1. PRIVATE EQUITY FIRMS AND VENTURE
CAPITALISTS
Group 17
Saurabh Chaubey (Roll No 56)
Vinay Prabhakar (Roll No 67)

2. PRIVATE EQUITY
Private
Equity
Venture Growth Mezzanine
Buyouts
Capital Capital Capital

3. DEFINITIONS
 Private Equity can be defined as the provision of equity capital
by financial investors to non quoted companies with high growth
potential.
 Venture Capital is strictly speaking a subset of private equity
and refers to equity investments made for launch, early
development or expansion of business. It has special emphasis
on entrepreneurial undertakings rather than mature business.

4. MAIN OBJECTIVES OF PE FIRM
 Seek out companies with the potential for growth and with the
aim to put in place the capital, talent and strategy needed to
permanently strengthen the company and raise its value.

5. EQUITY FIRMS BRINGS
 Long term capital, solidly underpinning your company’s growth
 Increased visibility with bankers, suppliers and clients
 A partnership, sharing of risk and rewards
 An investment fixed within the framework of a negotiated
contract
 The adoption of high-performance management standards
 Strategic and operational support along with financial advice in
times of crisis
 Assistance with subsequent financing operations
 Alliance due to investor’s network of contacts and portfolio of
investments
 A partial or total exit strategy

6. EQUITY FIRMS LOOK FOR
 High growth ,competitive product or services
 In the case of disposal or transfer, recurring profits
 A stable and qualified management team , capable of turning the
negotiated goals into reality
 Solid management procedures, either already in place or able to
be quickly put in place
 An agreement on the investor’s exists

7. PRIVATE EQUITY MODEL
Private Government
Institutional Investors Corporates Others
Individuals/Family
$
Portfolio Company 2
Advices Private equity
investmet fund
Private
Equity(Investment
Fund) Management Portfolio Company 1
company

8. PRIVATE EQUITY MODEL
 Creation of fund and underwriting by professional investors
 Investing the fund
 Managing the Investment
 Redistribution
How Do PE Fund Works
• Funds with Limited Life Span
• Funds with unlimited life span

9. DIFFERENT TYPE OF PV INVESTMENT FUNDS
 Independent private equity
 Captive funds
 Semi-captive funds

10. WHAT VC IS AND WHAT IT IS NOT
WHAT IT IS WHAT IT IS NOT
A source of capital for high risk businesses Right for “lifestyle” businesses or those without
strong potential for growth
A source of “patient” capital Money without strings or cost
An investment in the business Money to repay nonbusiness-related debts and
expenses
Money to drive business growth and development An inexhaustible supply of money that will
continue indefinitely
A validation of the business by outsiders Free from restrictions and conditions imposed by
the investors
A way to get access to the investors’ contacts and A loan that you can prepay at a low cost if things
resources go well
A source of strategic planning, management and An end in itself; rather it is just the beginning of
recruiting assistance the relationship
A way to get help raising funds in the future A guarantee that the free market will reward the
business and investors
Money that does not have to be paid back by the Available unless the investors can see a way to
entrepreneur if the business fails liquidate their investment in 5-7 years.
Investment looking for a “liquidity event” so Right for entrepreneurs who want to keep
investors ownership
can cash out and control indefinitely

11. HOW VC FIRMS SELECT INVESTMENTS
 Being highly selective.
 Seek companies with innovative products and “unfair”
advantages in large, ripe markets.
 Back outstanding management teams.
 Invest in companies with a clear and realistic exit strategy.
 Add value to the development of the business and play a
significant role in the ongoing management of the company.
 Make sure that companies have access to enough cash to get to
cash flow breakeven.
 Build a diverse investment portfolio.


12. HOW TO APPROACH VCS
 The best way to be successful in approaching venture investors
is to offer them a well-constructed investment opportunity that
meets their goals and objectives. The easier it is for the investor
to see how attractive the opportunity is, the more likely he or she
is to invest.
 Executive Summary, backed up by Business Plan

13. BUSINESS PLAN SHOULD COVER FOLLOWING
POINTS WHILE PRESENTING TO VC’S
 The mission of the business and the objectives of the
management team;
 A description of the product or service, its history, and an
explanation of what problem it solves or what is unique or
exciting about it;
 Objectives of any ongoing research and development activities;
 The ownership structure and capitalization;
 The amount of investment needed and what it will be used for;
 A description of the market and the competition, and where the
company fits into the market;
 Whether the product or service has any proprietary advantage
or other protection from competition;
 A description of the industry, its growth trends, prospects, and
its major challenges;

14. DIFFERENT STEPS IN PRIVATE EQUITY
INVESTMENT PROCESS
• Entrepreneur – a) Appoint Advisors b) Prepare Business Plan c) Approaching PE Firm
Contacting PE Firm • PE Firm – Review Business Plan
• Entrepreneur- Provide additional Information
• Entrepreneur and PE firm- Meet to discuss business plan, Build Relationship, Negotiate
outline terms
Initial Enquiries and • PE Firm- Conduct initial enquiries, Value the business, Consider Financing Structure,
Negotiation
• Entrepreneur and PE Firm – Liaise with accountants, Liaise with other external
consultants,
• PE Firm- Initiate External Due Diligence
Due Diligence

15.  The operations plan with an explanation of challenges, solutions,
and strategic relationships;
 The marketing and sales strategy, with the names and size of
principal customers;
 The organizational chart, with track records, compensation
packages, and resumes of key management and board
members, and hiring plans for unfilled positions;
 The historical financial data, along with financial objectives and
projections, with assumptions, showing cash flow needs of the
business and how they will be met; and
 A discussion of exit opportunities and strategies.

16. DIFFERENT STEPS IN PRIVATE EQUITY
INVESTMENT PROCESS
• Entrepreneur-Disclose all relevant business Information.
Final
• Entrepreneur and PE Fund- Negotiate financial terms, Document constitution
Negotiation and and voting rights.
Completion • PE Fund – Draw up completion documents.
• Entrepreneur- Provide periodic management accounts, Communicate regularly
with investors.
• PE Fund- Seat on board, Monitor investment, Constructive input, Involvement
Monitoring in major decisions.
• PE Fund – Evaluate and Decide to exit or to continue
EXIT

17. CONCLUSION
 Before you approach a VC for funding, examine your goals.
 Do your Homework
 Know your ultimate business objectives, and be honest about
those goals with your prospective investors.