Unit 1 Fundamentals Of Venture Capital PDF

Unit 1 FUNDAMENTALS OF VENTURE CAPITAL Venture An undertaking which involve risk. A dare to do or say something. Capital An amount invested by the person/s to carry out the newly established business. Venture Capital Venture capital means funds made available for startup firms and sm...

Unit 1 FUNDAMENTALS OF VENTURE CAPITAL Venture An undertaking which involve risk. A dare to do or say something. Capital An amount invested by the person/s to carry out the newly established business. Venture Capital Venture capital means funds made available for startup firms and small businesses with exceptional growth potential. Venture capital is the financial support to young, rapidly growing companies/ individuals that have potential to develop into significant economic contributors by the businessmen/ group to create a product or service which has a unique idea. Features of Venture Capital High risk Participation in management Provided at earlier stage Finance to Smaller and Less Mature companies Finance new and rapidly growing companies Lack of liquidity Long time horizon  Pros & Cons of Venture Capital provide large sum of equity Lengthy and complex process finance. (needs detailed business Venture Capitalist are plan, financial projections rewarded by business success etc.) & the capital gain. In the deal negotiation stage, Able to bring wealth and you will have to pay for legal expertise to your company and accounting fees The Venture Capitalist also Investors become part has a wide network of owners of your business - contacts. founder loss of autonomy or Providing additional funds. control Venture Capital Funding This scheme meets businesses having large up-front capital requirements which cannot be financed by cheaper alternatives such as debt. Young companies to raise venture capital require a combination of innovative technology, potential for rapid growth, a well-developed business model, and an impressive management team. Types of Funding Seeding Capital Startup capital Early-Stage Capital Expansion Capital Last Stage Capital  Risk in Each Stage Financial Stage Period (Funds Risk Activity to be financed locked in years) Perception Seeding Capital 7-10 Extreme For supporting a concept or idea or R&D for product development Start-up Capital 5-9 Very High Initializing operations or developing prototypes Early-Stage 3-7 High Start commercials production and Capital marketing Expansion Capital 3-5 Sufficiency Expand market and growing working high capital need Late-Stage 1-3 Medium Market expansion, acquisition and Capital product development for profit making company Venture Capitalist A person or investment firm that makes venture investments, and these venture capitalists are expected to bring managerial and technical expertise as well as capital to their investments Business Angels – are private investor with huge personal capital, looking forward to invest their money in business which are not helped by financial institutions because are too risky. Characteristics of Venture Capitalist Well Managerial Skills Well Knowledgeable Sophisticated Investors – Comes forward to take risk Decision Making Ability Analyzing Skills Technology Background – Scientist/Researchers Services Generally Provided by VCs Finance to new and: rapidly growing companies Finance to Typically knowledge-based sustainable, up scalable companies Purchase equity/quasi-equity securities Assist in the development of new products, or services Add value to the company through active participation Funding Process Step 1 Business Plan Submission Step 2 Introductory Conversation/Meeting Step 3 Due Diligence Step 4 Term Sheets and Funding Methods of Venture Capital Financing Equity Conditional loan Participating debentures Quasi equity Income note VC in the Philippines Kickstart Ventures - Tech focused Seed and Early-stage Corporate VC Firm investing in the Philippines Interplay Ventures - Tech focused VC and incubator firm investing primarily in the US First Asia Venture Capital - Offline-focused venture capital firm investing in geographies such as the Philippines Good Capital Group - Boutique investment firm