Venture capitalist and angel investors

Venture Capitalist and Angel Investors

Presented By:- Aqib ali Owais siddiquiJAMIA HAMDARD UNIVERSITY

Definition by SEBI

• The SEBI defined Venture capital fund in its regulation 1996 as a fund established in the form of a company or trust which raises money through loans, donations, issues of securities of units as the case maybe and makes or proposes to make investments in accordance with regulations

Need of venture capital• To bridge the gap between capital knowledge • Maximum utilization of available resources

Who is venture capitalist ?• A venture capitalist is a person or investment firm that makes

venture investments and these venture capitalists are expected as well as capital to their investments.

Characteristics of VCs• Well managerial skills• Well knowledgeable• Sophisticated investors-Comes forward to take risks • Decision making ability • Analyzing skills

Services generally provide by VCs

• Finance to new and rapidly growing firms• Finance to typically knowledge based sustainable up scalable

companies• Purchase equity and quasi equity securities • Assist in the development of new products or services • Add value to the company through active participation

Roles within a venture capital firm

• Venture capitak general partners-Also known in this case as “Venture Capitalist of thr firm

• Investors in venture capital funds are known as limited partners.

• Venture partners bring in deal and receive income only on deal they work on.

Advantage of venture capital

Economy oriented

Investor oriented

Entrepreneur oriented

Disadvantages of venture capital

• Lengthy and complex process• Deal in the negotiation stage.• Investors becomes parts of owners business.

Risk Stages

Risk stages

Venture capital process

VC industry wise segmentation

What is an angel Investor• A wealthy individual willing to invest own money in a business

start-up• Angel investor was first used by Willam Wetzel .• An angel investor or angel (also known as a business

angel, informal investor, angel funder, private investor, or seed investor) is an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity.

Investment Profile • Angel investments bear extremely high risks and are usually

subject to dilution from future investment rounds. As such, they require a very high return on investment.

• A large percentage of angel investments are lost completely when early stage companies fail, professional angel investors seek investments that have the potential to return at least ten or more times their original investment within 5 years, through a defined exit strategy, such as plans for an initial public offering or an acquisition.

Investment Profile Contd…• Current 'best practices' suggest that angels might do better setting

their sights even higher, looking for companies that will have at least the potential to provide a 20x-30x return over a five- to seven-year holding period.

• The actual effective internal rate of return for a typical successful portfolio of angel investments is, in reality, typically as 'low' as 20–30%.

Geographical differences

United States• United States angel investing, receiving 39% of the $7.5B

invested in US-based companies throughout Q2 2011, 3–4 times as much as the total amount invested within New England.

• Total investments in 2011 were $22.5 billion, an increase of 12.1 percent over 2010 when investments totalled $20.1 billion.

• Angel investors are not only responsible for funding over 67,000 Start-up ventures annually, but their capital also contributed to job growth by helping to finance 274,800 new jobs in 2012. In 2013, 41% of tech sector executives name angel investors as a means of funding

Geographical differences Contd…United Kingdom• A study by NESTA in 2009 estimated that there were between 4,000 and

6,000 angel investors in the UK with an average investment size of £42,000 per investment. Furthermore, each angel investor on average acquired 8 percent of the venture in the deal with 10 percent of investments accounting for more than 20 percent of the venture.

• In terms of returns, 35 percent of investments produced returns of between one and five times of the initial investment, whilst 9 percent produced returns of multiples of ten times or more. The mean return, however, was 2.2 times investment in 3.6 years and an approximate internal rate of return of 22 percent gross.

•the UK, with the average number of investments made by angels at 5, compared to 2.5 in 2009. The same report also found an increase in angel investors making impact investments, with 25% of angels saying they had made an impact investment in 2014

Geographical differences Contd…

Russia• In 2012, the 'International Business Angels Assembly' took

place in the Russian Federation. This was an exclusive event devoted to private investing into innovative projects in Eastern Europe.

Geographical differences Contd…

Asia• Fifteen years ago, it was difficult for startups in China to find

local angel investors, but that has changed. Angel groups such as Angelvest needed to be created from scratch by David Chen and media executive Ted Lai. Billionaire tech entrepreneur and grassroots investor Cai Wensheng also founded Long Neck Investments.

India Angel network achievement

• Largest Angel investor group spread PAN India geographically in mumbai delhui pune banglore.

• +125 active Angel investor from across india and overseas.• Concept has found resonance with corporate like IBM,

venture fund like SIDBI,IVP,RVCF etc.

India Angel network achievement

• +22 investments made to date acprss multiple sectors• +250 deals received per month pan india bases• Co investment with Sequoia Capital in Dhruva• Member of world business Angel investor Association

Some IAN Portfolio companies

Difference

Top VCs in India

• Helion Venture Partners.• Accel Partners.• Blume Ventures.• Sequoia Capital India.• Nexus Venture Partners.• Inventus Capital Partners.• IDG Ventures.• Fidelity Growth Partners.

Top Angel Investor in India• Rajan Anandan:• Anupam Gopal Mittal:• Sanjay Mehta:• Zishaan Hayath:• Sharad Sharma:• Anand Ladsariya:• Sunil Kalra