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• Venture Capital to business is like water to a germinating seed in today’s world. Most
of the new venture suffers from initial capital constraint and Venture capital firms are
the solution to their problems. They invest in businesses at a risky stage and hence
expect high returns from the ventures.

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• Startup companies with a potential to grow need a certain amount of
investment. Wealthy investors like to invest capital in such businesses with a
long term growth perspective. This capital is known as “Venture Capital” and
the investors are known as “Venture Capitalist”.

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• The concept of venture capital became famous only after 1946 after the
first two Venture Capital companies became famous. Post which it caught a
pace from 1960s.
1. American research Development Corporation
2. J.H. Whitney and Company.

• The concept of Venture capital came to be known in India from 1990s. After
the Venture capitals such as Technology Development and Information
Company of India Ltd along with two other firms were started in India.
• In the present scenario India has a lot of emerging Venture capital firms and
raising capitals for the startups in India.

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 Exit of Venture
Capital Limited Partners
pooling money in
(Initial Public Venture Capital
Offer or Mergers fund
and Acquisitions)

Exchanging Venture Capital

shares of the funds managed
portfolio by the general
company in partners or aka
exchange of the Management
funds provided to Company
borrowing firm.

VC decides upon
the projects to be
financed and
investing money in
the Portfolio
company
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• There are stages to Venture capital financing where in the capital is
provided to the businesses.

• At different stages different amount of capital based on the requirement of

businesses are offered to these startup companies.

• The amount of capital introduced in the business will be greater than the
previous stage.

• Venture capitalists not only input funds in the stages of financing but also
takes part in the management team to provide the needed managerial skills
for the growth and expansion of startup.

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 Seed Round 1 - Mezzanine
Capital Growth Capital

Startup Round 2- Bridge

Capital Expansion financing

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• At this stage an idea is developed by the entrepreneur and is
seeking for initial capital inputs.
• This stage is usually financed by Angel investors or by friends
and family.
• The capital received here is only to build prototypes and push
towards the second stage of financing.

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• At this second stage of finance as prototypes are ready the businesses
usually starts marketing its product and seeks assistance from Venture capital
firms to finance the business.
• Generally such firms have assembled their key management and are
prepared with business pans and forecasts.
• Here the firm has started seeing revenues but it is not sufficient to cover the
cost of product and marketing.

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• Even though the stage comes after Seed and Startup capital it
is known as first round as the investment firm has started
production and manufacturing.
• The risk involved in this venture has been cut down to 50 per
cent at this stage as the company has started production and
marketing which is generating revenues to the firm.

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• A second round of capital is invested in the business for
expansion. The company has successfully grown and is in
expansion stage.

• The management team is now strong and has experienced

people working on the projects undertaken by company.

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• The portfolio company has undergone expansion and is now
working to increase its working capital.
• It is a loan to the owner with a written warrant that if the loan
or interest are not paid in time, the lender has rights to convert
loan to equity.
• This will dilute the shares of company.
• The company is in a strong position to clear the short terms loan
which is taken as it has already started generating revenues
and larger profits.

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• This is the last round of financing of Venture capital firm prior to
exit.
• Venture capitalist present on management team helps build a
stronger team which helps the company ‘Go public’.
• This is the short term immediate finance requirement of the
company which is paid off once the Initial Public Offer (IPO)
has been issued to public.

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• The stages of finance cannot be discussed in isolation without
mentioning the process of Venture capital financing.

• VC firms follow a strict process prior to invest into a business.

• This is a due diligence process which is carried on by Venture

capital firms prior to investing in to a startup.

• Next slide shows us the steps included in process.

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 Deal
Origination

Exit plan Screening

Process
Post
Investment Evaluation
Activity

Deal
Structuring

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• Blume ventures
• Accel partners
• Kalaari Capital
• Tiger Global Management
• Nexus venture Partners
• IDG Ventures India
• Helion Venture Partners
• KAE Capital
• Intel Capital

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• In India the Venture Capital firms are regulated by Securities
and Exchange Board of India (SEBI) and Reserve Bank of India
(RBI).
• The Venture capital firm is governed under Company Act and
SEBI (venture capital fund) regulations, 1996.
• The Act mentions:
• Registration of Venture Capital firms.
• Eligibility Criteria
• Investment Conditions and restrictions.
• General Obligations and Responsibilities.
• Procedure in case of Default.

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• The websites referred in creating this presentation are;
www.investopedia.com
www.businessprofessor.com
www.mbaknol.com
www.google.com

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