Module 6 - Banking PDF

6 MODULE:___ MODULE G ALS BFBANFIX To be able to describe, understand and explain the products and services being offered by a Government Banking NON- BANKING FINANCIAL Institutions To differentiate pro...

6 MODULE:___ MODULE G ALS BFBANFIX To be able to describe, understand and explain the products and services being offered by a Government Banking NON- BANKING FINANCIAL Institutions To differentiate products and services of different INSTITUTIONS types of Government Banking Institutions PREPARED BY: MR. DAN JEWARD C. RUBIS, MBA  PHILIPPINE FINANCIAL STRUCTURE BANK Banks are the traditional institution for handling deposits and extending credit, but they aren't the only place that performs these functions. NON-BANK Non-banking finance companies don't have a full banking license, don't provide all of the services that an individual bank provides and aren't subject to the same regulation THE BANKING STRUCTURE RURAL BANKS COOPERATIVE SAVINGS AND MORTGAGE BANKS BANKS THRIFT BANKS PRIVATE DEVELOPMENT BANKS COMMERCIAL BANKS STOCK AND SAVINGS LOAN ASSOCIATIONS UNIVERSAL BANKS  RURAL BANKS COOPERATIVE SAVINGS AND MORTGAGE BANKS BANKS GOVERNMENT THRIFT BANKS PRIVATE BANKS DEVELOPMENT BANKS COMMERCIAL BANKS STOCK AND SAVINGS LOAN ASSOCIATIONS UNIVERSAL BANKS NON-BANKING STRUCTURE Nonbank financial companies (NBFCs), also known as nonbank financial institutions (NBFIs), are financial institutions that offer various banking services but do not have a banking license. Generally, these institutions are not allowed to take traditional demand deposits—readily available funds, such as those in checking or savings accounts—from the public. However, NBFIs do facilitate alternative financial services, such as investment (both collective and individual), risk pooling, financial consulting, brokering, money transmission, and check cashing. NBFIs are a source of consumer credit (along with licensed banks)  NON-BANKING STRUCTURE VENTURE CAPITALISTS/FIRMS LENDING COMPANIES INSURANCE COMPANIES PAWNSHOPS CURRENCY EXCHANGES INVESTMENT COMPANIES VENTURE CAPITAL Venture capital is financing that investors provide to startup companies and small businesses that are believed to have long term- growth potential.  VENTURE CAPITAL is that level of investment that typically takes place before a company goes public  It is financing provided for startup companies and small companies that want to grow  START UP A startup is a young company founded by one or more entrepreneurs to develop a unique product or service and bring it to market  HOW VENTURE CAPITAL WORKS?  SMALL FIRMS lack access to the capital markets. So once the owners have tapped their own financial resources, they have to look for OUTSIDE SOURCES OF FINANCING in order to grow the business. The business principals will often seek out either a venture capital firm or an angel investor to provide funding for this purpose The business submits a BUSINESS PLAN to the venture capital firm. If the venture capital firm decides to go ahead and invest in the startup, they will make a proposal. That will include the amount of the investment that they are willing to make  VENTURE CAPITALISTS are an integral part of the start-up ecosystem. They invest in funding, provide advice and mentorship to businesses seeking to enter new markets. These can be things like customer acquisition, product development or scaling operations. For entrepreneurs looking for funding, knowing the top venture capital investors in Philippines is essential as they can provide sound business advice and accelerate your growth plans. TOP 5 VC INVESTORS IN PHILIPPINES (IN 2024) https://www.basetemplates.com/investors/top-5-vc-investors-in-philippines  SOURCES OF VENTURE CAPITAL  VENTURE CAPITALIST is an investor who either provides capital to startup ventures or supports small companies that wish to expand but do not have access to equities markets.  VENTURE CAPITAL FIRM firms that provide ‘venture capital’, meaning high risk capital that supports companies and organizations with the hope that these provide a great return on investment (ROI)  Yoon Sun Hak is the head of SH Venture Capital PHOTOS: CTTO  Venture capitalists typically invest in companies they anticipate being sold either to the public or to larger firms within the next several years.  ANGEL INVESTOR Angel investors are a different group of small business investors. They perform a very similar function to venture capitalists and so are often thought to be the same thing. Angel investors are wealthy individuals who act as investors in startup businesses on their own, rather than as part of a group or a VC funding organization  An angel investor is an accredited investor who uses their own money to invest in small businesses. They are required to have a minimum net worth of $1 million and an annual income of at least $200,000 to be considered an accredited investor. A venture capitalist is a person or firm that invests in small companies, generally using money pooled from investment companies, large corporations, and pension funds. Typically, VCs do not use their own money to invest in companies.  PHOTOS: CTTO FUNDING ROUND PHOTOS: CTTO PHOTOS: CTTO  The funding will be provided in rounds in part because the venture capitalist wants to be sure that the startup is meeting its expected goals and projections  SEED ROUND The seed round usually happens when the company is at the initial idea stage, or once the founder has a prototype/proof of concept, as well as some kind of sign that there’s a demand for what could be offered.  SERIES A ROUND Once a business has developed a track record (an established user base, consistent revenue figures, or some other key performance indicator), that company may opt for Series A funding in order to further optimize its user base and product offerings.  Typically, Series A rounds raise approximately $2 million to $15 million, but this number has increased on average due to high tech industry valuations, or unicorns. The average Series A funding as of 2020 is $15.6 million. UNICORN is the term used in the venture capital industry to describe a startup company with a value of over $1 billion. The term was first coined by venture capitalist Aileen Lee. Some popular unicorns include Airbnb and Uber.  SERIES B ROUND Series B rounds are all about taking businesses to the next level, past the development stage. Investors help startups get there by expanding market reach. The average estimated capital raised in a Series B round is $33 million. Companies undergoing a Series B funding round are well-established, and their valuations tend to reflect that; most Series B companies have valuations between around $30 million and $60 million, with an average of $58 million  SERIES C ROUND Businesses that make it to Series C funding sessions are already quite successful. These companies look for additional funding in order to help them develop new products, expand into new markets, or even to acquire other companies. Average Series C Funding Amount in 2020: An analysis of 14 Series C deals in the U.S. in June, 2020 showed the mean Series C round to be $59 million; the median was $52.5 million.  The venture capitalist will expect to be invested in the startup for several years, giving the company a chance to grow and meet its expected goals. The payoff comes when the startup is either acquired by another company or launches its initial public offering (IPO). WHY WOULD AN INVESTOR INVEST IN VENTURE CAPITAL?  VC funding is undoubtedly one of the highest risk types of investing there is. This is because the risk of failure by startup companies is greater than the likelihood of success. In fact, more than 70% of startups fail at some point in the VC process But despite those risks, VC funding can be incredibly profitable. For example, a venture capitalist might invest $20 million in a startup in exchange for a 20% equity position in the company. If the startup raises $1 billion in its IPO, the venture capitalist equity stake will rise to $200 million. That will give them a 10 to 1 return on their initial investment. example is WhatsApp. This is a popular message app for smartphones. In April 2011, venture capital firm, Sequoia Capital invested $8 million in WhatsApp in exchange for a 15% share in the company. In February 2013, Sequoia Capital invested another $50 million in the company. At the time of the 2013 funding, WhatsApp was valued at $1.5 billion. But then in 2014, lightning struck. WhatsApp was acquired by Facebook for more than $19 billion. Sequoia Capital’s 15% equity stake was suddenly worth nearly $3 billion. That’s about 50-to-1 return on their venture capital investment of $58 million.  THE FUNDING PROCESS Approaching a Venture Capital for funding as a Company  PHOTOS: CTTO IDEA GENERATION The initial step in approaching a Venture Capital is to submit a business plan  There should be an executive summary of the business proposal Description of the opportunity and the market potential and size Review on the existing and expected competitive scenario Detailed financial projections Details of the management of the company  PHOTO: CTTO INTRODUCTORY MEETING 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  PHOTO: CTTO DUE DILLIGENCE 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.  PHOTO: CTTO TERM SHEETS AND FUNDING The VC offers a term sheet, which is a non-binding document explaining the basic terms and conditions of the investment agreement  A TERM SHEET is a nonbinding agreement that shows the basic terms and conditions of an investment. The term sheet serves as a template and basis for more detailed, legally binding documents. Once the parties involved reach an agreement on the details laid out in the term sheet, a binding agreement or contract that conforms to the term sheet details is drawn up. THANK YOU