Venture Capital

Venture Capital is a form of “Risk Capital”. In other words, capital that is invested in a project where there is a substantial element of risk relating to the future

creation of profits and cash flows.

Risk capital is invested as shares (equity) rather than as a loan and the investor requires a higher "rate of return" to

compensate him for his risk.

Why Venture Capital ?

Venture capital provides long-term, committed share capital, to help unquoted companies grow and succeed. If an entrepreneur is looking to start-up, expand, buy-into a business, buy-out a business in which he works, turnaround or revitalise a company, venture capital could help do this.

Obtaining venture capital is substantially different from raising debt or a loan from a lender. Lenders have a legal right to interest on a loan and repayment of the capital, irrespective of the success or failure of a business. Venture capital is invested in exchange for an equity stake in the business. As a shareholder, the venture capitalist's return is dependent on the growth and profitability of the business. This return is generally earned when the venture capitalist "exits" by selling its shareholding when the business is sold to another owner.

Online women's clothing brand eShakti.com has received funding from venture capital firm IvyCap Ventures, as it prepares to scale up operations in the US. Existing investor IDG Ventures India also participated in this second round of funding that takes the total amount raised by the Chennai and Gurgaon-based company to about Rs 90 crore. Source:- ET Bureau | 10 Sep, 2014, 06.48AM IST

Holisol Logistics, a leading back-end logistic provider to e-commerce players, including Jabong, has got its first venture capital funding as it expands operations. City-based Holisol, which was set up in June 2009, has received its first venture capital funding of $1.5 million from oil and gas professional Sundeep Bhandari, a company official said. The investment was made by Bhandari through his company Datavision. Source:- SiliconIndiaNews | Monday, 25 August 2014, 16:51 IST

Examples

Public Private Partnership

A public–private partnership (PPP) is a government service or private business venture which is funded and operated through a partnership of government and one or more private sector companies. These schemes are sometimes referred to as PPP, P3 or P3.

There are usually two fundamental drivers for PPPs.

1. PPPs are claimed to enable the public sector to harness the expertise and efficiencies that the private sector can bring to the delivery of certain facilities and services traditionally procured and delivered by the public sector.

2. A PPP is structured so that the public sector body seeking to make a capital investment does not incur any borrowing.

Public-private partnerships often use private-sector investments to finance a public project when sufficient public funding is not available.

For example, a city government might be heavily indebted, but a private enterprise might be interested in funding the project's construction in exchange for receiving the operating profits once the project is complete.

Public-private partnerships can be used to finance, build and operate projects such as public transportation networks, parks and convention centers.

Public Private Partnership Benefits:• Public Private partnerships could increase and provide greater

infrastructure solutions.• It will offer faster project completion and reduced delays on

infrastructure projects.• The operational and project execution risk is transferred totally to the

private sector, leaving the public component on a win-win situation.• P3 allows government funds to be re-directed to other important socio-

economic areas.

Public Private Partnership Disadvantages:• Every Public private partnership has risks involved, and the

government will the pay the price to transfer those risks to the private sector.

• Government representative must be highly specialized personnel and contracting experts.

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