Venture Capital Financing

Venture Capital Investment Process

Venture capital investment process is different from normal project financing. In order to understand the venture capital investment process a review of the available literature on venture capital finance is carried out.

Tyebjee and Bruno in 1984 gave a model of venture capital investment process which with some variations is commonly used presently.  As per this model this activity is a five step process as follows:

  1. Deal Organization
  2. Screening
  3. Evaluation or Due Diligence
  4. Deal Structuring
  5. Post Investment Activity and Exit

Deal origination:

In generating a deal flow, the VC investor creates a pipeline of deals or investment opportunities that he would consider for investing in.… Read the rest

Abey Francis

Stages of Venture Capital Financing

The Venture Capital Financing Spectrum

The requirements of funds vary with the life cycle stage of the enterprise. Even before a business plan is prepared the entrepreneur invests his time and resources in surveying the market, finding and understanding the target customers and their needs. At the seed stage the entrepreneur continue to fund the venture with his own or family funds. At this stage the funds are needed to solicit the consultant’s services in formulation of business plans, meeting potential customers and technology partners. Next the funds would be required for development of the product/process and producing prototypes, hiring key people and building up the managerial team.… Read the rest

Abey Francis

Difference between Venture Capital & Other Funds

Venture Capital Vs Development Funds

Venture capital differs from Development funds as latter means putting up of industries without much consideration of use of new technology or new entrepreneurial venture but having a focus on underdeveloped areas (locations). In majority of cases it is in the form of loan capital and proportion of equity is very thin. Development finance is security oriented and liquidity prone. The criteria for investment are proven track record of company and its promoters, and sufficient cash generation to provide for returns (principal and interest). The development bank safeguards its interest through collateral.

They have no say in working of the enterprise except safeguarding their interest by having a nominee director.… Read the rest

Abey Francis

Introduction to Venture Capital

Concept of Venture Capital

The term venture capital comprises of two words that is, “Venture” and “Capital”. Venture is a course of processing, the outcome of which is uncertain but to which is attended the risk or danger of “loss”. “Capital” means resources to start an enterprise. To connote the risk and adventure of such a fund, the generic name Venture Capital was coined.

Venture capital is considered as financing of high and new technology based enterprises. It is said that Venture capital involves investment in new or relatively untried technology, initiated by relatively new and professionally or technically qualified entrepreneurs with inadequate funds.… Read the rest

Abey Francis