project piyush - final

A

Research Report

ON

Growth of Venture Capital Finance in India

and Role of Business Confidence Index

In partial fulfillment of the requirements for the degree of

Master of Business Administration

(Kurukshetra University, Kurukshetra; Session 2012-14)

Under Supervision of: Submitted By:

Dr. Shilpa Jain Piyush Gupta

Head of Department Student, MBA IV

MBA, SDIMT Reg. No. 05 MY 1282

S. D. Institute of Management and TechnologyJagadhri, Yamunangar, Haryana 135003

DECLARATION

I, Piyush Gupta, hereby declare that the work presented herein is genuine

work done originally by me and has not been published or submitted

elsewhere for the requirement of a degree programme. Any literature, data or

works done by others and cited within this dissertation has been given due

acknowledgement.

Piyush Gupta

MBA (2012-14)

Roll No. ______

Growth of Venture Capital Finance in India and Role of Business Confidence Index | 2

Table of Contents

ACKNOWLEDGEMENT 5

PREFACE 6

1 INTRODUCTION TO VENTURE CAPITAL FINANCE 7

1.1 VENTURE CAPITAL FINANCING 7

1.2 BENEFITS OF VC OVER OTHER FUNDING METHODS 9

1.3 A BRIEF HISTORY 10

1.4 VENTURE CAPITAL FINANCING PROCESS 12

1.5 WHAT DO VCS LOOK FOR? 13

2 VENTURE CAPITAL IN INDIA AND BUSINESS CONFIDENCE 14

2.1 INDUSTRY OVERVIEW 14

2.2 STRENGTHS AND CHALLENGES OF INDIA 15

2.3 GROWTH OF VENTURE CAPITAL INDUSTRY 16

2.4 BUSINESS CONFIDENCE INDEX 18

3 INTRODUCTION TO THE STUDY 21

3.1 BACKGROUND OF THE STUDY 21

3.2 NEED FOR THE STUDY 22

3.3 OBJECTIVES OF STUDY 23

3.4 SCOPE OF STUDY 24

4 LITERATURE REVIEW 25

5 RESEARCH METHODOLOGY 29


5.1 DATA COLLECTION 29

5.2 RESEARCH DESIGN 30

5.3 LIMITATIONS OF STUDY 30

6 ANALYSIS AND INTERPRETATION 31

6.1 ANALYSING GROWTH OF VENTURE CAPITAL FINANCE IN INDIA AND

FORECASTING VC INVESTMENTS IN NEAR FUTURE 31

6.2 ANALYSIS OF VENTURE CAPITAL INVESTMENTS IN DIFFERENT SECTORS OF

ECONOMY 35

6.3 CII’S BUSINESS CONFIDENCE INDEX AND VENTURE CAPITAL INVESTMENT

GROWTH 46

7 FINDINGS AND CONCLUSION 49

7.1 FINDINGS 49

7.2 CONCLUSION 51

8 REFERENCES 52

8.1 BIBLIOGRAPHIC REFERENCES 52

8.2 WEB REFERENCES 53

9 SUGGESTED READINGS 54

APPENDIX 55

APPENDIX I - DATA SETS 55

APPENDIX II - GLOSSARY OF TERMS AND ABBREVIATIONS 58


ACKNOWLEDGEMENT

This research project “Growth of Venture Capital Finance in India and

Role of Business Confidence Index” in itself is an acknowledgement to the

inspiration, drive, and technical assistance contributed to it by many

individuals. The project and its report work would have never been

completed without the guidance and assistance that I received from time to

time during the whole research process.

I express my sincere gratitude to my Internal Supervisor Dr. Shilpa Jain

(Head of Department, MBA, SDIMT Jagadhri) for giving me unconditional

support and an opportunity to enhance my skill in the field of my project.

I would like to thank Dr. Shelly Gupta (Director, SDIMT Jagadhri) for her

immense cooperation and provision of every possible required resource

during project work.

Above all, I am grateful to GOD who showed me rays of light to do the

project and I am also thankful to all my family members and friends for their

constant support and inspiration to complete this report.

Piyush Gupta

MBA(2012-2014)

Roll No.


PREFACE

The research project report “Growth of Venture Capital Finance in India

and role of Business Confidence Index” is undertaken as a part of MBA

curriculum at Kurukshetra University. Venture Capital Finance is a mode of

financing a high risk and new business ventures and is no more in the

dormant stage in India.

The academic research study has been undertaken in order to know the

current scenario of venture capital finance in India and to predict it near

future rate of growth. The report also lookouts for market share of different

economic sectors in terms of Venture Capital Investments and analyses

growth of venture capital investment in these sectors.

The research project report further analyse whether values Business

Confidence Index can predict growth rate of Venture Capital Investments.

For this reason Business Confidence Index by Confederation of Indian

Industry (CII) has been used.

The report starts with Introduction to the topic i.e. Venture Capital

Financing. It then throws light of this Industry in India. The report than

provides objectives of this project, reviews of literature done and Research

methodology used. It then provides details of Analysis and Interpretation

followed by findings and conclusion.


1 INTRODUCTION TO VENTURE CAPITAL FINANCE

1.1 Venture Capital Financing

Business requires capital, and getting it at the right time is very important.

There are several alternatives to fund the business. A brief heading to name

a few would be:

• Owner or proprietor’s capital

• Equity partner

• Debt Finance

These can further be branched to many options giving entrepreneur several

options to choose among. In this study the focus would be more on financing

by venture capital which comes under equity financing.

Venture capital is a risk financing in the form of equity or quasi-euity. It

gives the business funds based on their potential and their interest as

perceived by the investor. Funds might be required for seed stage funding,

expansion/development funding or for acquisition financing. Venture capital

is established among developed countries and is developing in third world

countries because of its impact on encouraging entrepreneurial activities

within a nation. Venture Capital firms invest funds on any business with a

professional outlook; they focus on their primary segment which varies

among different specializations (e.g. e-commerce, Oil & Gas, Healthcare,

Manufacturing, Health/life sciences, etc.).


'Venture Capital' is an important source of finance for those small and

medium-sized firms which have very few avenues for raising funds.

Although such a business firm may possess a huge potential for earning

large profits in the future and establish itself into a larger enterprise. But the

common investors are generally unwilling to invest their funds in them due

to risk involved in these types of investments. In order to provide financial

support to such entrepreneurial talent and business skills, the concept of

venture capital emerged. In a way, venture capital is a commitment of

capital, or shareholdings, for the formation and setting up of small scale

enterprises at the early stages of their life cycle.1

Venture capitalists comprise of professionals of various fields. They provide

funds (known as Venture Capital Fund) to these firms after carefully

scrutinizing the projects. Their main aim is to earn huge returns on their

investments, but their concepts are totally different from the traditional

moneylenders. They know very well that if they may suffer losses in some

project, the others will compensate the same due to high returns. They take

active participation in the management of the company as well as provide

the expertise and qualities of a good banker, technologist, planner and

managers. Thus, the venture capitalist and the entrepreneur literally act as

partners.

1 “Venture Capital”, accessed February 18, 2014 http://business.gov.in/business_financing/venture_capital.php


1.2 Benefits of VC over other Funding Methods

Venture capital has a number of advantages over other forms of finance:

It injects long term equity finance which provides a solid capital base

for future growth.

The venture capitalist is a business partner, sharing both the risks and

rewards. Venture capitalists are rewarded by business success and the

capital gain.

The venture capitalist is able to provide practical advice and

assistance to the company based on past experience with other

companies which were in similar situations.

The venture capitalist also has a network of contacts in many areas

that can add value to the company, such as in recruiting key

personnel, providing contacts in international markets, introductions

to strategic partners, and if needed co-investments with other venture

capital firms when additional rounds of financing are required.


1.3 A Brief History

One of the first steps toward a professionally-managed venture capital

industry was the passage of the Small Business Investment Act of 1958. The

1958 Act officially allowed the U.S. Small Business Administration (SBA)

to license private "Small Business Investment Companies" (SBICs) to help

the financing and management of the small entrepreneurial businesses in the

United States. It is commonly noted that the first venture-backed startup is

Fairchild Semiconductor (which produced the first commercially practical

integrated circuit), funded in 1959 by what would later become Venrock

Associates.

During the 1960s and 1970s, venture capital firms focused their investment

activity primarily on starting and expanding companies. More often than not,

these companies were exploiting breakthroughs in electronic, medical, or

data-processing technology. As a result, venture capital came to be almost

synonymous with technology finance.

The public successes of the venture capital industry in the 1970s and early

1980s (e.g., Digital Equipment Corporation, Apple Inc., Genentech) gave

rise to a major proliferation of venture capital investment firms. The number

of firms multiplied, and the capital managed by these firms increased ten

folds over the course of the decade.

Growth in the venture capital industry remained limited throughout the

1980s and the first half of the 1990s.


The late 1990s were a boom time for venture capital. Initial public offerings

of stock for technology and other growth companies were in abundance, and

venture firms were reaping large returns.

The NASDAQ crash and technology slump that started in March 2000

shook virtually the entire venture capital industry as valuations for startup

technology companies collapsed. Over the next two years, many venture

firms had been forced to write-off large proportions of their investments, and

many funds were significantly "under water" (the values of the fund's

investments were below the amount of capital invested). The revival of an

Internet-driven environment in 2004 through 2007 helped to revive the

venture capital environment.

Currently, Venture Capital Environment is at all time high leading to

emergence of all together new businesses. Innovations are sprouting at fast

speed and VC investments are helping them for realizing full potential of

Entrepreneurs.


1.4 Venture capital financing process

There are typically six stages of venture round financing offered in Venture

Capital that roughly correspond to these stages of a company's development.

Seed funding: Low level financing needed to prove a new idea, often

provided by angel investors. Crowd funding is also emerging as an

option for seed funding.

Start-up: Early stage firms that need funding for expenses associated

with marketing and product development

Growth (Series A round): Early sales and manufacturing funds

Second-Round: Working capital for early stage companies that are

selling product, but not yet turning a profit

Expansion: Also called Mezzanine financing, this is expansion

money for a newly profitable company

Exit of venture capitalist: Also called bridge financing, 4th round is

intended to finance the "going public" process

Between the first round and the fourth round, venture-backed companies

may also seek to take venture debt.


1.5 What do VCs look for?

Venture capitalists are higher risk investors and, in accepting these risks,

they desire a higher return on their investment. The venture capitalist

manages the risk/reward ratio by only investing in businesses which fit their

investment criteria and after having completed extensive due diligence.

Venture capitalists have differing operating approaches. These differences

may relate to location of the business, the size of the investment, the stage of

the company, industry specialization, structure of the investment and

involvement of the venture capitalists in the company’s activities.

The venture capital firm will ask prospective investee companies for

information concerning the product or service, the market analysis, how the

company operates, the investment required and how it is to be used,

financial projections, and importantly questions about the management team.

All the above questions should be answered in the Business Plan. Assuming

the venture capitalist expresses interest in the investment opportunity, a

good business plan is a pre-requisite.


2 VENTURE CAPITAL IN INDIA AND BUSINESS CONFIDENCE

2.1 Industry Overview

India currently has more than about 400 Venture capital firms. The Venture

Capital industry has shown an exponential upward curve from investments

of about USD 57 billion in 2008 to USD 140 billion in 2013. Unlike before

as observed in the early stages of the industry’s growth the investments were

inclined largely towards the Real Estate and IT sector, but within 7 years of

success stories now in 2014 venture capital firms are now interested in

nearly all sectors.

With developing Indian entrepreneurship standards, government support,

policies and globalization policies there are vast opportunities for private

equity investors to capitalize on.

Among cities, companies headquartered in Bangalore and Mumbai were the

favourite among VC investors during 2013 attracting 49 investments each,

followed by Delhi-based companies that accounted for 24 investments and

Chennai-based companies with 21 investments. Gurgaon and Hyderabad

followed with 15 deals and 8 deals respectively

Preferred regions for VC investments are Mumbai, Delhi & NCR, and

Bangalore, followed by Chennai and Hyderabad. Tier-2 cities like Lucknow

and Chandigarh are slowly catching up in attracting VC Investments.


2.2 Strengths and Challenges of India

India is an attractive market with a challenging business environment. Its

appeal lies in its competitive labor costs, lucrative domestic market, and its

skilled workforce. Foreign investors also applaud its strong management and

business education system, as well as its improving telecommunications

infrastructure. However, the country’s weaknesses are its under-developed

infrastructure and a restrictive operative environment.

Key Strengths

Local Labor Costs

Domestic Market

Business and Management Education

Skilled Services Workforce

Telecommunications Infrastructure

Key Challenges

Legislative and administrative environment

Transport and logistics infrastructure

Corporate Taxation

Ease of doing business


2.3 Growth of Venture Capital Industry

Up to 1996: The Early Years:

Funds that were mobilized for venture investment were small in value.

The venture capitalists in those times were mostly from a banking

background.

Banks approached the subject of venture funding much likely they

approached debt financing of a project.

The accent was on the asset-side of the balance sheet. And the focus

on innovation and business building was low.

Value creation as a focus had not yet been fully discovered, and exit

strategies were being thought more around the life-term of the fund.

Valuations were low.

No competition between VCs.

Indian entrepreneurs had not yet discovered the venture capital route

to funding and growth and it reflected in the small amounts that were

invested.

There was little or no active participation of venture capitalists in

entrepreneurial activities such as financial structuring, business

strategy.

Business enhancement through networks.

1997 to 2000: The Rock ‘n’ Roll Years:

The SEBI guidelines of 1996 acted as huge incentive for domestic and

foreign venture capital companies to focus their attention on India.


The range of venture capitalists now spanned incubators, angel

investors, classic venture capitalists and even private equity players.

And the lines between them had begun to blur.

Venture capitalists were instrumental in introducing risk taking too

many, members of the professional class.

2001 Onwards: The Reality Years:

The number of people who had got in to venture capital game was

truly impressive.

In addition to the seasoned players, there were finance and noon

finance professionals of different hues entering the industry and

people with little or no experience running the companies.

Venture capital community is finally recognizing that the evolution

and business is an on-going process. This added to the return of the

business maturation cycle of five to seven years, portends a less

frenetic and more sustained pace of venture activity.

Domestic Venture Capital firms have realised the potential of Indian

Entrepreneurs.

Legislative support has seen tremendous reforms.

According to surveys by International agencies like Deloitte, EY;

Foreign Investors attractiveness among India is increasing.


2.4 Business Confidence Index

About Business Confidence Index

Business Confidence Index (BCI) is an economic indicator that measures the

amount of optimism or pessimism that business/investment managers feel

about the prospects of business in their countries/organisations. It also

provides an overview of the state of the economy. It is usually based on

survey of such managers.

BCI is usually given by industrial organisations conducting such economic

surveys. In India, Business Confidence is given by Confederation of Indian

Industries.

About CII

The Confederation of Indian Industry (CII) is an association of Indian

businesses which works to create an environment conducive to the growth of

industry in the country.

CII is a non-government, not-for-profit, industry-led and industry-managed

organization, playing a proactive role in India's development process.

Founded in 1895, CII has over 7100 members, from the private as well as

public sectors, including SMEs and MNCs, and an indirect membership of

over 90,000 enterprises from around 257 national and regional sectoral

industry bodies.


CII works closely with Government on policy issues, interfacing with

thought leaders, and enhancing efficiency, competitiveness and business

opportunities for industry through a range of specialized services and

strategic global linkages.

About CII’s Business Confidence Index

Every quarter CII provides Business Confidence survey results in the form

of Index for forthcoming quarters. The CII’s Business Confidence Index is

an indicator designed to measure the degree of optimism on the state of the

economy in India that business owners are expressing through their activities

of investing and spending. Decreasing business confidence often implies

slowing economic growth because business owners are likely to decrease

their investment. The idea is that the more confident business owners and

managers feel about the economy, their companies, their jobs and incomes,

the more likely they are to make investments and purchases.

Business Confidence in India increased to 54.90 in the fourth quarter of

2013 from 45.70 in the third quarter of 2013. Business Confidence in India

is reported by the Confederation of Indian Industry (CII). From 2005 until

2013, India Business Confidence averaged 59.3 reaching an all time high of

71.8 in March of 2007 and a record low of 45.7 in September of 2013. In

India, the Business Confidence Index (BCI) is based on a sample size of

around 300 companies covering all industry sectors, including small,

medium and large enterprises from different regions. BCI is calculated as a

weighted average of the Current Situation Index (CSI) and the Expectation

Index (EI), with greater weight given to EI as compared to CSI. These

indices are based on three questions on the performance of the economy,


respondent’s industry and respondent’s company. Respondents are asked to

rate the current and expected performance on a scale of 0 to 100. A score

above 50 indicates positive confidence while a score above 75 would

indicate strong positive confidence.


3 INTRODUCTION TO THE STUDY

3.1 Background of the Study

Today due to the economic crisis and the change in job market,

Entrepreneurship has gained interest. A number of young people in India

today, plans to setup their own ventures and capitalize this opportunities. In

today’s highly dynamic economic climate with regular technological

inventions, few traditional business models may survive but margin lies

more towards more innovative business ideas. Now, along with

conglomerates that fuel economic growth SMEs and other innovative

businesses have gained the momentum towards contribution in it.

Starting and expanding an enterprise has its own risk and is never easy.

There are number of parameters that contribute to its success or downfall.

Some of these include:

Should one choose Venture Capital or any other mode of finance?

Which sector one should start its venture in?

What array of businesses are points of attraction among Venture

Capitalists?

What is possible near future growth in sector of one’s choice?

The study helps in providing answers to these questions by analysing status

of Venture Capital in India, Which sectors are on rise, what is the confidence

level of Indian and Foreign investors.


3.2 Need for the Study

The need of study has following facets:

The study has been conducted for gaining the practical knowledge

about Venture Capital Finance in India

The study has been undertaken as a part of MBA curriculum for the

partial fulfilment of the requirement of MBA degree by Kurukshetra

University, Kurukshetra.

There is a limited Academic Literature available regarding Venture

Capital Finance in India.


3.3 Objectives of Study

As we know Venture Capital Finance is no more in the dormant stage in

India. But there is a dearth of academic research on the topic. In order to fill

the gap the study has been undertaken. The main objectives of study are:

To know the current scenario of venture capital finance in India

To predict the future rate of growth of Venture Capital Finance

To lookout for market share of different economic sectors in terms of

Venture Capital Investments

To analyse growth of venture capital investment in different sectors of

economy

To analyse whether Business Confidence Index can predict growth

rate of Venture Capital Investments


3.4 Scope of Study

The study is about Venture capital Finance in India. So any kind of

financing other than Venture Capital is out of scope. Also, data of any

country other than India is out of scope of this study.

This study has used CII’s Business Confidence. Any other Business

Confidence Survey doesn’t hold in scope of the study.

Only studies of Venture Capital Investments are in scope. Factors

responsible for such investments are out of scope.


4 LITERATURE REVIEW

Although there is limited literature available for Venture Capital Finance in

Indian context, there are extensive texts available on Venture capital all over

the world. Following are some insightful work done by different

academicians and researchers in the same line.

I M Panday “The process of developing venture capital in India” -

Technovation, Volume 18, Issue 4, April 1998

This study investigates the process of developing venture capital in a

developing country — India. The discussion documents the experiences of

the largest venture capital firm in India (TDICI) in initiating and developing

the concept of venture capital as well as learning the venture capital

business. The history of modern venture capital in India is of recent origin; it

only goes back to the mid-eighties. In the initial years, venture capital firms

(VCFs) in India encountered a number of problems in developing their

businesses. From the in-depth case study of TDICI, it is found that the firm

went through the initial constraint of not knowing the venture capital

business well, and learnt through experience. It faced problems in raising

funds and evaluating prospective ventures. It initially focused its investment

in the high-technology business, but gradually shifted the focus towards

other potentially high-growth, high-profitable businesses, not just high-tech

businesses. It is also noticed that TDICI undertook a number of business

development initiatives to popularise the venture capital business in India. It

introduced a simple organisational structure for facilitating quick decision-

making, and developed innovative funding and financing mechanisms.


Dossani, R. and Kenney “Creating an Environment for Venture Capital in

India”- M. World Development, 30 (2) 227–253 (2002)

The institution of venture capitalism is a difficult one to initiate through

policy intervention, particularly in developing countries with unstable

macroeconomic environments and histories of state involvement in the use

of national capital and in the composition of production. India has all these

constraints. The emergence of a thriving software services industry after

1985 created the raw material that venture capital could finance, thus

achieving a critical precondition for venture capital's growth. It was

followed by efforts to create a venture capital industry. After several

setbacks, some success has been achieved largely due to a slow process of

moulding the environment of rules and permissible institutions. The process

was assisted by the role of overseas Indians in Silicon Valley's success in the

1990s. Yet, in terms of what is needed, most of the work remains to be done.

Inevitably, this will be the result of joint work by policymakers and

practitioners.

Asim Mishra “Indian Venture Capitalists (VCs): Investment Evaluation

Criteria” - ICFAI Journal of Applied Finance, Vol. 10, No. 7, pp. 71-93,

July 2004

This paper analyses the validity of venture evaluation model in India by

directly comparing the relative importance of evaluation criteria on the

funding decision with the relative importance to factors influencing venture's

empirical performance. In the light of the differences in investment

opportunities around India, and the nature of industrial development in


South East Asia in general, the author anticipated that the investment criteria

employed by Venture Capital Firms (VCFs) in India would differ. A

questionnaire was administered to venture capitalists (regular members of

Indian Venture Capital Association) to determine the criteria they use to

decide on funding new ventures. The response rate was 100%. A list of forty

two criteria was developed on previously developed lists. The criteria fell

into six groups: the entrepreneur's personality, the entrepreneur's experience,

characteristics of the product or service, characteristics of the market,

financial consideration and characteristics of venture management team.

Answers were given on a four point rating scales. The results reveal that

criteria adopted by Indian VCs are different from those adopted by VCs in

other countries including US. The results also confirm that the

Sayed Ahmed Naqi and Samanthala Hettihewa “Venture capital or

private equity? The Asian experience”- Business Horizons Volume 50, Issue

4, July–August 2007

Venture capital in Asia has exhibited remarkable growth over the last two

decades. Researchers and practitioners have, however, expressed doubts as

to whether what is being reported as venture capital in Asia can really be

classified as such. Authors of scholarly studies often avoid this debate and,

consequently, fail to caution readers about the applicability of their research

findings. Through an exploration of the history, development, and

composition of venture capital in Asia, this article not only confirms

significant differences between Asian and traditional venture capital, but

also finds that venture capital in Asia differs little from what is commonly

called private equity. As such, a need exists within the venture capital


literature to recognize this peculiarity of the Asian venture capital market.

Moreover, venture capitalists considering expansion into Asia must

comprehend the nature of the Asian market in order to avoid disillusionment

and frustrations which may result from inadequate understanding.

A. Thillai Rajan “Venture capital and efficiency of portfolio companies” -

IIMB Management Review, Volume 22, Issue 4, December 2010

Venture Capital (VC) has emerged as the dominant source of finance for

entrepreneurial and early stage businesses, and the Indian VC industry in

particular has clocked the fastest growth rate globally. Academic literature

reveals that VC funded companies show superior performance to non VC

funded companies. However, given that venture capitalists (VCs) select and

fund only the best companies, how much credit can they take for the

performance of the companies they fund? Do the inherent characteristics of

the firm result in superior performance or do VCs contribute to the

performance of the portfolio company after they have entered the firm? A

panel that comprised VCs, an entrepreneur and an academic debated these

and other research questions on the inter-relationships between VC funding

and portfolio firm performance. Most empirical literature indicates that the

value addition effect dominates the selection effect in accounting for the

superior performance of VC funded companies. The panel discussion

indicates that the context as well as the experience of the General Partners in

the VC firms can influence the way VCs contribute to the efficiency of their

portfolio companies.


5 RESEARCH METHODOLOGY

Research Methodology is a way to systematically solve the research

problem. In it, step-by-step methods are followed to solve a particular

problem. It refers to a search for knowledge. It can also be defined as a

scientific and systematic search for pertinent information on a specific topic.

The study is carried out around different sources of data regarding Venture

Capital Finance in India. The data is analysed using different functions of

Microsoft Office Excel 2007 and Microsoft Office Word 2007. The main

statistical tools used are Correlation, Exponential Growth and Linear

Forecast.

5.1 Data Collection

The study is based on secondary data on Venture Capital Investments. The

data is collected from different publications and online resources including

SEBI’s Handbook of Statistics on Indian Securities Markets

SEBI’s website

Indian Venture Capital Association reports

Bain & Company’s reports

CII, Deloitte and E&Y survey results

Trading Economics website

and many other books, publications, reports and articles


5.2 Research Design

Research Design is the way in which the research is carried out. It works as

a blue print. Research Design is the arrangement of conditions for the

collection and analysis of data in a manner that aims to combine relevance to

the research purpose with economy in procedure.

The Research design for the study is descriptive in nature. The research is

done with analog observations. Predictive analysis is done in order to know

pattern of near future investment patterns.

5.3 Limitations of Study

The Study is based on the data provided by different sources, any

incorrectness or biasness in same might also have been resulted in same for

this study.


6 ANALYSIS AND INTERPRETATION

6.1 Analysing Growth of Venture Capital Finance in India and

Forecasting VC Investments in near future

To understand the scenario of venture capital investments in India, firstly we

looked at the Total Investment Details of SEBI Registered Venture Capital

Funds (VCF) and Foreign Venture Capital Investors (FVCI) as of Dec 31 of

each year starting 2007.

Year Total VC Investments (in Rs. Crores)

2007 28260

2008 33939

2009 42059

2010 47859

2011 56868

2012 55542

2013 69520

Table 1: Cumulative Total Investment Details of SEBI Registered Venture Capital Funds (VCF) and Foreign Capital Investors (FVCI) as of Dec 31 of each year


With the help MS Word Excel, Growth Rate is determined for given values

from year 2007-2013 and prediction for next two years is made using

following GROWTH function:

GROWTH(known_Ys, known_ Xs, New_Xs, constant)

Here,

Ys = Known Values of Total Investments

Xs = Year corresponding to known Ys (2007-2013)

New Xs = Year for which Value to be forecasted (2014), (2015)

Constant = None

Following are the Forecasted Values of Total Investment in 2014 and 2015

using Growth function.

Year Expected Total VC Investments

(in Rs. Crores)

2014 80988

2015 93383

Table 2: Forecasted values of Total Investments by Venture Capital Funds as of Dec 31 of 2014 and 2015


When values of Venture Capital Investments in India from 2007 to 2013 and

their forecasted values for 2014 and 2015 are plotted on a Line Graph,

following curve is obtained:

2007 2008 2009 2010 2011 2012 2013 2014 20150

10000

20000

30000

40000

50000

60000

70000

80000

90000

100000

Total VC Investments (in Rs. Crores)

Total Investments (in Rs. Crores)Exponential (Total Investments (in Rs. Crores))

Fig 1. Line Graph of Total Venture Capital (VC) investments from year 2007 to 2013 along with forecasted values for year 2014 and 2015

Interpretation

Fig. 1 shows the Line Graph of Total Venture Capital (VC) investments

from year 2007 to 2013 along with forecasted values for year 2014 and

2015. The black curve shows Exponential Growth curve for same. We can

infer that Venture Capital Investments in India have grown exponentially. If


same trend continues, the investments by VC in India will be increasing in

near future.

Also, Investments have been slow in one year dropping from Rs. 56868

crores in 2011 to Rs. 55542 crores in 2012 but they have gained their

momentum back in 2013 by increasing more that 25%. The Value of

Investments in 2014 and 2015 is predicted to be near Rupees 81 and 93

thousand crores respectively.


6.2 Analysis of Venture Capital Investments in different sectors of

economy

Now we look at the different sectors of Economy details Venture Capital

Investments of SEBI Registered Venture Capital Funds (VCF) and Foreign

Capital Investors (FVCI) as of Dec 31 of each year (FVCFs)

>Year

v Sectors of Economy

2007 2008 2009 2010 2011 2012 2013

Information

technology

2169 2520 2864 3319 4322 4481 5325

Telecommunications 990 1076 4268 7469 7516 7086 7798

Pharmaceuticals 1076 1229 1478 1325 1132 1151 1006

Biotechnology 385 634 461 289 283 278 326

Media/ Entertainment 470 906 1434 1006 1124 739 1406

Services Sector 2475 2976 3529 2677 2973 2809 3697

Industrial Products 2047 1951 2344 1355 2014 2107 2377

Real Estate 6348 6311 8185 9783 10831 9987 12048

Others 16749 24413 27158 20637 26673 26903 35535

Table 3: Cumulative Total Investment Details of SEBI Registered Venture Capital Funds (VCF) and Foreign Capital Investors (FVCI) as of Dec 31 of each year


Table 3 shows Annual Venture Capital Investments data for different sectors

of economy. Different sectors of economy for which data has been obtained

are Information Technology, Telecommunications, Pharmaceuticals,

Biotechnology, Media/Entertainment, Services Sector, Industrial Products

and Real Estate.

Now in order to analyse percent share of Venture Capital Investment in 2013

for each different sector following pie chart is obtained.

8%

11%1%0%2%

5%

3%

17%

51%

Sector-wise Venture Capital Investments in India in 2013

Information technologyTelecommunicationsPharmaceuticalsBiotechnologyMedia/ EntertainmentServices SectorIndustrial ProductsReal EstateOthers

Fig 2. Total VC Investment Share of different sector of Economy in India


Interpretation

In 2013, Real Estate is the biggest sector of Venture Capital Investments,

followed by Telecommunications and Information Technology. Services

Sector stands at 4th position followed by Industrial Products sector and

Media/Entertainment sector. Pharmaceutical and Biotechnology sector has

least share of Venture Capital Funds among 8 sectors.


To understand the scenario of growth in each sector, line graphs have been

obtained using values from Table 3. In each graph, a black coloured trend

line is obtained which shows forecasted linear trend of respective sector.

2007 2008 2009 2010 2011 2012 20130

1000

2000

3000

4000

5000

6000

Information technology

Information technology Linear (Information technology)

Fig 3. Total Venture Capital (VC) investments curve from year 2007 to 2013

in Information Technology Sector. It also shows forecasted linear trend line.

Information Technology (IT) has been high growth factor all these years.

According to Bain India Private Equity report 20142, IT is expected to be

one of the most attractive sectors for PE and VC investments in the next two

years. We can infer that IT is going to be one of the high growth sectors

attracting large amount of Venture Capital in year 2014 and 2015.

2 INDIA PRIVATE EQUITY REPORT 2014 - Bain & Company and IVCA


2007 2008 2009 2010 2011 2012 20130

2000

4000

6000

8000

10000

12000

14000

Real Estate

Fig 4. Total Venture Capital (VC) investments curve from year 2007 to 2013 in Real Estate Sector. It also shows forecasted linear trend line.

As India is developing country and Real Estate is an utmost important need

of any developing nation. Real Estate sector has always seen reasonable

growth and is still attracting investment. It can be inferred that this sector

will be growing in 2014 and 2015 in terms of Venture Capital Investment.


.2007 2008 2009 2010 2011 2012 2013

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

Telecommunications

Fig 5. Total Venture Capital (VC) investments curve from year 2007 to 2013 in Telecommunication Sector. It also shows forecasted linear trend line.

Telecommunication sector has seen some of the biggest investments in 2009

and 2010 making it Hot Favorite sector of Venture Capital Investment in

those years. Following bad news of scams and cancelation of 2G licenses the

sector has not attracted much investment from year 2010. Although

Forecasted Linear 7 year trend line projects it as high growth sectors but

when we look at data from last 4 years, Telecommunications has been

laggard leading to very slow growth in upcoming years.


.2007 2008 2009 2010 2011 2012 2013

0

200

400

600

800

1000

1200

1400

1600

Media/ Entertainment

Fig 6. Total Venture Capital (VC) investments curve from year 2007 to 2013 in Media/Entertainment Sector. It also shows forecasted linear trend line.

Media/Entertainment Sector has seen moderate growth in past years. In

2013, Venture Capitalists have shown significant interest. There were good

numbers of deals in the sector. The sector is further going to show moderate

growth depending upon current factors affecting the sector.


.2007 2008 2009 2010 2011 2012 2013

0

500

1000

1500

2000

2500

3000

3500

4000

Services Sector

Fig 7. Total Venture Capital (VC) investments curve from year 2007 to 2013 in Services Sector. It also shows forecasted linear trend line.

2009 and 2013 are the only years of high growth for Services Sector.

Because of less inclined forecasted linear trend of the investments in the

sector, there will be moderate growth in venture capital investments in India

in upcoming years.


.2007 2008 2009 2010 2011 2012 2013

0

500

1000

1500

2000

2500

Industrial Products

Fig 8. Total Venture Capital (VC) investments curve from year 2007 to 2013 in Industrial Products’ Sector. It also shows forecasted linear trend line.

Industrial Products sector is a source of high employment opportunities for

less skilled labor. The sector has not seen much growth in terms of venture

capital investments. Because of less inclined forecasted linear trend of the

investments in the sector, there will be slow growth in venture capital

investments in India in upcoming years.


2007 2008 2009 2010 2011 2012 20130

200

400

600

800

1000

1200

1400

1600

Pharmaceuticals

Fig 9. Total Venture Capital (VC) investments curve from year 2007 to 2013 in Pharmaceutical Sector. It also shows forecasted linear trend line.

2007 2008 2009 2010 2011 2012 20130

100

200

300

400

500

600

700

Biotechnology

Fig 10. Total Venture Capital (VC) investments curve from year 2007 to 2013 in Biotechnology Sector. It also shows forecasted linear trend line.

Fig. 9 and Fig. 10 shows Total Venture Capital (VC) investments curve from

year 2007 to 2013 and forecasted linear trend in Pharmaceutical and


Biotechnology Sector. These sectors have been sectors of declining growth

since 2009. There is not much growth expected in 2014 and 2015 from these

sectors.

Interpretation

There are different sectors of Economy in India. Out of all above mentioned

Economic Sectors, few sectors are attracting more Venture Capital Funds

than others.

With analysis of each sector we can categorize them by rate of growth of

investments over 7 years.

Information Technology and Real Estate have continuously seen High

Growth and are predicted to do so in coming years. For Entrepreneurs

these sectors can be fruitful to start their venture in.

Telecommunication and Media/Entertainment have been areas of

Moderate Growth and may do better in coming years. For

Entrepreneurs these sectors can be fruitful but they must keep caution

while starting their venture in.

Services Sector and Industrial Products Sector are areas of very Slow

Growth in terms of VC investments in these areas. One must have

strong know how of these sectors while starting any business.

Pharmaceuticals and Biotechnology are Sectors of Declining Growth

in VC Investments. One may have hurdles in getting investments for

ventures in these sectors.


6.3 CII’s Business Confidence Index and Venture Capital Investment

Growth

Confederation of Indian Industry (CII) provides Business Confidence Index

about confidence among industry about doing business in India. Here we do

comparative study of Business Confidence and Percent change in total

investments, VCFs Investments and FVCFs investment in each quarter

starting June 2011.

Quarter CII Business Confidence Index

Change in Business Confidence

Total investment

% change in total investment

VCFs investment

% change in VCFs investment

FVCF investment

% change in FVCFs investment

Jun-11 54844 26222 37098Sep-11 66.2 55536 1.26 26896 2.57 37635 1.45Dec-11 66.7 0.5 56868 2.4 27592 2.59 38730 2.91Mar-12 62.5 -4.2 59408 4.47 28920 4.81 39815 2.8Jun-12 53.6 -8.9 61056 2.77 29238 1.1 41277 3.67Sep-12 48.6 -5 53574 -12.25 29924 2.35 33291 -19.35Dec-12 52.9 4.3 55542 3.67 31556 5.45 33773 1.45Mar-13 55 2.1 62866 13.19 31336 -0.7 41174 21.91Jun-13 51.3 -3.7 63310 0.71 31669 1.06 40848 -0.79Sep-13 49.9 -1.4 64336 1.62 30975 -2.19 43140 5.61Dec-13 51.3 1.4 69520 8.06 35400 14.29 44889 4.05Correlation Coefficient

0.48 0.3 0.41

Mar-14 51.2Jun-14 45.7Sep-14 54.9

Table 4: CII’s Business Confidence Index values, Change in Business Confidence, Percentage Change in VCFs, FVCFs and Total Venture Capital Investment in each Quarter from June 2011


Here,Change in Business Confidence= Business Confidence Current year - Business Confidence in Previous year Percent Change in investment =

( Investment∈Current Year−Investment ∈previous yearInvestment∈PreviousYear )∗100

Correlation Coefficient has been derived using MS Excel’s CORREL Function on given values of data.

CORREL(array1,array2)

For our analysis here,

Array 1 = Array of values Change in Business ConfidenceArray 2 = Array of values of Percentage Change in VCFs, FVCFs and Total VC Investments

% change in total investment

% change in VCFs investment

% change in FVCFs investment

Correlation Coefficient with change in CII’s BCI

0.48 0.3 0.41

Table 5: Correlation Coefficient between Change in CII’s Business Confidence Index values and Percentage Change in VCFs, FVCFs and Total Venture Capital Investment in each Quarter from Jun 2011 to Dec 2013

Interpretation

Table 4 shows data of CII’s Business Confidence Index values, Change in

Business Confidence, Percentage Change in VCFs, FVCFs and Total

Venture Capital Investment in each Quarter from June 2011. In table 5,

Correlation Coefficient is used to measure the significance of Business


Confidence survey by CII in case of Venture Capital Investments in the

country.

The correlation coefficient between Change in Business Confidence and

percent change in Total Investment, VCFs Investments and FVCFs

Investments comes out to be 0.48, 0.3 and 0.41 respectively. The correlation

coefficient turns out to be positive between the index values and investment

data. Although not significant at precision levels of 0.01 and 0.05, we can

infer that there is Positive Relation between Index and Venture Capital

Investment Rate.

For forthcoming (March 2014 – 51.2 and June 2014 – 45.7) quarters CII

Business Confidence Index shows a decrease in confidence values, therefore

we can infer that Venture Capital Investment in these quarters can be less

than Investments in last quarter of 2013.

But as we can see Business Confidence for September 2014 is going

significantly up (54.9), we can infer that there will be increase in Venture

Capital Investments in that quarter.


7 Findings and Conclusion

7.1 Findings

There was an exponential increase in Venture capital from 2007 till

date

It is predicted that there will be good amount of Venture Capital

Investments about to occur in 2014 and 2015.

Around Rs. 81000 crores of VC investments will be made in 2014

2015 will see VC investments of around Rs 93400 Crores.

Real Estate Sector gets maximum share of Total Venture Capital

Investments among different sectors of Economy in 2013, followed by

Telecommunications and Information Technology.

Among different sectors of economy, Information Technology and

Real Estate are sectors with high growth rate of Venture Capital

Investment and is expected to do well in comings years as well.

In terms of Venture Capital investments made Telecommunications

and Media/Entertainment sectors are growing at medium pace.

Telecommunications have seen decline only in recent years, the most

obvious reason for it is the policy paralysis and scams around this

sector in India.

Services Sector and Industrial Products Sectors are not attracting

much VC investments and growing very slow.

Sectors of Pharmaceuticals and Biotechnology have been left quite far

in attracting VC investments. They have shown declining trend and

there is less hope from these sectors in upcoming years.


Every Quarter, CII provides values Business Confidence Index based

on the perception of investors. When these values are correlated with

Investment details SEBI registered Venture Capital Funds (VCFs) and

Foreign Venture Capital Funds (FVCFs), they showed a positive

Correlation.

The CII’s Business Confidence Index for First two quarters of 2014

i.e. March 2014 and June 2014 has decreased from their previous

quarters. This will have negative effect on Venture Capital

Investments i.e. The Total Venture Capital investments will decrease

in these quarters.

For 3rd Quarter of 2014 i.e Sep 2014, The Business Confidence is

quite high and has increased sharply. This increase in confidence in 3 rd

quarter signifies the increase in Venture Capital Investments in India

towards end of this year.

Business Confidence Surveys like CII’s can predict the flow of

Venture Capital Investments in Long Term but cannot surely predict

small term movements in Investments Values.


7.2 Conclusion

Venture capital financing has become a part of the popular business in India.

VC investments are growing at an exponential rate and one who is starting

or expanding his business can look it as a good option of financing its

venture.

For predicting the scenario of Venture Capital Investments in India in

upcoming years, analysts can look at Business Confidence Index by CII. Our

study shows that values of the Index and amount of Investments are

correlated. With our analysis we can infer that there will be an increase in

Venture Capital Investments in 3rd quarter of 2014.

In India, Information Technology and Real Estate are sectors with High

Growth in VC Investments whereas Pharmaceuticals and Biotechnology are

sectors with Declining Growth in VC Investments.


8 REFERENCES

8.1 Bibliographic References

Bloomfield, Stephen. 2005. Venture Capital Funding - A practicle guide to raising

funds. s.l. : Kogan Page Limited, 2005.

Brigham, Eugene F. and Houston, Joel F. 2009. Fundamentals of Financial

Management. s.l. : South-Western Cengage Learning, 2009. Vol. 12.

CII Business Confidence Index Falls Sharply in Q2FY14. 2013. s.l. : Confederation of

Indian Industries, 2013, Economy Matters.

Economic and business prospects for 2014. Affairs, Policy and Public. 2014. 2014, CII.

Empirical Study on Venture Capital and Private Equity Investments: US & India.

Pandey, Dheeraj and Rajan, Thillai A. 2011. 2011. International Conference on

Technology and Business Management.

2012. Handbook of Statistics on Indian Securities Market. : SEBI, 2012.

2013. Handbooks of Statistic on the Indian Economy : Reserve Bank of India, 2013.

2014. INDIA PRIVATE EQUITY REPORT. : Bain & Company and Indian Venture

Capital Association, 2014.

Venture Capital and Private Equity in India: An Analysis of Investments and Exits.

Rajan, Thillai A and Deshmukh, Ashish. IIT Madras Journal.


8.2 Web References

Report of K B Chandrasekhar Committee on Venture Capital, SEBI

http://www.sebi.gov.in/commreport/sebicomm.html

Venture Capital, Business Portal of Government of India

http://business.gov.in/business_financing/venture_capital.php

Venture Capital for MSMEs, SIDBI Ventures http://www.sidbiventure.co.in/

Venture capital, Wikipedia

http://en.wikipedia.org/wiki/History_of_private_equity_and_venture_capital

Search Results on Venture Capital, Business Today http://businesstoday.intoday.in

Venture capital investments in India slide to $1.4 bn: Ernst & Young, Indian Express

http://indianexpress.com/article/news-archive/web/venture-capital-investments-in-india-

slide-to-1-4-bn-ernst-young/

VC Industry to grow in India: Deloitte, Indian Express

http://indianexpress.com/article/news-archive/web/vc-industry-to-grow-in-india-deloitte/

2014 to be year of adjustments; investment cycle may take time to revive, Team VCC

http://www.vccircle.com/news/alternative-investment/2014/02/19/2014-be-year-

adjustments-investment-cycle-may-take-time

Should you take seed funding from a VC ?, Yourstory India

http://www.yourstory.com/2014/03/seed-funding-vc/

$1.6 Billion invested in Indian Startups in around 300 deals in 2013, YourStory India

http://www.yourstory.com/2013/12/1600mn-invested-in-indian-startups-in-2013/


http://www.yourstory.com/2013/12/1600mn-invested-in-indian-startups-in-2013/

http://www.yourstory.com/2014/03/seed-funding-vc/

http://www.vccircle.com/news/alternative-investment/2014/02/19/2014-be-year-adjustments-investment-cycle-may-take-time

http://www.vccircle.com/news/alternative-investment/2014/02/19/2014-be-year-adjustments-investment-cycle-may-take-time

http://indianexpress.com/article/news-archive/web/vc-industry-to-grow-in-india-deloitte/

http://indianexpress.com/article/news-archive/web/venture-capital-investments-in-india-slide-to-1-4-bn-ernst-young/

http://indianexpress.com/article/news-archive/web/venture-capital-investments-in-india-slide-to-1-4-bn-ernst-young/

http://businesstoday.intoday.in/search.jsp?searchword=venture%20capital&searchtype=text&searchphrase=exact

http://en.wikipedia.org/wiki/History_of_private_equity_and_venture_capital

http://www.sidbiventure.co.in/

http://business.gov.in/business_financing/venture_capital.php

http://www.sebi.gov.in/commreport/sebicomm.html

9 SUGGESTED READINGS

How to get registered as a Venture Capital Fund - SECURITIES AND

EXCHANGE BOARD OF INDIA

Impact of Budget 2014-15 on Startup Companies - YOURSTORY.COM

India Private Equity Report 2014 – BAIN & COMPANY


APPENDIX

Appendix I - Data Sets

Data Set 1: Industry wise Cumulative Investment Details of SEBI Registered Venture Capital Funds (VCF) and Foreign Capital Investors (FVCI)

Particulars as on December 31, 2013

(Rs. in Crore)

Sectors of Economy VCF FVCI Total*

Information Technology 954 4499 5325

Telecommunication 1468 7013 7798

Pharmaceuticals 420 646 1006

Biotechnology 222 142 326

Media/Entertainment 1148 827 1406

Services Sector 2428 2353 3697

Industrial Products 1252 1444 2377

Real estate 11482 1758 12048

Others 16026 26209 35535

Total 35400 44889 69520

*excludes Rs.10769 crore of FVCI investments through VCFs

Note:

1. The above report is compiled on the basis of quarterly information submitted to SEBI by registered Venture Capital Funds and Foreign Venture Capital Investors.

2. Due to change in reporting format with effect from the quarter ended 31st March 2010, the investment details for the March '10 and December '09 quarter are not strictly comparable.


http://www.sebi.gov.in/cms/sebi_data/commondocs/Statistics_VC_Current_h.html#RANGE!A1

Data Set 2: Cumulative Investment Details of SEBI Registered Venture Capital Funds (VCF) and Foreign Capital Investors (FVCI)

Quarter Cumulative net investments by all VCFs as at the end of the quarter

Cumulative net investments by all FVCIs at the end of the quarter

Total investment (*)

Mar-07 11270 7856 17621

Jun-07 12868 10706 20310

Sep-07 14264 13401 23218

Dec-07 17325 15384 28260

Mar-08 19955 16705 31682

Jun-08 20128 16926 32379

Sep-08 22488 16165 34772

Dec-08 21216 19800 33939

Mar-09 22771 23047 37578

Jun-09 22192 24151 37151

Sep-09 24102 25849 40560

Dec-09 24893 26827 42059

Mar-10 18273 28894 39051

Jun-10 21500 30722 43686

Sep-10 22977 33102 47843Dec-10 23023 33241 47859

Mar-11 25576 35593 52688

Jun-11 26222 37098 54844

Sep-11 26896 37635 55536

Dec-11 27592 38730 56868

Mar-12 28920 39815 59408

Jun-12 29238 41277 61056

Sep-12 29924 33291 53574

Dec-12 31556 33773 55542

Mar-13 31336 41174 62866

Jun-13 31669 40848 63310

Sep-13 30975 43140 64336

Dec-13 35400 44889 69520

Data Set 3: CII Business Confidence Index from “Economy Matters”


http://www.sebi.gov.in/cms/sebi_data/commondocs/Statistics_VC_Archive_h.html#RANGE!A1




























Data Set 4: India’s Business Confidence from “Trading Economies”


Appendix II - Glossary of Terms and Abbreviations

Abbreviations

BCI Business Confidence IndexCII Confederation of Indian IndustriesCSI Current Situation IndexEI Expectation Index E&Y Ernst & YoungFVCI Foreign Venture Capital Investors IT Information TechnologyMBA Masters of Business AdministrationNASDAQ National Association of Securities Dealers Automated QuotationsNCR Nation Capital RegionSBA Small Business Administration SBICs Small Business Investment CompaniesSEBI Securities and Exchange Board of IndiaSME Small and Medium scale EnterpriseTDICI Technology Development and Information Company of IndiaVC Venture CapitalVCF venture capital firms VCs Venture Capitalists

Terms

Acquisition

The establishment of control in one business entity by another, often with the assistance

of private equity. Third party acquisition is a common Exit Mechanism for private equity

funds.

Acquisition Financing

Capital provided to a company to finance its controlling interest in another entity for

growth purposes.

Angel


A wealthy individual who invests in entrepreneurial firms. Although angels perform

many of the same functions as venture capitalists, they invest their own capital rather

than that of institutional or other individual investors.

Bridge Financing

Capital provided on a short-term basis to a company prior to its going public or its next

major private equity transaction.

Capital Gains

The proceeds obtained on the sale of assets

Deal

Each transaction involving a private equity fund or funds in a given portfolio company

represents one round of financing. Each financing is made up of one or more investments,

depending on the presence of co-investors. Financings are also known as deals

Due Diligence

The process of assessing the business and financial viability of a potential investment

target, as well as the potential terms and conditions of an investment agreement.

Financings and Investments

Each transaction involving a private equity fund or funds in a given portfolio company

represents one round of financing. Each financing is made up of one or more investments,

depending on the presence of co-investors. Financings are also known as deals

Fund

A pool of capital raised periodically by a venture capital organisation. Usually in the

form of limited partnerships, venture capital funds typically have a ten-year life, though

extensions of several years are often possible.

Institutional Investor


Pension funds, insurance companies, endowments, charitable foundations, mutual funds

and other non-bank financial institutions that are often key suppliers to private equity

funds. In Canada, certain large institutional investors also have in-house progra

Institutional Venture Capital

The organized market for venture activity, based on an industry of management firms and

funds, as distinct from the informal investment mark.

Internal rate of return (IRR)

The discount rate equating the present value of cash outflows with the present value of

cash inflows.

Investment adviser

A financial intermediary who assists investors, particularly institutions, with investments

in venture capital and other financial assets. Advisers assess potential new venture funds

for their clients and monitor the progress of existing investments. In s

Investment banks

Financial institutions that organise the provision of medium to longer-term loans, usually

for larger amounts than clearing banks. Later they can play an important role in the

process of “going public” by advising on the terms and price of public issues a

Merger

The strategic combination of one business entity with another, often with the assistance

of private equity.

Mezzanine Capital

A specialized form of private equity, characterized chiefly by use of Subordinated Debt,

or preferred stock with an equity kicker, to invest largely in the same realm of companies

and deals as buyout funds


Refinancing

The purchase of the venture capital investors' or others' shareholdings by another

investment institution.

Rescue/turnaround

To finance a company in difficulties or to rescue it from receivership.

Restructuring/ Turnaround Financing

Capital provided to a established firm, usually in a traditional sector, that is undergoing

financial distress or a major re-organization, but is perceived as having long-term

commercial viability.

Seed Financing

Capital provided to facilitate commercialization of new product concepts, often from

laboratories, research centres or entrepreneurs. If successful, a seed financing may result

in a Start-up.

Start-up Financing

Capital provided to facilitate the first-time establishment of a legal company structure

around a marketable product concept

Venture capitalist

A general partner or associate at a venture capital organisation.

Write-off

The write-down of a portfolio asset to the value of zero, with the result that the private

equity investor or investors go without proceeds upon disposition.


project piyush - final

Documents

venture capital finance71

venture capital financing71

research report

project work

report work

ciis business confidence

business confidence142

research design305