6057_Session 6-7-Venture capital-Bill discounting -Credit rating (1)

6057_Session 6-7-Venture capital-Bill discounting -Credit rating (1)

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5/26/2011 1 Non Banking Financial Services PGPBFS-2010-11 Session 6-7 Venture Capital Bill Discounting Credit rating PDF created with pdfFactory Pro trial version www.pdffactory.com
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5/26/2011 2 3 Venture Capital Theoretical Framework : Venture Capital is a way in which investors support new entrepreneurial talent, primarily with finance to exploit potential market opportunities, with an objective to earn high capital gains in the medium to long term. In addition to finance, the VC may also provide some value addition in the form of management advice and contribution to overall strategy. VC funding has nourished some of corporate America's greatest success stories when they were still baby businesses—FedEx, Intel, Sun Microsystems, and Apple, to name a few. 4 Theoretical Framework . . Contd. . Venture capital is generally an equity finance scheme for the new companies, when it is too early for the companies themselves to approach the capital market to raise finance themselves. However, such investment is not exclusively equity investment . It can also be made in the form of a loan / convertible debt to ensure a running yield on the portfolio of venture capitalists. Venture capital involves high risk –high return spectrum . Some of the ventures yield very high returns to more than compensate for heavy losses on others . The returns are mostly generated in the form of substantial capital gains at the time of exits, from the disinvestments made in the capital market. PDF created with pdfFactory Pro trial version www.pdffactory.com
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3 5 VC Equity Vs Traditional Equity Feature VCE Traditional Equity 1)Liquidity Illiquid Liquid 2) Stages of Multistage Single stage funding 3) Monitoring Active Passive 4) valuation Restricted Wide range of no of technique techniques 5) Information Pvt. Information Public Info. 6) Access to Initially restricted Access is there capital 6 Stages of Financing in a VC deal Stages of financing in VC industry fall broadly into two categories : A) early stage : This may again be : i) seed capital/ pre start up : Only concepts and ideas in place. This may constitute the basis of a pre commercialization research project, usually expected to end in a prototype product which may or may not lead to a business launch. Maximum risk involved in the investment, very few VCs can be found that are willing to invest at this stage. ii) Start up : This is the stage when the commercial manufacturing has to commence, and production facility has to be set up. Initial design and prototype development risk is over. Some indication of the potential market for the new product / service is
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This note was uploaded on 05/30/2011 for the course ECON 101 taught by Professor Ke during the Spring '11 term at Lethbridge College.

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6057_Session 6-7-Venture capital-Bill discounting -Credit rating (1)

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