1. Unit :V - Venture Capital
Bharati Vidyapeeth (Deemed to be) University, Pune
Abhijit Kadam Institute of Management & Social Sciences,Solapur
To promote Industrial development sector may
Financial institutions set up in India, they are
undertaken by new or unknown entrepreneurs.
They evaluate projects, extend financial assistance by
follow-up the criteria of Safety, Liquidity and
Profitability and security but not potentiality.
These institution do not mitigate the problems of
new entrepreneurs who are risky and innovate
In India /world technological revaluation with emergence
which required professional temperament and technical
To support technological entrepreneurs support in all
aspect but specially financial assistance is more essential.
Venture capital : made investment in new and tried
enterprises that are lacking a stable record of growth.
Commitment of Capital as shareholding for formulation
and setting up small firms in new ideas or technology.
VCC not only assist the finance but input the skilled to;
1. To set up finance
2. Design market strategy
3. Organize and manage it
It is an association who assist every development stage of
• The capital invested in a project in which
there is a substantial element of risk,
typically a new or expanding business
• Project Or Activity which
• The Money or Fund require
7. Venture capital
Long term risk capital to finance high technology
project which involve high risk but have strong
potential for growth.
Pool their resources including managerial abilities to
assist new entrepreneurs in early years / stage of the
Once project reaches profitability they sell
shareholding @ high premium.
8. Venture Capital Company
“Financial institution which join as a co-promoter in
project and share the risk and rewards of the
A venture capitalist (VC) is a person who makes such
investments, these include wealthy investors,
investment banks, other financial institutions other
9. 1. FINANCE NEW AND RAPIDLY GROWING COMPANIES
1. PURCHASE EQUITY SECURITIES
2. ASSIST IN THE DEVELOPMENT OF NEW PRODUCTS
3. ADD VALUE TO THE COMPANY THROUGH ACTIVE
10. Features of Venture Capital
1. Venture capital is usually in the form of an equity participation. It may
also take the form of convertible debt or long term loan.
2. Investment is made only in high risk but high growth potential
1. Venture capital is available only for commercialization of new ideas or
new technologies and not for enterprises which are engaged in trading
,booking , financial services, agency, liaison work or research
2. Venture capitalist joins the entrepreneur as a co-promoter in projects
and share the risks and rewards of the enterprises.
3. The is continuous involvement in business after making an investment
by the investor.
11. Features of Venture Capital ….
Once the venture has reached the full potential, the venture
capitalist disinvest his holding either to the promoters or in
The basic objective of investment is not profit but capital
appreciation at the time of disinvestment.
Venture capital is not just injection of money but also an
input needed to setup the , design its marketing strategy
and organized and manage it.
Investment is usually made in small and medium scale
12. History – Origin of VC
Venture Capital as new phenomenon
originated in USA and developed
spectacularly world wide since the second
half of the seventies.
American Research and Development
corporation, founded by Gen. Doriot soon
after the second World war, is believed to
have heralded the institutionalization of
venture capital in the USA.
The real development of VC took place in
1958.When the Business Administration
Act was passed by US Congress.
Present day like Apple, Microsoft, Xerox et
are the beneficiaries of Venture capital.
Eugene Kleiner (third from left), one of
Fairchild Semiconductor’s “traitorous
eight”, went on to found Kleiner
Perkins Caufield & Byers, the “largest
and most established” venture capital
firm in Silicon Valley
13. Railway Mania: many investors lost
money, but Victorian Britain
The Mississippi Company: the first
14. History of VC IN INDIA
Indian tradition of VC for industry goes back more than 150
years when many of the managing agency houses acted as
venture capitalists providing both finance and management skill
to risky projects.
It was the managing agency system through which TATA IRON
and STEELS AND EMPRESS MILLS were able to raise
equity capital from the investing public.
The TATA also initiated a managing agency house , named
investment corporation of India in 1937 which by acting as
venture capitalist, successfully promoted hi-tech enterprises such
as CEAT tyres , Associated Bearings, National Rayon etc.
15. Stages of VC
of an Idea
16. • Translating an idea into business proposition
• Making investigation is made in-depth which
normally takes a year or more
• Set up to manufacture a product or a service
• The first and Second stage of capital used for full
scale manufacturing and further business
• Established in the market and expected to expand at
a rapid pace.
• Need finance for expansion & Diversification to
reap economies of scale and attain stability
• Made some headway and entered the stage of
manufacturing a product
• Generating adequate funds for financing to develop the
17. Importance And Advantages of VC
18. Process of Venture Financing
19. Guidelines of Venture Capitalist
Public Sector Financial institutions, SBI, Scheduled Bank,
foreign Bank &their subsidiaries are eligible
• Minimum Size Rs-10 cr.
• Debt –Equity ratio 1:1.5
VCC and VCF can be set up as joint venture between
• Equity holding not exceed 20% and should not be largest single holder
20. VC assistance should go the enterprises with total investment not
more than Rs-10cr
The VCC/VCF should be managed by professionals should be
independent of the parent organization
The VCC will not be allowed to undertake activities such as
trading , broking, money market operations, bill discounting.
A person holding a position or full time
chairman/President/CEO/MD in company will not be allowed
to hold same position in VCC/VCF
21. Venture Capital in India
The concept of venture capital was formally introduced
in India in 1987 by IDBI.
•The government levied a 5 per cent cess on all know-
how import payments to create the venture fund.
•ICICI started VC activity in the same year.
•Later on ICICI floated a separate VC company – TDICI.
22. Those promoted by public banks.
e.g. : -SBI Capital Market Ltd
4)Those promoted by private sector
e.g.: - IL&FS Trust Company Ltd
Infinity Venture India Fund
5)Those established as an overseas venture
e.g.: - Walden International Investment Group
- HSBC Private Equity management Mauritius Ltd
23. Process -
Stage –I ABC- 10 cr
Stage - IDBI – Financial Institution
Stage-III –IDBI-ABC by shareholding pattern
IDBI- Rs- 1000 =1 share
IDBI- Total no of Share purchase of ABC =1,00,000*1000= 10 cr.
STAGE – ABC- - Primary Market – IPO
IDBI – Rs- 1000
Bid Share – 1600/- Per Share
Disinvestment – Rs-1000 Share Purchase
- Rs- 1600 share selling
Profit against 1 share = 600/-
Total investment =10 cr
Disinvestment = 1,00,000*1600= 16 cr
Net profit = 6 cr