Introduction to Venture Capital and Joint Venture

Transcript:Introduction to Venture Capital and Joint Venture:
Introduction to Venture Capital and Joint Venture ENTREPRENEURSHIP DEVELOPMENT AND INDUSTRIAL CONSULTANCY (DBM-421) A K JHA Venture Capital Entrepreneurs need funds to realize their endeavour Venture capital financing is funding provided to companies and entrepreneurs Venture capital is an important source of financing small scale enterprise and high technology and risky ventures. It is often thought of as the early stage financing of new and young enterprises seeking to grow rapidly. In this mode there is involvement of venture capitalist in the management of entrepreneurs unit. Traditional finances generally provide financial support to the established and proved technology areas only whereas venture capitalist provides financial support to high and new technology based units. In broad terms, Venture capital is the investment of long term equity finance where the venture capitalist receives his return generally in the form of capital gains. Under this mode, venture capital financer and entrepreneur work together as partners for the benefit of enterprise. The venture capitalist focuses on growth and wants to see small businesses grow in to larger ones. Venture Capital Venture capital is a form of private equity and a type of financing that investors provide to start-up companies and small businesses that are believed to have long-term growth potential. Venture capital funds are investment funds that manage the money of investors who seek private equity stakes in start-up and small & medium enterprises with strong growth potential. These investments generally involve characterized as high-risk/high-return opportunities Venture Capitalist in India are an essential part of start-up ecosystem. Once a start-up has reached it’s growth stage, it’s most important requirement is undoubtedly the backing by reliable investors and an ample amount of funding to scale up. Characteristics of venture financing Equity participation It is actual or potential equity participation through direct purchase of shares, options or convertible securities with objectives of making capital gains by selling off the investment when the unit becomes profitable. Long term investment Time period of investment varies from 5 to 10 years. Managerial participation There is active involvement of venture capitalist in the enterprise. By providing necessary management skills viz., planning, organizing, controlling, leading and functions like finance, marketing etc. Stages in Venture Capital Financing There are five stages in venture capital financing: 1. Seed Stage At the seed stage, the company is only an idea for a product or service, and the entrepreneur must convince the venture capitalist that