A Presentation on Venture

Capital

ROADMAP
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Definition
Characteristics of VC
Scope of VC
Suppliers of VC
VC Investment Process
Regulations on Venture Capital Funds in India
Important VCFs and their schemes

Definition
Money provided by investors to start-up firms and

small businesses with perceived long-term growth

potential
It is financial support to young, rapidly growing
companies/individual that have potential to
develop into significant economic contributors by
investors or group of investors to create products
or service that has unique idea

Characteristics of VC
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High risk
Above average return
Participation in management
Long time horizon
Lack of liquidity

Scope of VC
Seeding Capital : For supporting a concept/idea or

R&D for product development , risk is extreme

Start up Capital: Initializing operations or

developing prototypes, risk is very high

Early Stage Capital: Start commercial operations and

marketing, risk is high

Expansion Capital: Expand market and growing

working capital need, risk sufficiently high

Late Stage Capital: Market expansion, acquisition
and product development for profit making
company, risk is medium

Suppliers of Venture Capital

Subsidiaries of large financial corporation and
banks
2. Private independent specialized firms
3. Publicly funded small business investment
corporations
4. Subsidiaries or division of large manufacturing
corporations
1.

VC Investment Process
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Deal Origination
Screening
Due Diligence
Deal Structuring
Post Investment Activity
Exit Plan

Regulations on Venture Capital Funds in India

VCF are regulated by SEBI Regulations,1996
Some of the provisions of this regulation are:

1. A venture capital fund may be set up by a company

or a trust, after a certificate of registration is granted
by SEBI on an application made to it.
2. A VCF may raise fund from any investor
(Indian, NRI or foreign), provided that the money
accepted is not less then Rs 5 lacs

3. The VCF should not issue any document or

advertisement inviting offers from public for
subscription of its securities or units
4. At least 80% of the funds should be invested in
venture capital companies
5. SEBI Regulations do not provide any sectoral
restriction for investment in companies engaged in
financial services

Important VCFs and their Schemes

VCF of IDBI
It was started with an initial capital of Rs 10 crore
and is a part of the technology department of IDBI.
It assists high technology, small and medium sized
projects with a maximum total cost of 2.5 crore
The projects must employ technology that is new and
untested in India

VCFs of UTI
In 1988, the UTI set up a VCF of Rs 20 crore in

collaboration with the ICICI

Technology Development and Information Company
of India Ltd was established as an adviser and
manager of the fund
Its objective was to finance greenfield ventures and
enhancing industrial development

Technology Development and Information Company of

India Ltd(TDICI)

It provides assistance to industries directly or

through venture funds

It manages two venture capital funds of the UTI

Risk Capital and Technology Finance Corporation

Ltd(RCTFC)

It provides financial assistance to new entrepreneurs

It provides both risk capital and technology finance
Most of its financed projects are based on new

technology or on new usage of existing technology

Credit Capital Venture Fund (India) Ltd.

It was launched in 1989 and is the second largest

VCF in private sector in India

It was started with an initial capital of Rs 10 crore
Its thrust areas are small export oriented units and
ancillary units
It also provide management support to the projects

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