venture capital

Ventureast APIDC-VCL Biotechnology Fund

VENTURE CAPITAL FUNDING

PRESENTATION BY CHANDRA SHEKHAR REDDY KUNDUR

DIRECTOR APIDC-VENTURE CAPITAL LIMITED

Compiled by Augustin AmaladasM.com.,AICWA.,B.ED.,AICWA


VC FUNDING OF BIOTECH/ BIOTECH-PHARMA VENTURES

1. VC “UNDEFINED”

2. VC DEFINED

3. VC CRITERIA FOR INVESTMENT

4. ENTREPRENEURS’ CRITERIA FOR VC

5. RISKS OF A VENTURE

6. UNIQUE NATURE OF BIOTECH VENTURES

7. SOME USEFUL HINTS


WHAT IS VC FUNDING?

IS IT JUST THE STORY OF THE MAN WITH

THE IDEA AND THE MAN WITH THE MONEY?


VC FUNDING IS NOT JUST ABOUT

• … FIRST GENERATION ENTREPRENEURS

• … TECHNOCRATS

• … HIGH TECHNOLOGY

• … FIRST TIME TECHNOLOGIES

• … SEED CAPITAL AT SOFT TERMS


WHAT VC FUNDING IS

… IT IS THE BUSINESS OF EMPLOYING CAPITAL ‘PATIENTLY’ TO ‘MAXIMISE

RETURNS’ WHILE MANAGING RISKS IN A RELATIVELY HIGH-RISK VENTURE

VERSUS

SIMPLY ‘MINIMISING RISKS’ FOR A SURER FIXED RETURN


VC FUNDING IS

… DIFFERENT FROM OTHER TYPES OF FUNDING IN THE:

- SELECTION OF INVESTMENT

- STRUCTURING OF INVESTMENT

- ACTIVITY FOLLOWING INVESTMENT

- EXITING FROM INVESTMENT


SELECTION OF INVESTMENT BY THE VC WILL SPAN ...

PROMOTERS WITH SIGNIFICANT & PROVEN BUSINESS TRACK RECORD, WHO WILL

DEVELOP NEW TECHNOLOGIES &/OR BUILD NEW BUSINESSES

TO

PROMOTERS WHO ARE TECHNOLOGY SAVVY, HAVE DEVELOPED INNOVATIVE

TECHNOLOGIES TO A SIGNIFICANT EXTENT, BUT HAVE NO RELEVANT BUSINESS TRACK

RECORD


VCs WILL, IN STRUCTURING THEIR INVESTMENT, FAVOUR

• EQUITY Vs DEBT

• UNLISED EQUITY Vs LISTED EQUITY

• LONG-TERM Vs SHORT-TERM INVESTMENT

• NO SECURITY Vs FULL SECURITY

• SHARINING UPSIDE POTENTIAL Vs FIXED INCOME


IN THE POST- INVESTMENT STAGE, VCs WILL

• ADD VALUE Vs ONLY MONITORING AND RELYING ON COLLATERAL RECOVERY

• HELP WITH FINANCIAL, MARKETING, TECHNICAL & PERSONNEL LINKAGES

• PROVIDE INCENTIVES FOR BETTER PERFORMANCE Vs PENALTIES FOR LACK OF IT

• MONITOR CLOSELY THROUGH BOARD REPRESENTATION PLUS CONTINUAL CONTACT


VC WILL LOOK FOR EXITING FROM INVESTMENT THROUGH...

- IPO

- THIRD PARTY ACQUSITION

- BUYBACK BY ENTREPRENEUR


WHAT VCs WILL LOOK FOR IN INVESTEE COMPANIES - 1

• PROMOTER’S INTEGRITY, RELEVANT EXPERIENCE, DRIVE LEVEL

• UNIQUENESS OF THEIR IDEA

• FOCUS ON/COMMITMENT TO THEIR IDEA

• HIGH ENTRY BARRIERS

• COMPETITIVE ADVANTAGES

• GOOD MARKET SIZE & GROWTH RATES

• ACCEPTABLE GEOGRAPHIC LOCATION

• APPROPRIATE STAGE OF INVESTMENT


WHAT VCs WILL LOOK FOR IN INVESTEE COMPANIES - 2

• COMPANY Vs OTHER ENTITIES

• UNLISTED Vs LISTED

• ACCEPTABLE % OF EQUITY

• ACCEPTABLE SIZE OF INVESTMENT

• NUMBER OF YEARS THAT INVESTMENT MUST BE HELD

• TYPE OF FINANCIAL INSTRUMENTS ALLOWED

• DESIRED RATE OF RETURN


CRITERIA INVESTEE CO SHOULD LOOK FOR IN THE VC

• RESPONSIVENESS

• SUPPORT Vs INTERFERENCE Or INDIFFERENCE

• UNDERSTANDING OF YOUR INDUSTRY/ SECTOR

• ABILITY & WILLINGNESS TO ADD VALUE

• ALIGNMENT OF THEIR EXIT OBJECTIVE WITH YOURS


RISKS IN VENTURES

• FINANCE • PEOPLE • RESEARCH & DEVELOPMENT• IMPLEMENTATION • PRODUCTION• REGULATORY • MARKETING• EXIT


THESE RISKS ARE PRONOUNCED IN BIOTECH/BIOTECH-PHARMA INDS…

• LONGER LEAD TIMES

• MOSTLY NASCENT TECHNOLOGIES

• FAST EVOLVING TECHNOLOGIES

• HIGH CAPITAL REQUIREMENT

• HIGHLY REGULATED

… … … NET, PHARMA/BIOTECH VENTURES ARE

SIGNIFICANTLY RISKIER!!!


SO, WHAT DO WE DO WITH THESE RISKS

- EXAMINE THEM CAREFULLY

- QUANTIFY THEM, WHERE POSSIBLE

- MANAGE THEM

- OFFSET BY COMMENSURATE RETURNS


SOME USEFUL HINTS: 1

• THINK A GREAT DEAL ABOUT THE BUSINESS

• CONVINCE YOURSELF THAT THE BUSINESS IS RIGHT

• ENSURE COMFORT WITH

- GESTATION PERIOD

- CAPITAL REQUIREMENT

• ENSURE ABILITY TO KEEP PACE WITH TECHNOLOGY CHANGES

• CHANGE AVOID HERD MENTALITY



• DISPLAY A PROFESSIONAL APPROACH AT EVERY STEP

• TEST EVERY ASSUMPTION IN THE BIZ PLAN

• LEARN FROM SIMILAR MODELS IN INDIA AND ABROAD

• SEE HOW YOU COULD BE DIFFERENT AND BETTER AT EVERY STEP

• BE SURE OF SALES PROJECTIONS AND ACHIEVEMENT OF TARGETS



• ENSURE COHERENCE AND SYNERGIES IN THE TEAM

• CHECK THE VC TEAM BACKGROUND AND PAST PROJECTS

• UNDERSTAND CLEARLY THE TERMS OF VC FUNDING & THEIR IMPLICATIONS

• DO NOT SIGN THE TERM SHEET BLINDLY

• UNDERSTAND POST-INVESTMENT APPROACH OF THE VC

• FOLLOW A WIN-WIN APPROACH


THE APIDC VENTUREAST BIOTECHNOLOGY FUND…

• FUND SIZE: RS. 45 CRORES MINIMUM

• FUND WILL INVEST IN EARLY-STAGE BIOTECH, BIOTECH-PHARMA VENTURES

• AVERAGE SIZE OF INVESTMENT: RS. 4 CR

• AP GOVERNMENT LEAD INVESTOR

• FUND MANAGER HAS EXTENSIVE INDO-US CROSS BOREDER EDUCATION, WORK EXPERIENCE, ENTREPREURSHIP, NETWORKING & VC TRACK RECORD


THANK YOU


APIDC-VENTURE CAPITAL LIMITED1102, Babukhan Estate,Basheerbagh, Hyderabad-500001, Tel.No.91-40-3299951 & 6510491Fax No.91-40-3297449E-mail: [email protected]

venture capital

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