 Start up companies with a potential to

grow need a certain amount of

investment. Wealthy investors like to
invest their capital in such businesses
with a long term growth perspective.
This capital is known as venture
capital and the investors are called
venture capitalists.
• It is a private or institutional
investment made into early-stage /
start-up companies (new ventures). As
ventures involve risk (having uncertain
outcome) in the expectation of a
sizeable gain.
• Venture Capital is money invested in
businesses that are small, or exist only
as an initiative, but have huge potential
to grow.
• The people who invest this money are
called venture capitalists (VCs). The
venture capital investment is made
when a venture capitalist buys shares
of such a company and becomes a
financial partner in the business.
 E:g
1.Helion Venture Partners :Investing in technology-
powered and consumer service businesses,
StartupsFunded: Yepme, MakemyTrip,  TAXI For Sure, 
2. Accel Partners  : Internet and Consumer Services,
Infrastructure, Cloud -Enabled Services, Mobile and
Software.
StartupsFunded: Flipkart, , Freshdesk, Book My Show,
 Zansaar, Probe, Myntra, CommonFloor.
3. Blume Ventures : Mobile Applications,
Telecommunications Equipment, Data Infrastructure,
Internet and Software Sectors, Consumer Internet, Media,
Research and Development
Startups Funded: Carbon Clean Solutions,
 EKI Communications, Audio Compass, Exotel, Printo.
1. High Risk : Venture
capital represents financial
investment in a highly risk
project with the objective
of earning a high rate of
return.
2.  Equity Participation:
Venture capital financing is,
always, an actual or potential
equity participation wherein
the objective of venture
capitalist is to make capital
gain by selling the shares once
the firm becomes profitable.
 3. Long Term Investment:
Venture capital financing is a
long term investment. It generally
takes a long period to encash the
investment in securities made by
the venture capitalists.
 4. Participation in Management:

In addition to providing capital,

venture capital funds take an active
interest in the management of the
assisted firms. Thus, the approach
of venture capital firms is different
from that of a traditional lender of
banker.
 5. Investment In Small and
Medium Enterprises :
Investment of venture capital is
made for the establishment of small
and medium enterprises only, and
not for the establishment of large
Industries. Because risks involved
in the establishment of small and
medium enterprises are less than the
large Enterprises.
 6.
Availability of Venture
Capital
Venture capital is available only for
the commercialization of new ideas
and new technology.
It is not available for Enterprises,
like – booking of the train, bus, or
another journey, financial services by
individuals, banks, and financial
institutions, agency, research, and
development, etc.
 7. New Concept :
Venture capital is a new concept
because it has been formed for
fulfilling the financial needs of
entrepreneurs taking high risks for
technical developments and
processing.
 Seed Capital.

 Startup Capital

 Early Stage Capital

 Expansion Capital:

 Late Stage Capital :

 Bridge Financing:
 Seed Capital.  If you’re just starting
out and have no product or organized
company yet, you would be seeking
seed capital.  Few VCs fund at this
stage and the amount invested would
probably be small.  Investment capital
may be used to create a sample
product, fund market research, or
cover administrative set-up costs.
 Startup Capital :  At this stage, your
company would have a sample
product available with at least one
principal working full-time.  Funding
at this stage is also rare.  It tends to
cover recruitment of other key
management, additional market
research, and finalizing of the product
or service for introduction to the
marketplace.
 Early Stage Capital : Two to three years
into your venture, you’ve gotten your
company off the ground, a management
team is in place, and sales are increasing.  
At this stage, VC funding could help you
increase sales to the break-even point,
improve your productivity, or increase
your company’s efficiency.
 Expansion Capital:   Your company
is well established, and now you are
looking to a VC to help take your
business to the next level of growth. 
Funding at this stage may help you
enter new markets or increase your
marketing efforts.  You should seek
out VCs that specialize in later stage
investing.
 Late Stage Capital : At this stage,
your company has achieved
impressive sales and revenue and
you have a second level of
management in place.  You may be
looking for funds to increase
capacity, ramp up marketing, or
increase working capital.
 Bridge Financing: You may also be
looking for a partner to help you find
a merger or acquisition opportunity,
or attract public financing through a
stock offering.  There are VCs that
focus on this end of the business
spectrum, specializing in initial
public offerings (IPOs), or
recapitalizations. 
 Idea generation and submission of the Business

Plan

 Introductory Meeting

 Due Diligence

 Term Sheets and Funding

1. There should be an executive summary
of the business proposal
2. Description of the opportunity and the
market potential and size
3. Review on the existing and expected
competitive scenario
4. Detailed financial projections
5. Details of the management of the
company
6. There is detailed analysis done of the
submitted plan, by the Venture Capital
to decide whether to take up the project
or not
 Once the preliminary study is
done by the VC and they find
the project as per their
preferences, there is a one-to-
one meeting that is called for
discussing the project in detail.
After the meeting the VC
finally decides whether or not
to move forward to the due
diligence stage of the process.
 The due diligence phase varies
depending upon the nature of the
business proposal. This process
involves solving of queries related to
customer references, product and
business strategy evaluations,
management interviews, and other
such exchanges of information during
this time period.
 If the due diligence phase is satisfactory,
the VC offers a term sheet, which is a non-
binding document explaining the basic
terms and conditions of the investment
agreement. The term sheet is generally
negotiable and must be agreed upon by all
parties, after which on completion of legal
documents and legal due diligence, funds
are made available.
1. They bring wealth and expertise to the
company
2. Large sum of equity finance can be
provided
3. The business does not stand the
obligation to repay the money
4. In addition to capital, it provides
valuable information, resources,
technical assistance to make a business
successful
1. As the investors become part owners, the

autonomy and control of the founder is lost

2. It is a lengthy and complex process

3. It is an uncertain form of financing

4. Benefit from such financing can be realized in

long run only.