1. VENTURE CAPITAL
AN INNOVATIVE PRACTICE
BY
Dr. Neeta Shah
Prof. Poonam Singh

2. INTRODUCTION
 Venture capital is also known as risk capital
 Most flexible form of financing technology
based.
 Innovative business firms.
 More wide way of getting finances for
investment in business enterprises which hold a
bright future in terms of profit and growth.
 It is invested as equity shares and not as any
type of a loan.
 It has now emerged as the best financing
alternative in developing as well as developed
countries

3. TRAITS REQUIRED FOR VENTURE CAPITAL
INVESTMENT
 A business firm which has the potential to grow in
near future
 The investment should be for a long time like from
two to ten years.
 The business should have had invested in shares
of established business
enterprises which hold strong history of profits.
 The risk level should be high of the ongoing
projects in the firm that also ensure high amount of
pro fits.
 Once the funding is done, the investor must remain
active. And profitability which is best for an investor.

4. CHARACTERISTICS OF THE VENTURE
CAPITAL
 Long horizon time:
 Lack of liquidity:
 High risk:
 High returns:
 Equity participation
 Participation in management:

5. METHODS OF VENTURE CAPITAL
 Seed money financing
 Development financing:
 Later stage financing

6. THE VENTURE CAPITAL INSTITUTION WILL
PROVIDE FINANCE AS FOLLOWS
 Messanine capital:
 Bridge capital
 Management buy-outs:
 Management buy-in:
 Turn around:
 Financial turn around
 Management turns around

7. MODES OF VENTURE FINANCING
Venture capitalists carry out substantial
financial support to provide enough flexibility
to meet the requirements of the company.
The venture capitalist typically makes an
investment in........
 Equity:
 Quasi-equity:

8. VENTURE CAPITAL INVESTMENT PROCESS
 Deal origination:
 Screening:
 Evaluation:
 Deal structuring:
 Post-investment activities and exit

9. FACTORS DETERMINING VENTURE CAPITAL
INVESTMENTS
 Management and organization pattern:
 Production process:
 Marketing and sales:
 Profitability:
 Reference information:
 Legal matters:
 Professional reference:

10. VALUATION METHODS
 Conventional valuation method:
 Present-value method

11. ADVANTAGES
 It injects long term equity finance which provides a solid
capital base for future growth.
 The venture capitalist is a business partner, sharing both the
risks and rewards. Venture capitalists are rewarded by
business success and the capital gain.
 The venture capitalist is able to provide practical advice and
assistance to the company based on past experience with
other companies which were in similar situations.
 The venture capitalist also has a network of contacts in many
areas that can add value to the company.
 The venture capitalist may be capable of providing additional
rounds of funding should it be required to finance growth.
 Venture capitalists are experienced in the process of
preparing a company for an initial public offering (IPO) of its
shares onto the stock exchanges or overseas stock exchange
such as NASDAQ.

12. CONCLUSION
 The venture capital investment being risky and long
term in nature needs to be introduced effectively to
enhance its applicability to a larger extent.
 Effective measures of financing pattern of venture
capital companies certainly give a boost to the efforts for
setting up such technology based companies.
 Public financial institutions are making efforts in this
direction.
 Government institutions need to be more open and
flexible to work hand in hand with the other institutions
for overall development of the country with strong
financial support.