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Technically, venture capital is just a subset of private equity.

They both invest in companies, they both recruit former bankers, and
they both make money from investments rather than advisory fees.
But if you take a look beneath the surface, youll see that theyre
significantly different.
Definitions
Technically,
the term private equity refers to money invested in private compani
es
, or companies that become private through the investment.

Venture Capitalis a form of "risk capital". In other words, capital that


is invested in a business where there is a substantial element of risk
relating to the future creation of profits and cash flows. Risk capital is
invested as shares (equity) rather than as a loan and the investor
requires a higher "rate of return" to compensate him for his risk.
Venture Capitalprovides long-term, committed share capital, to help
unquoted companies grow and succeed. If an entrepreneur is looking to
start-up, expand, buy-into a business, buy-out a business in which he
works, turnaround or revitalize a company, venture capital could help
do this. Obtaining venture capital is substantially different from raising
debt or a loan from a lender. Lenders have a legal right to interest on a
loan and repayment of the capital, irrespective of the success or failure
of a business. As a shareholder, the venture capitalist's return is
dependent on the growth and profitability of the business. This return is
generally earned when the venture capitalist "exits" by selling its
shareholding in the business.

Difference between VC and private equity:


Private equity refers to equity or quasi-equity investments
in high-growth companies and includes buyouts, mezzanine
financing, privatization and public as well as private deals.
The private equity asset class includes venture capital,
buyouts, and mezzanine investment activity. While venture
capital focuses on investing in private, young, fast growing
companies, private equity players largely provide
mezzanine or bridge funding.

What kind of businesses are attractive to venture


capitalists:
Venture capitalists prefer to invest in "entrepreneurial businesses".
This does not necessarily mean small or new businesses. Rather, it
is more about the investment's aspirations and potential for
growth, rather by current size. Venture capital investors are
interested in companies with high growth prospects, which are
managed by experienced and ambitious teams who are capable of
turning their business plan into reality.

Process of investment by VC investors


1. VC funds receive the proposals for investment either directly or through financial intermediaries. The process of
investment by a VC funds begins with desk research on a deal. In case the deal evinces interest of VC funds,the
Management Team is requested to present the Business model of company, unique aspects of business,
future prospects and the investment proposal.
VC funds take up the venture for detailed due-diligence after getting final concurrence of Entrepreneurs on terms of
proposed investment negotiated with them.
On successful completion of due diligence, depending on findings and in process of getting internal approvals for
investment, VC funds may modify or stipulate such other conditions as are considered appropriate by them for investment
in the company and accordingly negotiate changes/ modifications in the term sheet with the Entrepreneurs (also called
Promoters).
Investee companies, passing of requisite Board/ Company's resolution, obtaining approval of Govt. & other statutory
approvals, etc. for facilitating investment.
During currency of investment, VC funds regularly monitor functioning of Investee companies, give inputs on strategic
plans and guide companies for optimizing their performance.
VC funds also pursue the Investee companies to orient their business plans & achieve performance targets to qualify for
bringing out Initial Public offers (IPOs) and get listed on stock exchanges for providing exit from investment to VC funds.
The process of investment and level of participation of VC funds in management of venture indicated above is illustrative
and may vary depending on merits of a venture or strategy of a VC fund.

Exceptions
There are always special cases:
Some VCs usedebtto make their investments, especially
for larger / later-stage investments.
Some turnaround PE firms buy less-than-stable
companies andfocus on operational improvementrather
than financial engineering.
Sometimes PE firms acquireless than 100% of a company,
especially firms that are growth equity-focused.

The People
Private equity firms focus on recruiting former
investment banking analysts the modeling and due diligence
work you do in PE is very similar to what you do on transactions in
banking.
Consultantsand anyone with an operating backgroundcanget
into PE, but its an uphill battle theyll always be skeptical over
whether or not you know how to build an LBO model.
VC attracts a more diverse mix youll see ex-bankers,
consultants, business development people, and even former
entrepreneurs.
In the early days the 1960s and 1970s many VCs had
entrepreneurial backgrounds, but today that is less true and many
Partners have never even worked outside of finance.

Most Recent Example of PE


Startups, private equity firms invested Rs 843 crore in West Bengal after
Mamata Banerjee came into power: Amit Mitra
Over Rs 843 crore have been invested by private equityfirms, angel funds,
start-ups, venture capitalists and others after Mamta Banerjee's government
came to power in West Bengal, said the state finance and industry minister Dr
Amit Mitra at an ASSOCHAM-IACC event held inKolkataon Wednesday.
Quoting from a study, he said that PE firms had invested $8.4 billion in India
between January and September 2014 as against $7.8 billion in 2013 thereby
showcasing 38 per cent jump year-on-year in PE firms' investment in India.
"Time has come when PE funds, particularly for funding start ups, angel
networks as well as VCs are coming in large numbers to Bengal as the energy
ofentrepreneurshiphere is unbelievable and young people who wanted to only
get a job before are turning towards creating jobs rather than only working,
He also informed that forreal estateproject in Bata, $33 million came from GIC
via HDFC and it was signed in Singapore.
"When GIC which is probably world's largest sovereign fund, decides to come
to Bengal, it means they have done their due-diligence and HDFC being very
professional entity as their partner are obviously aware of what is going on the
ground in Bengal," said Dr Mitra.

Source: Economic Times


Dated: Jan 27,2016

E-Commerce leader Flipkart's $210 million round - led by Russia-based DST Global - was the
largest PE investment announced during Q2'14.
The next two largest transactions were in the pharmaceuticals sector and involved investors who
have been operating in India for more than a decade now - Temasek and Warburg Pincus. While
Temasek paid a reported $170 million to buyout fellow PE investor ChrysCapital from Intas Pharma,
Warburg Pincus committed to invest $150 million in Laurus Labs including by buying out the stake
held by previous investor Fidelity Growth Partners India.
Flipkart competitor Snapdeal.com ensured it did not get left behind in the e-commerce fund raising
game and collected another $100 million - this time from investors like Temasek and Premji Invest
along with global asset management firm BlackRock and a couple of Hong Kong based hedge
funds.
With national election results out only in the last month of the quarter and new rules imposed by
the New Companies Act delaying a few deal closures, investors squeezed through bets on safe
sectors in Q2'14.
Led by the mega deals in e-commerce and pharmaceuticals, the IT & ITES and Healthcare & Life
Sciences industries accounted for 67% of the investment pie during Q2' 2014, Venture Intelligence
research showed.
The other prominent investments in IT included the Google Capital led $31 million investment in
Social CRM software maker Freshdesk, Axon Partners and Madison India Capital led $28 million for
remote tech support firm iYogi, the SAIF Partners led $25 million investment in online ticketing firm
Bookmyshow and IDG Ventures and Vertex Ventures-led $23.2 million investment in online travel
services firm Yatra.com.