL half of Lhe
remalnlng companles are dlscarded aL Lhe
negoLlaLlon sLage
1he Lhlrd sLage or Lhe due dlllgence sLage
lnvolves a Lhorough sLudy of Lhe LargeL
company by Lhe venLure caplLal lnvesLor who
assesses Lhe company on Lhe basls of hls own
welghLed lnvesLmenL crlLerla
1he preparedness of Lhe company
managemenL Lo launch and developed Lhe
buslness ln quesLlon ls generally seen as Lhe
mosL lmporLanL crlLerlon
CLher vlLal lssues lnclude Lhe slze and
developmenL of Lhe companys LargeL markeL
Lhe compeLlLlveness of Lhe company's producL
and Lechnology
as well as Lhe caplLal requlred by Lhe buslness
aL Lhe acLual lnvesLmenL sLage and Lhe
evenLual addlLlonal lnvesLmenL needs
urlng Lhe second and Lhlrd sLage of Lhe
assessmenL process Lhe lnvesLor deLermlnes
Lhe value of Lhe company
Cnce Lhe enLrepreneur and Lhe lnvesLor have
agreed on Lhe value Lhe lnvesLors fuLure
share of Lhe company ls deLermlned
1he enLry valuaLlon of lnvesLor wlll depend on
facLors such as lnvesLors reLurn expecLaLlons
and Lhe vlew of Lhe opporLunlLy for new
concepL producL or servlce
1he lnLenLlon ls Lo llquldaLe Lhe shareholdlng ln
early phase companles afLer 48 years and ln
companles wlLh followon fundlng afLer 13 years
ln Lhe end Lhe lnvesLmenL ls made ln abouL 3 Lo
4 cases of all recelved lnvesLmenL requesLs
1he parLles flnally make a shareholder agreemenL
Lo esLabllsh pracLlcal operaLlng rules
tages of Investments
Larly sLage companles may have proprleLary
Lechnology or lnLellecLual properLy LhaL has
Lhe poLenLlal Lo be explolLed on a global scale
1he Lechnology or lead producL ls usually
beyond proof of prlnclple sLage
MldsLage companles may have sLrong
plpellne of Lechnologles and producLs whlch
has been developed by research and
managemenL Leams wlLh sclenLlflc and
commerclal credlblllLy
aLer sLage companles have operaLlonal and
corporaLe flnance skllls ldeally poslLloned and
company may need lnvesLmenLs Lo preclplLaLe
consolldaLlons
Companles aL Lhls sLage are wlLhln 12 Lo 18
monLhs of an l9C
VC's contr|but|on to entrepreneur
ln addlLlon Lo money professlonal vC as a
shareholder brlng sLrong lndusLry operaLlonal
flnanclal and lnvesLmenL banklng skllls Lo Lhe
parLnershlp wlLh Lhe LargeL company
1hrough Lhe vC's experLlse and neLwork Lhe
porLfollo companles could galn access Lo
a) followon caplLal Lhrough venLure caplLal Lles
b) knowledge of parLnershlp opporLunlLles ln
mulLlple markeLs
c) lndepLh operaLlonal and managemenL
experlence'
d) access Lo hlghquallLy managemenL Leams
e) Lles Lo Lhe lnvesLmenL banklng communlLy
VC's contr|but|on to entrepreneur
vC adds Lhe mosL value by asslsLlng ln Lhe
creaLlon of Lhe besL posslble Leam Lo manage
and supervlse Lhe LargeL company
ManagemenL assessmenL ls one of Lhe ma[or
Lasks Lo be carrled ouL by Lhe venLure caplLal
before decldlng Lo lnvesL
eed stage f|nanc|ng
1he venLure ls sLlll ln Lhe ldea formaLlon sLage
and lLs producL or servlce ls noL fully
developed
1he usually lone founder/lnvenLor ls glven a
small amounL of caplLal Lo come up wlLh a
worklng proLoLype
Monles may also be spenL on markeLlng
research paLenL appllcaLlon lncorporaLlon
and legal sLrucLurlng for lnvesLors
lLs rare for a venLure caplLal flrm Lo fund Lhls
sLage
ln mosL cases Lhe money musL come from Lhe
founders own pockeL from Lhe 3 s (amlly
rlends and ools) and occaslonally from
angel lnvesLors
tart up f|nanc|ng
1he venLure aL Lhls polnL has aL leasL one
prlnclpal worklng full Llme
1he search ls on for Lhe oLher key
managemenL Leam members and work ls
belng done on LesLlng and flnallzlng Lhe
proLoLype for producLlon
|rst stage f|nanc|ng
1he venLure has flnally launched and achleved
lnlLlal LracLlon
Sales are Lrendlng upwards
A managemenL Leam ls ln place along wlLh
employees
1he fundlng from Lhls sLage ls used Lo fuel
sales reach Lhe breakeven polnL lncrease
producLlvlLy cuL unlL cosLs as well as bulld Lhe
corporaLe lnfrasLrucLure and dlsLrlbuLlon
sysLem
AL Lhls polnL Lhe company ls Lwo Lo Lhree
years old
econd stage f|nanc|ng
Sales aL Lhls polnL are sLarLlng Lo snowball
1he company ls also rapldly accumulaLlng accounLs
recelvable and lnvenLory
CaplLal from Lhls sLage ls used for fundlng expanslon
ln all lLs forms from meeLlng lncreaslng markeLlng
expenses Lo enLerlng new markeLs Lo flnanclng
rapldly lncreaslng accounLs recelvable
venLure caplLal flrms speclallzlng ln laLer sLage
fundlng enLer Lhe plcLure aL Lhls polnL
,ezzan|ne or 8r|dge f|nanc|ng
AL Lhls polnL Lhe company ls a proven wlnner and
lnvesLmenL bankers have agreed Lo Lake lL publlc
wlLhln 6 monLhs
Mezzanlne or brldge flnanclng ls a shorL Lerm
form of flnanclng used Lo prepare a company for
lLs l9C
1hls lncludes cleanlng up Lhe balance sheeL Lo
remove debL LhaL may have accumulaLed buy ouL
early lnvesLors and founders deemed noL sLrong
enough Lo run a publlc company and pay for
varlous oLher cosLs sLemmlng from golng publlc
1he fundlng may come from a venLure caplLal
flrm or brldge flnanclng speclallsL
1hey are usually pald back from Lhe proceeds
of Lhe l9C
In|t|a| ub||c ffer|ng (I%
1he company flnally achleves llquldlLy by
belng allowed Lo have lLs sLock boughL and
sold by Lhe publlc
ounders sell off sLock and ofLen go back Lo
square one wlLh anoLher sLarLup
1ypes of vCs
Angel lnvesLors
lnanclal vCs
SLraLeglc vCs
Angel lnvesLors
1yplcally a wealLhy lndlvldual
- CfLen wlLh a Lech lndusLry background ln poslLlon Lo
[udge hlghrlsk lnvesLmenLs
- usually a small lnvesLmenL ( $1M) ln a very early
sLage company
- MoLlvaLlon
ramaLlc reLurn on lnvesLmenL vla exlL or llquldlLy
evenL
- lnlLlal 9ubllc Cfferlng (l9C) of company
- SubsequenL flnanclng rounds
lnLeresL ln Lechnology and lndusLry
lnanclal vCs
MosL common Lype of vC
- An lnvesLmenL flrm caplLal ralsed from
lnsLlLuLlons and lndlvlduals
- CfLen organlzed as formal vC funds
- SomeLlmes organlzed as a holdlng company
- und compensaLlon carrled lnLeresL
- Poldlng company compensaLlon l9C
- und slzes $23M Lo 10's of bllllons
- MoLlvaLlon
9urely flnanclal maxlmlze reLurn on lnvesLmenL
l9Cs Mergers and AcqulslLlons (MA)
SLraLeglc vCs
1yplcally a (small) dlvlslon of a large Lechnology
company
- Lxamples lnLel Clsco Slemens A11
- CorporaLe fundlng for sLraLeglc lnvesLmenL
- Pelp companles whose success may spur revenue
growLh of vC corporaLlon
- noL excluslvely or prlmarlly concerned wlLh reLurn on
lnvesLmenL
- May provlde lnvesLees wlLh valuable connecLlons and
parLnershlps
- 1yplcally Lake a back seaL" role ln fundlng
1he undlng 9rocess Slngle 8ound
Company and lnLeresLed vCs flnd each oLher
- Company makes lL plLch Lo mulLlple vCs
8uslness plan execuLlve summary flnanclal pro[ecLlons wlLh
assumpLlons compeLlLlve analysls
- lnLeresLed vCs engage ln due dlllgence
1echnologlcal markeL compeLlLlve buslness developmenL
egal and accounLlng
- A lead lnvesLor ls ldenLlfled resL are followon
- 1he followlng are negoLlaLed
Company valuaLlon
Slze of round
ead lnvesLor share of round
1erms of lnvesLmenL
- 9rocess repeaLs several Llmes bullds on prevlous rounds
1erms of lnvesLmenL
lnlLlally lald ouL ln a Lerm sheeL (noL blndlng!)
- valuaLlon + lnvesLmenL vC equlLy (share)
- CLher lmporLanL elemenLs
8oard seaLs and reserved maLLers
lquldaLlon and dlvldend preferences
1hese days vCs exLracL a huge amounL of
conLrol over Lhelr porLfollo companles
8aslcs of valuaLlon
9remoney valuaLlon v agreed value of company prlor Lo Lhls
round's lnvesLmenL (l)
- 9osLmoney valuaLlon v' v + l
- vC equlLy ln company l/v' l/(v+l) noL l/v
- Lxample $3M lnvesLed on $10M premoney glves vC 1/3 of Lhe
shares
- l and v are lLems of negoLlaLlon
- Cenerally company wanLs large v vC small v buL Lhere are many
subLleLles
- 1hls round's v wlll have an lmpacL on fuLure rounds
- 9osslble elemenLs of valuaLlon
MulLlple of revenue or earnlngs
9ro[ecLed percenLage of markeL share
8oard SeaLs and 8eserved MaLLers
CorporaLe boards
noL lnvolved ln dayLoday operaLlons
Pold exLreme conLrol ln ma[or corporaLe evenLs (sale mergers
acqulslLlons l9Cs bankrupLcy)
- ead vC ln each round Lakes seaL(s)
- 8eserved maLLers (veLo or approval)
Any sale acqulslLlon merger llquldaLlon
8udgeL approval
LxecuLlve removal/appolnLmenL
SLraLeglc or buslness plan changes
- urlng dlfflculL Llmes companles are ofLen conLrolled by Lhelr vCs
So WhaL o vCs ook or?
CommlLLed experlenced managemenL
- efenslble Lechnology
- CrowLh markeL
- SlgnlflcanL revenues
- 8eallsLlc sales and markeLlng plan
Lx|ts
ependlng on Lhe lnvesLmenL focus and sLraLegy of Lhe
venLure flrm lL wlll seek Lo exlL Lhe lnvesLmenL ln Lhe porLfollo
company wlLhln Lhree Lo flve years of Lhe lnlLlal lnvesLmenL
Whlle Lhe lnlLlal publlc offerlng may be Lhe mosL glamourous
and heralded Lype of exlL for Lhe venLure caplLallsL and
owners of Lhe company
mosL successful exlLs of venLure lnvesLmenLs occur Lhrough a
merger or acqulslLlon of Lhe company by elLher Lhe orlglnal
founders or anoLher company
I
1he lnlLlal publlc offerlng ls Lhe mosL glamorous and
vlslble Lype of exlL for a venLure lnvesLmenL
ln recenL years Lechnology l9Cs have been ln Lhe
llmellghL durlng Lhe l9C boom of Lhe lasL slx years
AL publlc offerlng Lhe venLure flrm ls consldered an
lnslder and wlll recelve sLock ln Lhe company
buL Lhe flrm ls regulaLed and resLrlcLed ln how LhaL
sLock can be sold or llquldaLed for several years
Cnce Lhls sLock ls freely Lradable usually afLer abouL
Lwo years Lhe venLure fund wlll dlsLrlbuLe Lhls sLock
or cash Lo lLs llmlLed parLner lnvesLor
who may Lhen manage Lhe publlc sLock as a regular
sLock holdlng or may llquldaLe lL upon recelpL
Cver Lhe lasL LwenLyflve years almosL 3000
companles flnanced by venLure funds have gone
publlc
,ergers and Acqu|s|t|ons
Mergers and acqulslLlons represenL Lhe mosL
common Lype of successful exlL for venLure
lnvesLmenLs
ln Lhe case of a merger or acqulslLlon Lhe
venLure flrm wlll recelve sLock or cash from
Lhe acqulrlng company and Lhe
venLure lnvesLor wlll dlsLrlbuLe Lhe proceeds
from Lhe sale Lo lLs llmlLed parLners
48
wrere 0oes verlure Cap|la| Vorey Core Fror?
loW are verlure Cap|la| Furds 0rgar|zed?
loW do verlure Cap|la||sls ra|e rorey Persora||y?
49
wrere 0oes verlure Cap|la| Vorey Core Fror?
Proless|ora| verlure Cap|la| F|rrs ra|se rorey lror lrsurarce
Corpar|es, Educal|ora| ErdoWrerls, Pers|or Furds ard wea|lry
lrd|v|dua|s.
Trese orgar|zal|ors rave ar |rveslrerl porllo||o Wr|cr lrey a||ocale lo
var|ous assel c|asses sucr as sloc|s (equ|l|es), oords, rea| eslale elc.
0re ol lre assels c|asses |s ca||ed 'A|lerral|ve lrveslrerls- verlure
cap|la| |s sucr ar |rveslrerl. Perraps 5 lo 10 ol lre porllo||o r|grl oe
a||ocaled lo A|lerral|ve lrveslrerls.
Tre porllo||o oWrers see| lo oola|r r|gr relurrs lror lrese rore r|s|y
A|lerral|ve lrveslrerls.
30
loW are verlure Cap|la| Furds 0rgar|zed?
Vosl verlure Cap|la| Furds are L|r|led Parlrersr|ps:
verlure Cap|la| Furd
L|r|led Parlrers
Pers|or Furds, Educal|ora| ErdoWrerls,
Fourdal|ors, lrsurarce Corpar|es, wea|lry
lrd|v|dua|s
0erera| Parlrers
Tre 0erera| Parlrers use ar 0ller|rg Verorardur
lo ra|se a lurd ol a g|ver s|ze lror lre L|r|led
Parlrers oy corv|rc|rg lrer lral lre 0Ps rave a
ur|que slralegy or experl|se |r a parl|cu|ar seclor or
seclors ol lre rar|el. Furd ra|s|rg car la|e a year
or rore.
ll lre 0Ps are successlu| lrey W||| corv|rce
erougr L|r|led Parlrers lo |rvesl erougr
rorey lo acr|eve lre s|ze lurd ollered. wrer
lr|s rappers lrere |s a l|rsl 'c|ose ol lre lurd.
31
wral 0o verlure Cap|la||sls 0o?
3ource 0ea|s
Tre 0Ps rave lo 'source dea|s- l.e. l|rd |rveslrerl opporlur|l|es. Tr|s |s dore |r a
var|ely ol Ways- relerra|s lror lrusled sources (olrer lurds, erlreprereurs lrey
rave |rvesled |r oelore, |aWyers, accourlarls elc.)
Va|e lrveslrerl 0ec|s|ors
Fror lre opporlur|l|es |derl|l|ed lre 0Ps p|c| lre ores lrey lr|r| W||| oe lre
'W|rrers. Trey r|grl |oo| al 50 or 100 opporlur|l|es lor eacr ore lrey |rvesl |r.
32
wral 0o verlure Cap|la||sls 0o?
Varage Tre lrveslrerl
Tre 0P/vCs rave a l|duc|ary duly lo lre LPs lo 'rarage lre |rveslrerl. Tr|s
rears lrey usua||y s|l or lre 8oard ol 0|reclors. 0|ver lr|s l|re corr|lrerl a
vC r|grl or|y oe ao|e lo rard|e lo 10 porllo||o |rveslrerl corpar|es al a l|re.
larvesl Tre lrveslrerl
Tre 0P/vCs W|r or|y |l lrey car gel lre|r rorey oul ol lre |rveslrerl ('rarvesl
lre |rveslrerl). Tr|s usua||y la|es lre lorr ol ar acqu|s|l|or ol lre porllo||o
corpary or la||rg lre porllo||o corpary puo||c |r ar lr|l|a| Puo||c 0ller|rg (lP0).
Nole: ever lre rosl successlu| lurds rare|y rave ever 1/3 ol lre|r porllo||o
|rveslrerls oecore successlu| - |.e ever W|lr carelu| vell|rg 2 oul ol 3
|rveslrerls are rol 'W|rs.
33
Ecoror|cs ol lre verlure Cap|la| Furd - CAPlTAL
Cap|la| Corr|lrerls
Tre L|r|led Parlrers do rol aclua||y |rvesl rorey |r lre Furd al lre c|os|rg.
Trey |ega||y corr|l lo prov|de a cerla|r arourl ol cap|la| Wrer lrey are ca||ed
upor. Tr|s |s ca||ed a L|r|led Parlrer's Cap|la| Corr|lrerl.
Cap|la| Ca||s
wrer lre 0erera| Parlrers l|rd Wral lrey lr|r| |s a good |rveslrerl opporlur|ly
lrey ra|e a 'Cap|la| Ca|| or lre L|r|led Parlrers. Exarp|e: a Furd ras S500V
ol cap|la| ard lre 0P/vCs Warl lo ra|e ar |rveslrerl ol S10V. A L|r|led Parlrer
W|lr a Cap|la| Corr|lrerl ol S50V W||| oe requ|red lo serd S1V lo lre 0erera|
Parlrers: 50V/500V = 10 l|res 10V = S1V
34
Ecoror|cs ol lre verlure Cap|la| Furd - vC Corpersal|or
Varagererl Fees
Tre 0erera| Parlrers rece|ve ar arrua| Varagererl Fee, Wr|cr |s usua||y a
percerlage ol lre Cap|la| Corr|lrerls lo lre Furd.
A lyp|ca| lee |s 2.5. 0r a S100V lurd lr|s S10V per year.
Tre Varagererl Fee |s used oy lre 0erera| Parlrers lo rur lre Furd ous|ress -
e.g. |l pays lre sa|ar|es ol lre 0erera| Parlrers, lre Assoc|ales, lre 3upporl 3lall
ard lre oll|ce rerl.
33
Ecoror|cs ol lre verlure Cap|la| Furd - vC Corpersal|or
3p||ll|rg lre Relurrs
Tre 0P/vCs ra|e |rveslrerls ard lrey ropelu||y rarvesl sore ol lrose.
Tre relurrs lror lre |rveslrerl are sp||l oelWeer lre L|r|led Parlrers ard lre
0erera| Parlrers. A lyp|ca| arrargererl |s as lo||oWs:
Tre L|r|led Parlrers rece|ve 99 ol a|| lre relurrs ard lre 0P/vCs rece|ve
1 ol a|| relurrs url|| lre L|r|led Parlrers rece|ve oac| 100 ol lre|r Cap|la|
(p|us |r sore cases '|rleresl or lral Cap|la|).
Trerealler lre sp||ls go 80 lo lre L|r|led Parlrers ard 20 lo lre 0P/vCs.
Tr|s 20 parl |s ca||ed lre 0P's 'Carr|ed lrleresl
verlure Cap|la||sls W|lr a greal lrac| record W||| rece|ve a r|grer Carr|ed lrleresl-
e.g. 30
'2000 ottepteoeotlol lloooce SmlLh and klholm SmlLh ChapLer 14
rgan|zat|ona| tructure of
Venture Cap|ta| Investment
PortfoIio
Companies
Value
creation
Generate deal flow
Screen opportunities
Harvest investments
Negotiate deals
Monitor and advise
eneraI Partners
Venture CapitaI Fund
Pension plan
Endowments
Life insurance companies
Corporations
ndividuals
Limited Partners
Effort and
1% of
capital
Annual
Management
Fee 2-3%
Carried
nterest 20-
30% of
Gain
99% of nvestment
Capital
Capital Appreciation
70-80% of Gain
nvestment
Capital and
Effort
Financial
Claims
37
Ecoror|cs ol lre verlure Cap|la| Furd - vC Corpersal|or
Corpersal|or 0r|ves 8erav|or
Tre 3p||l Forru|a prov|des a reavy |rcerl|ve lor lre 0P/vCs lo |rvesl |r s|lual|ors
lral car oe 8|g l|ls. Reasor: Trey dor'l ra|e rorey ur|ess lrey relurr 8|g
Relurrs lo lre L|r|led Parlrers.
Exarp|es
Assure lre Furd ras |rvesled S100V |r 20 corpar|es (S20V per corpary or
average).
Assure lral eacr ol lre Furd's |rveslrerl prov|des |l W|lr a 50 oWrersr|p
|rleresl |r a porllo||o corpary.
Assure lral 25 ol lre corpar|es are successlu| ard lre Furd car rarvesl lrose
|rveslrerls - |.e. 5 ol lre 20 corpar|es are successlu|.
38
Ecoror|cs ol lre verlure Cap|la| Furd - vC Corpersal|or
Exarp|e (corl|rued)
Assure lre average 'W|r relurrs lo lre Furd 5 l|res lre arourl |rvesled. lr our
exarp|e, lre S20V oecores S100V.
Nole: ll lre Furd oWrs 50 ol a corpary lrer lre va|ue ol lre corpary al rarvesl ras
lo oe S200V |r order lor lre Furd lo rece|ve 5 l|res |ls |rveslrerl.
Venture Partners Fund 1
Capital Commitments: 400
Winning nvestments:
Company
Amount
nvested % Ownership
Return
Multiple
nvestment
Value at
Harvest
Value of
Company
1 20 50% 5 100 200
2 20 50% 5 100 200
3 20 50% 5 100 200
4 20 50% 5 100 200
5 20 50% 5 100 200
100 500
39
Ecoror|cs ol lre verlure Cap|la| Furd - vC Corpersal|or
Exarp|e (corl|rued)
Tr|s |s roW lre Relurr 3p||ls Wou|d Wor|:
Reca||: 99 ol lre relurrs go lo lre L|r|led Parlrers url|| lrey rece|ve oac| lre|r |rvesled Cap|la| lrer
lre ups|de |s sp||l W|lr lre 0erera| Parlrers
lr lr|s case lre LPs are prooao|y soreWral rappy - lrey gel a 19 relurr - ard lre 0Ps
ra|e S23V. (role: lr|s exarp|e |grores lre l|re va|ue ol rorey).
Venture Partners Fund 1
Capital Commitments: 400
Winning nvestments:
Company
Amount
nvested % Ownership
Return
Multiple
nvestment
Value at
Harvest
1 20 50% 5 100
2 20 50% 5 100
3 20 50% 5 100
4 20 50% 5 100
5 20 50% 5 100
100 500
Return SpIits
Returns $
%
$
%
Return of Capital: 404 400 99% 4 1%
Upside, if any: 96 77 80% 19 20%
500 477 23
LP % Return: 19%
Limited Partners eneraI Partners
60
Ecoror|cs ol lre verlure Cap|la| Furd - vC Corpersal|or
3ers|l|v|ly ol Relurrs
Nol|ce Wral rappers |l lre 5 W|rr|rg |rveslrerls pay oul al |oWer ru|l|p|es:
Tre reWard sysler ra|es lre vCs 'sW|rg lor lre lerces - lrey reed lo l|rd corpar|es
lral car oe rea||y o|g.
Venture Partners Fund 1
Capital Commitments: 400
Winning nvestments:
Company
Amount
nvested % Ownership
Return
Multiple
nvestment
Value at
Harvest
Value of
Company
1 20 50% 5 100 200
2 20 50% 4 80 160
3 20 50% 4 80 160
4 20 50% 3 60 120
5 20 50% 3 60 120
100 380
Return SpIits
Returns $ % $ %
Return of Capital: 380 376.2 99% 4 1%
Upside, if any: 0 0 80% 0 20%
380 376 4
LP % Return: -6%
Limited Partners eneraI Partners
Venture Partners Fund 1
Capital Commitments: 400
Winning nvestments:
Company
Amount
nvested % Ownership
Return
Multiple
nvestment
Value at
Harvest
Value of
Company
1 20 50% 4 80 160
2 20 50% 4 80 160
3 20 50% 3 60 120
4 20 50% 3 60 120
5 20 50% 3 60 120
100 340
Return SpIits
Returns $ % $ %
Return of Capital: 340 336.6 99% 3 1%
Upside, if any: 0 0 80% 0 20%
340 337 3
LP % Return: -16%
Limited Partners eneraI Partners
61
Furd lrveslrerl Cyc|e
Furd L|le
Vosl Furds rave a 10 year ||le. Al lre erd ol 10 years lrey are ||qu|daled.
Furds p|ar lo rarvesl W|rrers |r 5 lo Z years or |ess.
lr|l|a| Porllo||o lrveslrerls
For Ear|y 3lage Furds |l |s lyp|ca| lor lre Furd lo reserve S2-S3 lor every S1
|rvesled. For exarp|e |l lre Furd |rvesls S2r |r Rourd 1 lrey W||| reserve arolrer
S1r -Sr lor lo||oW-or rourds. 3o a S100V Furd r|grl |rvesl S100V |r lre l|rsl
rourds ol porllo||o corpar|es ard S300V |r lo||oW or rourds.
T|r|rg ol lr|l|a| lrveslrerls
A Furd usua||y ra|es |ls |r|l|a| |rveslrerls |r lre l|rsl 3 years ol lre Furd ||le cyc|e.
0ur|rg lre rera|r|rg ||le ol lre Furd lo||oW-or |rveslrerls are rade ard lre
porllo||o corpar|es are pos|l|ored lor 'rarvesl
62
Fo||oW-0r Furds
0rce lre |r|l|a| |rveslrerls rave oeer rade |r Furd 1, lre vCs are rol|valed lo
ra|se Furd 2 so lrey car ra|e |rveslrerls |r reW opporlur|l|es ard gel add|l|ora|
Varagererl Fees.
lopelu||y lrere are sore ear|y successes |r Furd 1 so lrey car go lo lre|r LPs ard
gel lrer lo |rvesl |r Furd 2.
Trrougr lr|s |ayer|rg ol Furds lre 0Ps ou||d up lre|r lola| Cap|la| urder
Varagererl.
ear ear ear ear ear ear ear ear ear ear
1 2 3 4 5 6 7 8 9 10 Totals
Fund 1 nitial nvestments 30 30 30 90
Fund 1 Follow On 50 110 150 310
Fund 2 nitial nvestments 30 30 30 90
Fund 2 Follow On 50 110 150 310
Fund 3 nitial nvestments 30 30 30 90
Fund 3 Follow On 50 110 150 310
63
Tr|rgs For lre Erlreprereur To Tr|r| Aooul
0oes Your P|ar F|l lre Needs ol lre verlure Cap|la| Furd?
As you car see lrey reed lo see 8|g Relurrs. ll your P|ar car jusl|ly lr|s ard
you reed |ols ol cap|la| lo acr|eve your P|ar lrer vC ray oe lre Way lo go.
You ray oe ao|e lo groW a successlu| corpary ard ra|e a |ol ol rorey W|lroul
rav|rg lo sca|e lo lre s|ze lral W||| |rleresl verlure Cap|la|.
Are You Ready For verlure Cap|la|?
As you car see vCs rave a re|al|ve|y srorl l|re luse lo success- a 10 year Furd
ard lre reed lo sroW sore 'w|rrers ear|y |r order lo ra|se lre Nexl Furd.
Resu|l: You rave lo oe ready lo rove qu|c||y, lrere W||| rol oe rucr l|re lo
recover lror errors |r lre p|ar or execul|or.
64
Tr|rgs For lre Erlreprereur To Tr|r| Aooul
Are You Prepared lo 8ecore a V|ror|ly 3loc|ro|der?
As lre exarp|es sroW, |r order lo gererale relurrs lor lre|r L|r|led Parlrers lre
0P/vCs rave lo |rvesl a |arge arourl ard lr|s usua||y rears lrey W||| oola|r a
s|gr|l|carl percerlage ol lre corpary over l|re.
lav|rg a sra|| p|ece ol a 8|g P|e car ra|e you r|cr oul you rave lo oe rerla||y
prepared lo oecore a V|ror|ly 3loc|ro|der.
Va|e 3ure lre vC You wor| w|lr Car Add va|ue
Exper|erced verlure Cap|la||sls car prov|de va|uao|e adv|ce ard gu|darce,
sav|rg you l|re ard preverl|rg r|sla|es. Trey a|so rave corlacls W|lr
polerl|a| cuslorers, wa|| 3lreel ard acqu|rers.
VLN@DL CAI@AL
ths about Venture CapitaI
Financing
S S v0s uanr no |ess rnan 50/ Dunersn|p v0s uanr no |ess rnan 50/ Dunersn|p
,.9 ,.9 vC Furds cuslorar||y ro|d 1Z lo 53 vol|rg
lrleresl
S S v0s nave rne R|nr ro F|re rne Founoer/0ED v0s nave rne R|nr ro F|re rne Founoer/0ED
,.9 ,.9 Cuslorary Cord|l|or |s Erp|oyrerl Corlracl Cuslorary Cord|l|or |s Erp|oyrerl Corlracl
aulror|z|rg Vajor|ly ol 0|reclors lo aulror|z|rg Vajor|ly ol 0|reclors lo l|re l|re
Fourder/CE0 ' Fourder/CE0 'u|rn or u|rnour oause u|rn or u|rnour oause. .
Perlorrarce lssues vs. Corpary Needs: Perlorrarce lssues vs. Corpary Needs:
Adr|r|slralor or lrsp|ral|ora| Leader Adr|r|slralor or lrsp|ral|ora| Leader
VLN@DL CAI@AL
ths about Venture CapitaI Financing ths about Venture CapitaI Financing
S S v0s oom|nare rne Pr|vare Equ|ry Varker v0s oom|nare rne Pr|vare Equ|ry Varker
,.9 ,.9 vCs accourl lor |ess lrar 1 ol lre Pr|vale vCs accourl lor |ess lrar 1 ol lre Pr|vale
Equ|ly Var|el Equ|ly Var|el
S S v0s l|nanoe a 3roao Rane ol lnousrry Types on a v0s l|nanoe a 3roao Rane ol lnousrry Types on a
har|onu|oe 3as|s har|onu|oe 3as|s
,.9 ,.9 Vosl vC |rveslrerls are |r l|gr Vosl vC |rveslrerls are |r l|gr--Tecrro|ogy or Tecrro|ogy or
8|o 8|o--sc|erce lrduslr|es |r Ca||lorr|a's 3|||cor sc|erce lrduslr|es |r Ca||lorr|a's 3|||cor
va||ey or 8oslor area va||ey or 8oslor area
VLN@DL CAI@AL
ths about Venture CapitaI ths about Venture CapitaI
Financing Financing
S S v0s expeor ro Earn a 700/ Rare ol Rerurn u|rn|n Tuo ro v0s expeor ro Earn a 700/ Rare ol Rerurn u|rn|n Tuo ro
Tnree Years Tnree Years
,.9 ,.9 vCs a|r lo 'rarvesl lre|r lrveslrerls W|lr|r Z vCs a|r lo 'rarvesl lre|r lrveslrerls W|lr|r Z
lo 10 Years (ard lry lo earr ro |ess lrar Z00) lo 10 Years (ard lry lo earr ro |ess lrar Z00)
S S overnmenrs |nvesr |n v0 Funos oeoause rney are a overnmenrs |nvesr |n v0 Funos oeoause rney are a
"w|n "w|n--w|n $|ruar|on. Eye w|n $|ruar|on. Eye--Popp|n Rares ol Rerurn ano Popp|n Rares ol Rerurn ano
l|n l|n--Pay|n Joos Pay|n Joos
,.9 ,.9 Prooao|e Relurrs W||| oe arourd 25 W|lr |ess lrar Prooao|e Relurrs W||| oe arourd 25 W|lr |ess lrar
ra|l ol F|rrs surv|v|rg rore lrar 3 years ra|l ol F|rrs surv|v|rg rore lrar 3 years
1he venLure CaplLal 9rocess
lnd eals
8esearch eals A 36 MonLh 9rocess
SLrucLure and Close eals
Manage 1he lnvesLmenL
LxlL 1he lnvesLmenL
Some SLaLlsLlcs
99+ of All SLarLups o noL 8equlre
lnsLlLuLlonal venLure CaplLal
vCs average lnlLlal lnvesLmenL ls $3M+
Average lluLlon from f vC lnvesLmenL ls
40+
vCs look aL over 100 buslness plans for every
one Lhey flnance
When ls vC Cood
Peavy 8 ComponenL of Lhe buslness
SemlnconducLors
8loLech
aLacomm LqulpmenL
very arge CpporLunlLy 8equlrlng A oL of
Worklng CaplLal
ederal Lxpress
Amazoncom
1he CosL of venLure CaplLal
lluLlon
Average founder who uses vC owns less Lhan 10
of Lhe buslness upon exlL
lquldaLlon 9reference
1he vCs wlll wanL Lo Lake Lhelr money ouL flrsL
Some of Lhe unlque feaLures of a vC flrm are
Investment |n h|ghr|sk h|ghreturns
ventures
As vCs lnvesL ln unLesLed lnnovaLlve ldeas Lhe
lnvesLmenLs enLall hlgh rlsks
ln reLurn Lhey expecL a much hlgher reLurn
Lhan usual (lnLernal 8aLe of reLurn expecLed ls
generally ln Lhe range of 23 per cenL Lo 40 per
cenL)
art|c|pat|on |n management
8esldes provldlng flnance venLure caplLallsLs
may also provlde Lechnlcal markeLlng and
sLraLeglc supporL
1o safeguard Lhelr lnvesLmenL Lhey may also
aL Llmes expecL parLlclpaLlon ln managemenL
Lxpert|se |n manag|ng funds
vCs generally lnvesL ln parLlcular Lype of
lndusLrles or some of Lhem lnvesL ln parLlcular
Lype of buslnesses and hence have a prlor
experlence and conLacLs ln Lhe speclflc
lndusLry whlch glves Lhem an experLlse ln
beLLer managemenL of Lhe funds deployed
a|ses funds from severa| sources
A mlsconcepLlon among people ls LhaL venLure
caplLallsLs are rlch lndlvlduals who come
LogeLher ln a parLnershlp ln facL vCs are noL
necessarlly rlch and almosL always deal wlLh
funds ralsed malnly from oLhers 1he varlous
sources of funds are rlch lndlvlduals oLher
lnvesLmenL funds penslon funds endowmenL
funds eL ceLera ln addlLlon Lo Lhelr own
funds lf any
|vers|f|cat|on of the portfo||o
vCs reduce Lhe rlsk of venLure lnvesLlng by
developlng a porLfollo of companles and Lhe
norm followed by Lhem ls same as Lhe
porLfollo managers LhaL ls noL Lo puL all Lhe
eggs ln Lhe same baskeL
Lx|t after spec|f|ed t|me
vCs are generally lnLeresLed ln exlLlng from a
buslness afLer a prespeclfled perlod 1hls
perlod may usually range from 3 Lo 7 years
venLure CaplLal ln lndla
What spec|f|c areas |n Ind|a |nterest
VCs?
nondaLa nonvolce moblle phone appllcaLlons
lnLerneLbased Lechnologles
CrowLhsLage buslnesses ln real esLaLe and especlally
enLerLalnmenL and medla whlch wlll see many
emerglng Lechnologles aLesLage buslnesses LhaL
lnLeresL lnvesLors are ln Lhe reLalllng secLor
anguagebased lnLerneL appllcaLlons llke LexLLovolce
converslon lnLo vernacular
9harma secLor whlch ls aLLracLlng many prlvaLe equlLy
funds
SporLs and wellness/healLhcare
ett|ng the stage Venture Cap|ta| |n
Ind|a
9hase l ormaLlon of 1lCl ln Lhe 80's and
reglonal funds as Cv A9lC ln Lhe early 90s
9hase ll LnLry of orelgn venLure CaplLal funds
(vC) beLween 19931999
9hase lll (2000 onwards) Lmergence of
successful lndlacenLrlc vC flrms
9hase lv (currenL) Clobal vCs and 9L flrms
acLlvely lnvesLlng ln lndla
130 unds acLlve ln Lhe lasL 3 years (CovernmenL
Cverseas CorporaLe omesLlc)
@he |rst tage 1986199S
1lCl
ln 1988 Lhe flrsL organlzaLlon Lo acLually ldenLlfy
lLself as a venLure caplLal operaLlon
1echnology evelopmenL lnformaLlon
Company of lndla Ld (1lCl)
was esLabllshed ln 8angalore as a subsldlary of
Lhe lndusLrlal CredlL lnvesLmenL CorporaLlon of
lndla Ld(lClCl)
lndla's secondlargesL developmenL flnanclal
lnsLlLuLlon (aL Lhe Llme lL was sLaLe owned and
managed)
Cv
ln 1990 Cu[araL venLure lnance lmlLed
(Cv) began operaLlons wlLh a 240 mllllon
rupee fund wlLh lnvesLmenLs from Lhe World
8ank Lhe uk CommonwealLh evelopmenL
und Lhe Cu[araL lndusLrlal lnvesLmenL
CorporaLlon lndusLrlal evelopmenL 8ank of
lndla varlous banks sLaLe corporaLlons and
prlvaLe flrms
A9lC
1he Andhra 9radesh sLaLe governmenL formed
a venLure fund subsldlary ln lLs A9 lndusLrlal
evelopmenL CorporaLlon (A9lC)
@he econd tage 199S1999
1hls sLage saw Lhe enLrance of forelgn
lnsLlLuLlonal lnvesLors
1hls lncluded lnvesLmenL arms of forelgn banks
buL parLlcularly lmporLanL were venLure caplLal
funds ralsed abroad
very ofLen n8ls were lmporLanL lnvesLors ln
Lhese funds
1he overseas prlvaLe secLor
lnvesLors became a domlnanL force ln Lhe lndlan
venLure caplLal lndusLry
1he formallzaLlon of Lhe lndlan venLure caplLal
communlLy began ln 1993 wlLh Lhe formaLlon
of Lhe lndlan venLure CaplLal AssoclaLlon
(lvCA) headquarLered ln 8angalore
9hase lll (2000 onwards) Lmergence of
successful lndlacenLrlc vC flrms
9hase lv (currenL) Clobal vCs and 9L flrms
acLlvely lnvesLlng ln lndla
Number f Investments
3;08947 %49,
Sequoia Capital India 7 12 13 18 3 53
Ventureast 5 11 4 9 3 32
Intel Capital 3 7 4 8 1 23
Helion Venture Partners 0 4 8 8 2 22
DFJ India 0 3 3 9 2 17
Nexus India Capital 0 1 4 9 2 16
NEA IndoUS Ventures 0 0 5 9 0 14
IDG India Ventures 0 0 6 5 0 11
Kleiner Perkins 1 3 0 6 0 10
Norwest Venture
Partners
1 3 1 2 3 10
Canaan Partners 0 1 4 4 1 10
Inventus Capital Partners - - - - 3 3

Va|ue f Investments (5 mn%
3;08947 %49,
Sequoia Capital India 42 184 114 138 26 504
Intel Capital 19 37 15 53 7 131
Norwest Venture
Partners
13.9 8.1 24.1 17.7 92.8 156.6
Helion Venture
Partners
- 30 30 30 10 100
Nexus India Capital - 7.5 16 45 7 75.5
DFJ India - 13.75 4 33 10 61
Ventureast 7 19 2 17 9 54
NEA IndoUS
Ventures
- - 24 26 - 50
Canaan Partners - 4 10 12 4 30
Kleiner Perkins 2 8 - 19 - 29
IDG India Ventures - - 14 8 - 22
Inventus Capital
Partners
- - - - - -

egu|atory ramework
orelgn venLure CaplLal lnvesLor
An vCl (or orelgn venLure CaplLal lnvesLor) ls an
lnvesLor lncorporaLed or esLabllshed ouLslde lndla
whlch proposes Lo make lnvesLmenLs elLher ln
domesLlc venLure CaplLal unds ('vCs') or
venLure CaplLal underLaklngs
10
('vCus') ln lndla
(deflned Lo mean a domesLlc unllsLed lndlan
Company)
and whlch ls reglsLered under Lhe orelgn
venLure CaplLal lnvesLor 8egulaLlons 2000 ('vCl
8egulaLlons')
AlLhough forelgn prlvaLe equlLy players and
offshore vCs can lnvesL ln lndla dlrecLly under
Lhe orelgn lrecL lnvesLmenL Scheme (Lhe
'l Scheme')
Lhe SL8l granLs cerLaln beneflLs Lo Lhose
lnvesLors who reglsLer Lhemselves under Lhe
vCl 8egulaLlons
1he shares acqulred by a vCl ln an unllsLed company are
noL sub[ecL Lo Lhe one year lockup perlod upon Lhe lnlLlal
9ubllc Cfferlng ('l9C') of Lhe shares of Lhe company 1hus
Lhe vCl would be able Lo exlL lLs lnvesLmenL ln such a
company afLer Lhe llsLlng of Lhe shares wlLhouL havlng Lo
walL for Lhe compleLlon of Lhe lockup perlod
vCls reglsLered wlLh Lhe SL8l are 'Cuallfled lnsLlLuLlonal
8uyers' ln Lhe SL8l (lsclosure and lnvesLor 9roLecLlon)
Culdellnes 2000 ('l9 Culdellnes')
As a resulL Lhey are ellglble Lo parLlclpaLe ln Lhe prlmary
lssuance process meanlng LhaL Lhey would be able Lo
subscrlbe for Lhe securlLles ln an l9C under Lhe Lyplcal
bookbulldlng process
ockup requlremenLs
1he SL8l Lhrough Lhe l9 Culdellnes has sLlpulaLed lockup
requlremenLs on shares of promoLers Lo ensure LhaL Lhe
promoLers or persons who are conLrolllng Lhe company
conLlnue Lo hold some mlnlmum percenLage ln Lhe
company afLer Lhe publlc offerlng
A promoLer ls deflned as belng a person (or persons) who ls
ln overall conLrol of Lhe company or who ls lnsLrumenLal ln
Lhe formulaLlon of a plan or program pursuanL Lo whlch Lhe
securlLles are offered Lo Lhe publlc and Lhose named ln Lhe
prospecLus as promoLers(s)
1hls deflnlLlon however ls an lncluslve one and lL would
really depend upon Lhe manner ln whlch Lhe SL8l would
lnLerpreL Lhe acLlons of a company and Lhe key lndlvlduals/
enLlLles assoclaLed wlLh lL
Whlle conslderlng an vCl appllcaLlon Lhe
SL8l does revlew Lhe appllcanL's Lrack record
professlonal compeLence flnanclal soundness
experlence general repuLaLlon wheLher Lhe
appllcanL ls regulaLed by an approprlaLe
forelgn regulaLory auLhorlLy or ls an lncome
Lax payer amongsL oLher facLors
1he SL8l Lhen forwards lLs approval Lo Lhe 88l
whlch Lhen granLs lLs approval
Whlle reglsLraLlon under Lhe vCl 8egulaLlons
ls noL compulsory Lhe lndlan CovernmenL has
soughL Lo make Lhls reglsLraLlon aLLracLlve by
conferrlng cerLaln beneflLs upon Lhose
lnsLlLuLlons LhaL have reglsLered
An vCl ls enLlLled Lo varlous beneflLs under
securlLles and LaxaLlon laws ln lndla
MaurlLlus has LradlLlonally been Lhe mosL favored
[urlsdlcLlon for lncorporaLlon Lo lnvesL ln lndla
A company lncorporaLed ln MaurlLlus becomes a Lax
resldenL of MaurlLlus and Lhus ls sub[ecL Lo Lhe 1AA
beLween lndla and MaurlLlus
under Lhe lndlaMaurlLlus 1AA any caplLal galns earned
by a resldenL of MaurlLlus are exempL from Lax ln lndla
urLher Lhe buslness proflLs of a MaurlLlus offshore
company are Laxable aL an effecLlve Lax raLe of only 3
23

MosL lnvesLors who come lnLo lndla vla MaurlLlus do noL
have any subsLanLlve buslness ln MaurlLlus and are
lncorporaLed Lhere only Lo Lake advanLage of Lhe 1AA
SL8l venLure CaplLal unds (vCs)
8egulaLlons 1996
Accordlng Lo Lhese regulaLlons a vC means a
fund esLabllshed ln Lhe form of a LrusL /
company and reglsLered wlLh SL8l whlch has
A dedlcaLed pool of caplLal ralsed ln a manner
speclfled ln Lhe regulaLlons and
lnvesLs ln venLure CaplLal underLaklngs (vCus) ln
accordance wlLh Lhese regulaLlons
vCu
A vCu means a domesLlc company
Whose shares are noL on a recognlzed sLock
exchange ln lndla
Whlch ls engaged ln Lhe buslness of provldlng
servlces/producLlon/manufacLure of
arLlcles/Lhlngs excludlng a negaLlve llsL
All vCs musL be reglsLered wlLh SL8l and pay
8s 23000 as appllcaLlon fee and 8s 300000
as reglsLraLlon fee for granL of cerLlflcaLe
1hey cannoL lnvesL more Lhan 23 corpus of
Lhe fund ln one vCu
CuesLlons for 8evlslon
WhaL ls venLure CaplLal ? WhaL ls 9rlvaLe
LqulLy?
WhaL ls Lhe process of acqulrlng venLure
CaplLal lnanclng?
Lxplaln Lhe dlfferenL sLages of venLure CaplLal
lnvesLmenL?
WrlLe a shorL noLe on Lhe dlfferenL Lypes of
venLure CaplLallsLs?
CuesLlons for 8evlslon
WrlLe a shorL noLe on exlL for venLure CaplLal
unds?
Where oes venLure CaplLal Money Come
rom?
Pow are venLure CaplLal unds Crganlzed?
Pow do venLure CaplLallsLs make money?
CuesLlons for 8evlslon
WrlLe a shorL noLe on venLure CaplLal ln
lndla?
WrlLe a shorL noLe on Lhe regulaLory
framework for venLure CaplLal ln lndla?
1he Lnd