Ventre Cptl Fs Final Cpy

7/29/2019 Ventre Cptl Fs Final Cpy

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INTRODUCTION

A number of technocrats are seeking to set up shop on their own and

capitalize on opportunities. In the highly dynamic economic climate that

surrounds us today, few traditional business models may survive.

Countriesacrosstheglobearerealizingthatitisnottheconglomeratesand

thegiganticcorporationsthatfueleconomicgrowthanymore.Theessence

ofanyeconomytodayisthesmallandmediumenterprises.Forexample,in

the US, 50% of the exports are createdby companies with less than 20

employees and only 7% are createdby companies with 500 or more

employees. This growing trend canbe attributed to rapid advances in

technology in the last decade. Knowledge driven industries like InfoTech,

health-care,entertainmentandserviceshavebecomethecynosureofbourses

worldwide.Inthesesectors,itisinnovationandtechnicalcapabilitythatare

bigbusiness-drivers. This is aparadigm shift from the earlierphysical

productionandeconomiesofscalemodel.However,startinganenterprise

isnevereasy.Thereareanumberofparametersthatcontributetoitssuccess

ordownfall.Experience,integrity,prudenceandaclearunderstandingofthe

marketareamongthe soughtafterqualitiesofapromoter.However, there

are other factors, which lie beyond the control of the entrepreneur.


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Prominent among these is the timely infusion of funds. This is where the

venturecapitalistcomesin,withmoney,businesssenseandalotmore.


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WHAT IS VENTURE CAPITAL?

The venture capital investment helps for the growth of innovative

entrepreneurshipsinIndia.Venturecapitalhasdevelopedasaresultofthe

need toprovide non-conventional, risky finance to new venturesbasedon

innovativeentrepreneurship.Venturecapitalisaninvestmentintheformof

equity, quasi-equity and sometimes debt - straight or conditional, made in

new or untried concepts, promoted by a technically or professionally

qualifiedentrepreneur.Venturecapitalmeansriskcapital.Itreferstocapital

investment, both equity and debt, which carries substantial risk and

uncertainties. The risk envisaged maybe very high maybe so high as to

resultintotallossorverylesssoastoresultinhighgains

Venture capital means many things to manypeople. It is in fact nearly

impossibletocomeacrossonesingledefinitionoftheconcept.

Venture capital is moneyprovidedbyprofessionals who invest alongside

managementinyoung,rapidlygrowingcompaniesthathavethepotentialto

develop into significant economic contributors. Venture capital is an

important sourceofequity for start-upcompanies. Professionally managed

venture capital firms generally are private partnerships or closely-held

corporationsfundedbyprivateandpublicpensionfunds,endowmentfunds,


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foundations, corporations, wealthy individuals, foreign investors, and the

venturecapitaliststhemselves

Venturecapitalistsgenerally:

Financenewandrapidlygrowingcompanies

Purchaseequitysecurities

Assistinthedevelopmentofnewproductsorservices

Addvaluetothecompanythroughactiveparticipation

Takehigherriskswiththeexpectationofhigherrewards

Havealong-termorientation

When considering an investment, venture capitalists carefully screen the

technicalandbusinessmeritsof theproposedcompany.Venturecapitalists

onlyinvest inasmallpercentageof thebusinessestheyreviewandhavea

long-term perspective. They also actively work with the company's

management, especially with contacts and strategy formulation. .Venture

capitalistsmitigatetheriskofinvestingbydevelopingaportfolioofyoung

companies in a single venture fund. Many times they co-invest with other

professional venture capital firms. In addition, many venturepartnerships

managemultiplefundssimultaneously.Fordecades,venturecapitalistshave

nurtured the growth of America's high technology and entrepreneurial


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communities resulting in significantjob creation, economic growth and

international competitiveness. Companies such as Digital Equipment

Corporation, Apple, Federal Express, Compaq, Sun Microsystems, Intel,

Microsoft and Genetech are famous examples of companies that received

venturecapitalearlyintheirdevelopment.


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ADVANTAGE OF VENTURE CAPITAL

It injects long term equity finance which provides a solid capital base for

future growth.

The venture capitalist is a business partner, sharing both the risks and

rewards. Venture capitalists are rewarded by business success and the capital

gain.

The venture capitalist is able to provide practical advice and assistance to

the company based on past experience with other companies which were in

similar situations.

The venture capitalist also has a network of contacts in many areas that

can add value to the company, such as in recruiting key personnel, providing

contacts in international markets, introductions to strategic partners, and if

needed co-investments with other venture capital firms when additional

rounds of financing are required.


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TYPES OF VENTURE CAPITAL FIRMS

Depending on the business type, the venture capital firm differs.

For instance, if you're a startup internet company, funding

requests from a more manufacturing-focused firm will not be

effective. Doing some initial research on which firms to

approach will save time and effort. When approaching a Venture

Capital firm, consider their portfolio:

Business Cycle: Do they invest in budding or establishedbusinesses?

Industry: What is their industry focus? Investment: Is their typical investment sufficient for your

needs?

Location: Are they regional, national or international? Return: What is their expected return on inves tment? Involvement: What is their involvement level?

Targeting specific types of firms will yield the best results when

seeking Venture Capital financing. It is important to note that

many Venture Capital firms have diverse portfolios with a range

of clients. If this is the case, finding gaps in their portfolio is

one strategy that might succeed.


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FACTOS TO BE COSIDERED BY VENTURE CAPITALIST IN

SELECTION OF INVESTMENT PROPOSAL

Therearebasicallyfourkeyelementsinfinancingofventureswhichare

studiedindepthbytheventurecapitalists.Theseare:

1.Management-:Thestrength,expertise&unityofthekeypeopleonthe

boardbringsignificantcredibilitytothecompany.Themembersaretobe

mature,experiencedpossessingworkingknowledgeofbusinessandcapable

oftakingpotentiallyhighrisks.

2.Potential for capital gain-: Anaboveaveragerateofreturnofabout30-

40%isrequiredbyventurecapitalists.Therateofreturnalsodependsupon

thestageof thebusinesscyclewherefundsarebeingdeployed.Earlierthe

stage,higheristheriskandhencethereturn.

3. Realistic Financial Requirement and Projections- The venture

capitalist requires a realistic view about the present health of the

organization as well as future projections regarding scope, nature and

performanceofthecompanyintermsofscaleofoperations,operatingprofit

and further costs related to product development through Research &

Development.


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4.Owners Financial Stake-: Thefinancialresourcesowned&committed

by theentrepreneur/owner in thebusiness including thefunds investedby

family, friends and relativesplay a very important role in increasing the

viability of thebusiness. It is an important avenue where the venture

capitalistkeepsanopeneye.


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VENTURE CAPITAL- FINANCING STAGES

Seed up Capital

It is an idea or concept as opposed to a business. European

Venture Capital Association defines seed capital as the

financing of the initial product development or capital provided

to an entrepreneur to prove the feasibility of a project and to

qualify for start up capital.

The characteristics of the seed up capital may be enumerated as

follows:

Absence of ready product market Absence of complete management team Product/Process still in R&D stage Initial period/Licensing stage of technology transfer

Broadly speaking seed capital investment may take 7 to 10 years

to achieve realization. It is the earliest and therefore riskiest

stage of venture capital investment. The new technology and

innovations being attempted have equal chance of success and

failure. Such projects, particularly hi-tech, projects sink a lot of

cash and need a strong financial support for their adaptation,

commencement and eventual success. However, while the earliest


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stage of financing is fraught with risk, it also provides greater

potential for realizing significant gains in long term. Typically

seed enterprises lack asset base or track record to obtain finance

from conventional sources and are largely dependent upon

entrepreneurs personal resources. Seed capital is provided after

being satisfied that the entrepreneur has used up his own

resources and carried out his idea to a stage of acceptance and

has initiated research. The asset underlying the seed capital is

often technology or an idea as opposed to human assets (a good

management team) so often sought by venture capitalists .

Start up Capital

It is stage 2 in venture capital cycle and is distinguishable from

seed capital investments. An entrepreneur often needs finance

when the business is just starting. The start up stage involves

starting a new business. Here in the entrepreneur has moved

closer towards establishment of a going concern. Here in the

business concept has been fully investigated and the business

risk now becomes that of turning the concept into product.


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Start up capital is defined as: capital needed to finance the

product development, initial marketing and establishment of

product facility.

The characteristics of start-up capital are:-

i. Establishment of company or business- The company iseither being organized or is established recently. New

business activity could be based on experts, experience or a

spin-off from R&D.

ii. Establishment of most but not all the members of theteam- The skills and fitness to the job and situation of the

entrepreneurs team is an important factor for start up finance.

iii. Development of business plan or idea- The business planshould be fully developed yet the acceptability of the product by the

market is uncertain. The company has not yet started trading.

Early Stage Finance

It is also called first stage capital is provided to entrepreneur

who has a proven product, to start commercial production and

marketing, not covering market expansion, de-risking and

acquisition costs. At this stage the company passed into early

success stage of its life cycle. A proven management team is put


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into this stage, a product is established and an identifiable

market is being targeted. British Venture Capital Association

has vividly defined early stage finance as: Finance provided to

companies that have completed the product development stage

and require further funds to initiate commercial manufacturing

and sales but may not be generating profits. The characteristics

of early stage finance may be: -

Little or no sales revenue. Cash flow and profit still negative. A small but enthusiastic management team which consists

of people with technical and specialist background and with

little experience in the management of growing business.

Short term prospective for dramatic growth in revenue andprofits.

The early stage finance usually takes 4 to 6 years time horizon

to realization. Early stage finance is the earliest in which two of

the fundamentals of business are in place i.e. fully assembled

management team and a marketable product. A company needs

this round of finance because of any of the following reasons: -

Project overruns on product development.


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Initial loss after start up phase.The firm needs additional equity funds, which are not available

from other sources thus prompting venture capitalist that, have

financed the start up stage to provide further financing. The

management risk is shifted from factors internal to the firm (lack

of management, lack of product etc.) to factors external to the

firm (competitive pressures in sufficient will of financial

institutions to provide adequate capital, risk of product

obsolescence etc.) At this stage, capital needs, both fixed and

working capital needs are greatest. Further, since firms do not

have foundation of a trading record, finance will be difficult to

obtain and so Venture capital particularly equity investment

without associated debt burden is key to survival of the business.

The following risks are normally associated to firms at this

stage: -

a) The early stage firms may have drawn the attention of and

incurred the challenge of a larger competition.

b) There is a risk of product obsolescence. This is mo re so when

the firm is involved in high-tech business like computer,

information technology etc.


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Second Stage Finance

It is the capital provided for marketing and meeting the growing

working capital needs of an enterprise that has commenced the

production but does not have positive cash flows sufficient to

take care of its growing needs. Second stage finance, the second

trench of Early State Finance is also referred to as follow on

finance and can be defined as the provision of capital to the firm

which has previously been in receipt of external capital but

whose financial needs have subsequently exploded. This may be

second or even third injection of capital.

The characteristics of a second stage finance are:

A developed product on the market A full management team in place Sales revenue being generated from one or more products There are losses in the firm or at best there may be a break

even but the surplus generated is insufficient to meet the

firms needs.

Second round financing typically comes in after start up and

early stage funding and so have shorter time to maturity,

generally ranging from 3 to 7 years. This stage of financing has

both positive and negative reasons.


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Negative reasons include:

I. Cost overruns in market development.II. Failure of new product to live up to s ales forecast.

III. Need to re-position products through a new marketingcampaign.

IV. Need to re-define the product in the market place oncethe product deficiency is revealed

Positive reasons include:

I. Sales appear to be exceeding forecasts and the enterpriseneeds to acquire assets to gear up for production volumes

greater than forecasts.

II. High growth enterprises expand faster than their workingcapital permit, thus needing additional finance. Aim is to

provide working capital for initial expansion of an

enterprise to meet needs of increasing stocks and

receivables.

Later Stage Finance

It is called third stage capital is provided to an enterprise that

has established commercial production and basic marketing set-

up, typically for market expansion, acquisition, product

development etc. It is provided for market expansion of the


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enterprise. The enterprises eligible for this round of finance have

following characteristics.

I. Established business, having already passed the risky earlystage.

II. Expanding high yield, capital growth and goodprofitability.

III. Reputed market position and an established formalorganization structure.

Funds are utilized for further plant expansion, marketing,

working capital or development of improved products. Third

stage financing is a mix of equity with debt or subordinate debt.

As it is half way between equity and debt in US it is called

mezzanine finance. It is also called last rou nd of finance in run

up to the trade sale or public offer.

Venture capitalist s prefer later stage investment Vis a Vis early

stage investments, as the rate of failure in later stage financing is

low. It is because firms at this stage have a past performance

data, track record of management, established procedures of

financial control. The time horizon for realization is shorter,


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ranging from 3 to 5 years. This helps the venture capitalists to

balance their own portfolio of investment as it provides a

running yield to venture capitalists. Further the loan component

in third stage finance provides tax advantage and superior return

to the investors.

There are four sub divisions of later s tage finance.

Expansion / Development Finance Replacement Finance Buyout Financing Turnaround Finance

Expansion / Development FinanceAn enterprise established in a given market increases its profits

exponentially by achieving the economies of scale. This

expansion can be achieved either through an organic growth, that

is by expanding production capacity and setting up proper

distribution system or by way of acquisitions. Anyhow,

expansion needs finance and venture capitalists support both

organic growth as well as acquisitions for expansion.


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At this stage the real market feedback is used to analyze

competition. It may be found that the entrepreneur needs to

develop his managerial team for handling growth and managing a

larger business.

Realization horizon for expansion / development investment is

one to three years. It is favored by venture capitalist as it offers

higher rewards in shorter period with lower risk. Funds are

needed for new or larger factories and warehouses, production

capacities, developing improved or new products, developing

new markets or entering exports by enterprise with established

business that has already achieved break even and has started

making profits.

Replacement FinanceIt means substituting one shareholder for another, rather than

raising new capital resulting in the change of ownership pattern.

Venture capitalist purchase shares from the entrepreneurs and

their associates enabling them to reduce their shareholding in

unlisted companies. They also buy ordinary shares from non-

promoters and convert them to preference shares with fixed

dividend coupon. Later, on sale of the company or its listing on


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stock exchange, these are re-converted to ordinary shares. Thus

Venture capitalist makes a capital gain in a period of 1 to 5

years.

Buy - out / Buy - in FinancingIt is a recent development and a new form of investment by

venture capitalist. The funds provided to the current operating

management to acquire or purchase a significant share holding in

the business they manage are called management buyout.

Management Buy-in refers to the funds provided to enable a

manager or a group of managers from outside the company to

buy into it.

It is the most popular form of ventu re capital amongst later stage

financing. It is less risky as venture capitalist in invests in solid,

ongoing and more mature business. The funds are provided for

acquiring and revitalizing an existing product line or division of

a major business. MBO (Management buyout) has low risk as

enterprise to be bought have existed for some time besides

having positive cash flow to provide regular returns to the

venture capitalist, who structure their investment by judicious

combination of debt and equity. Of late there has been a gradual


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shift away from start up and early finance to wards MBO

opportunities. This shift is because of lower risk than start up

investments.

Turnaround FinanceIt is rare form later stage finance which most of the venture

capitalist avoid because of higher degree of risk. When an

established enterprise becomes sick, it needs finance as well as

management assistance foe a major restructuring to revitalize

growth of profits. Unquoted company at an early stage of

development often has higher debt than equity; its cash flows are

slowing down due to lack of managerial skill and inability to

exploit the market potential. The sick companies at the later

stages of development do not nor mally have high debt burden but

lack competent staff at various levels. Such enterprises are

compelled to relinquish control to new management. The venture

capitalist has to carry out the recovery process using hands on

management in 2 to 5 years. The risk profile and anticipated

rewards are akin to early stage inv estment.


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Bridge FinanceIt is the pre-public offering or pre-merger/acquisition finance to

a company. It is the last round of financing before the planned

exit. Venture capitalist help in building a stable and experienced

management team that will help the company in its initial public

offer. Most of the time bridge finance helps improves the

valuation of the company. Bridge finance often has a realization

period of 6 months to one year and hence the risk involved is

low. The bridge finance is paid back from the proceeds of the

public issue.


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VENTURE CAPITAL IN INDIA

Evolution of VC Industry in India

The first major analysis on risk capital for India was reported in 1983. It

indicated that new companies often confront serious barriers to entry into

capital market for raising equity finance which undermines their future

prospects of expansion and diversification. It also indicated that on the

whole there is a need to revive the equity cult among the masses by ensuring

competitive return on equity investment. This brought out the institutional

inadequacies with respect to the evolution of venture capital. In India, the

Industrial finance Corporation of India (IFCI) initiated the idea of VC when

it established the Risk Capital Foundation in 1975 to provide seed capital to

small and risky projects. However the concept of VC financing got statutory

recognition for the first time in the fiscal budget for the year 1986-87. The

Venture Capital companies operating at present can be divided into four

groups:

Promoted by AllIndia Development Financial Institutions Promoted by State Level Financial Institutions Promoted by Commercial banks Private venture Capitalist


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Promoted by all India development financial institutions

The IDBI started a VC fund in 1987 as per the long term fiscal policy of

government of India, with an initial capital of Rs. 10 cr which raised by

imposing a cess of 5% on all payments made for the import of technology

know- how projects requiring funds from rs.5 lacs to rs 2.5 cr were

considered for financing. Promoters contribution ranged from this fund was

available at a concessional interest rate of 9% (during gestation period)

which could be increased at later stages.

The ICICI provided the required impetus to VC activities in India, 1986; it

started providing VC finance in 1998 it promoted, along with the Unit Trust

of India (UTI) Technology Development and Information Company of India

(TDICI) as the first VC Company registered under the companies act, 1956.

The TDICI may provide financial assistance to venture capital undertakings

which are set up by technocrat entrepreneurs, or technology information and

guidance services.

The risk capital foundation established by the industrial finance corporation

of India (IFCI) in 1975, was converted in 1988 into the Risk Capital and

Technology Finance company (RCTC) as a subsidiary company of the ifci


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the rctc provides assistance in the form of conventional loans, interestfree

conditional loans on profit and risk sharing basis or equity participation in

extends financial support to high technology projects for technological up

gradations. The RCTC has been renamed as IFCI Venture Capital Funds

Ltd. (IVCF)

Promoted by State Level Financial InstitutionsIn India, the State Level financial institutions in some states such as Madhya

Pradesh, Gujarat, Uttar Pradesh, etc., have done an excellent job and have

provided VC to a small scale enterprises. Several successful entrepreneurs

have been the beneficiaries of the liberal funding environment. In 1990, the

Gujarat Industrial Investment Corporation, promoted the Gujarat Venture

Financial Ltd. (GVFL) along with other promoters such as the IDBI, the

World Bank, etc. The GVFL provides financial assistance to businesses in

the form of equity, conditional loans or income notes for technologies

development and innovative products. It also provides finance assistance to

entrepreneurs.

The government of Andhra Pradesh has also promoted the Andhra Pradesh

Industrial Development Corporation (APIDC) venture capital ltd. To provide

VC financing in Andhra Pradesh.


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Promoted by commercial banksCanbank Venture Capital Fund, State Bank Venture Capital Fund and

Grindlays bank Venture Capital Fund have been set up by the respective

commercial banks to undertake venture capital activities.

The State Bank Venture Capital Funds provides financial assistance for

bought out deal as well as new companies in the form of equity which it

disinvests after the commercialization of the project.

Canbank Venture Capital Fund provides financial assistance for proven but

yet to b commercially exploited technologies. It provides assistance both in

the form of equity and conditional loans.

Private Venture Capital FundsSeveral private sector venture capital funds have been established in India

such as the 20th Century Venture Capital Company, Indus Venture Capital

Fund, Infrastructure Leasing and Financial Services Ltd. Some of the

companies that have received funding through this route include:

Mastek, on of the oldest software house in India

Ruskan software, Pune based software consultancy


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SQL Star, Hyderabad-based training and software development

consultancy

Satyam infoway, the first private ISP in India

Hinditron, makers of embedded software

Selectia, provider of interactive software selector

Yantra, ITLInfosys US subsidiary, solution for supply chain management

Rediff on the Net, Indian website featuring electronic shopping, news, chat

etc.


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NEED FOR GROWTH OF VENTURE CAPITAL IN INDIA

In India, a revolution is ushering in a new economy, wherein entrepreneurs

mind set is taking a shift from risk adverse business to investment in new

ideas which involve high risk. The conventional industrial finance in India is

not of much help to these new emerging enterprises. Therefore there is a

need of financing mechanism that will fit with the requirement of

entrepreneurs and thus it needs venture capital industry to grow in India.

Few reasons for which active Venture Capital Industry is important for India

include:

Innovation : needs risk capital in a largely regulated, conservative,legacy financial system

Job creation: large pool of skilled graduates in the first and secondtier cities

Patient capital: Not flighty, unlike FIIs Creating new industry clusters: Media, Retail, Call Centers and

back office processing, trickling down to organized effort of support

services like office services, catering, transportation


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METHODS OF VENTURE FINANCING IN INDIA

Venture capital is typically available in three forms in India, they are:

Equity: All VCFs in India provide equity but generally their contribution

does not exceed 49 percent of the total equity capital. Thus, the effective

control and majority ownership of the firm remains with the entrepreneur.

They buy shares of an enterprise with an intention to ultimately sell them off

to make capital gains.

Conditional Loan: It is repayable in the form of a royalty after the venture

is able to generate sales. No interest is paid on such loans. In India, venture

capital firms charge royalty ranging between 2 to 15 percent; actual rate

depends on other factors of the venture such as gestation period, cost-flow

patterns, riskiness and other factors of the enterprise.

Income Note: It is a hybrid security which combines the features of both

conventional loan and conditional loan. The entrepreneur has to pay both

interest and royalty on sales, but at substantially low rates.

Other Financing Methods: A few venture capitalists, particularly in the

private sector, have started introducing innovative financial securities like

participating debentures, introduced by TCFC is an example.


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If we are struggling to find success in our quest for venture capital, maybe

we are looking in the wrong place. Venture capital is not for everybody. For

starters, venture capitalists tend to be very picky about where they invest.

They are looking for something to dump a lot of money into (usually no less

than $1 million) that will pour even more money right back at them in a

short amount of time (typically 3-7 years). We may be planning for a steady

growth rate as opposed to the booming, overnight success that venture

capitalists tend to gravitate toward. We may not be able to turn around as

large of a profit as they are looking for in quick enough time. We may not

need the amount of money that they offer or our business may simply not be

big enough.

Simply put, venture capital is not the right fit for our business and there are

plenty of other options available when it comes to finding capital.

Substitute in Early stage

1. Angels

Most venture capital funds will not consider investing in anything under $1

million to $2 million. Angels, however, are wealthy individuals who will

provide capital for a startup business. These investors have usually earned

their money as entrepreneurs and business managers and can serve as a


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prime resource for advice on top of capital. On the other hand, due to

typically limited resources, angels usually have a shorter investment horizon

than venture capitalists and tend to have less tolerance for losses.

2. Private Placement

An investment bank or agent may be able to raise equity for our company

by placing our unregistered securities with accredited investors. However,

you should be aware that the fees and expenses associated with this practice

are generally higher than those that come with venture and angel investors.

We will likely receive little or no business counsel from private investors

who also tend to have little tolerance for losses and under-performance.

3. Initial Public Offering

If we are somehow able to gain access to public equity markets than an

initial public offering (IPO) can be an effective way to raise capital. Keep in

mind that, while the public markets high valuations, abundant capital and

liquidity characteristics make it attractive, the transaction costs are high and

there are ongoing legal expenses associated with public disclosure

requirements.

Later Stage Financing


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1. Bootstrap Financing

This method is intended to develop a foundation for your business from

scratch. Financial management is essential to make this work. With

bootstrap financing youre building a business from nothing, which means

there is little to no margin for error in the finance department. Keep a rigid

account of all transactions and dont stray from your budget. A few different

methods of bootstrapping include:

Factoring-which generates cash flow through the sale of your accounts

receivable to a factor at a discounted price for cash.

Trade Credit-is an option if you are able to find a vendor or supplier that will

allow you to order goods on net 30, 60 or 90 day terms. If you can sell the

goods before the bill comes due then you have generated cash flow without

spending any money. Customers can pay you up front our services.

Leasing your equipment instead of purchasing it outright.

2. Fund from Operations

Look for ways to tweak your business in order to reduce the cash flowing

out and increase the cash flowing in. Funding found in business operations

come free of finance charges, can reduce future financing charges and can


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increase the value of your business. Month-by-month operating and cash

projections will show how well we have planned, how you can optimize the

elements of your business that generate cash and allow you to plan for new

investments and contingencies.

3. Licensing

Sell licenses to technology that is non-essential to our company or grant

limited licensing to essential technology that can be shared. Through

outlicensing we can generate revenue from up-front fees, access fees,

royalties or milestone payments.

4. Vendor Financing

Similar to the trade credit related to bootstrap financing, vendors can play a

big role in financing your new business. Establish vendor relationships

through our trade association and strike deals to offer their product and pay

for it at a date in the near future. Selling the product in time is up to us. In

hopes of keeping you as a customer, vendors may also be willing to work

out an arrangement if we need to finance equipment or supplies. Just make

sure to look for stability when you research a vendors credentials and

reputation before you sign any kind of agreement. And keep in mind that


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many major suppliers (GE Small Business Solutions, IBM Global

Financing) own financial companies that can help you.

5. Self Funding

Search between the couch cushions and in old jacket pockets for whatever

extra money you might have lying around and invest it into your business.

Obviously loose change will not be enough for extra business funding, but

take a look at your savings, investment portfolio, retirement funds and

employee buyout options from your previous employer. You wont have to

deal with any creditors or interest and the return on your investment could be

much higher. However, make sure that you consider the risks involved with

using your own resources. How competitive is the market that you are about

to enter into? How long will it take to pay yourself back? Will you be able to

pay yourself back? Can you afford to lose everything that you are investing

if your business were to fail? Its important that your projected returns are

more than enough to cover the risk that you will be taking.

6. SBIR and STTR Programs

Coordinated by the SBA, SBIR (Small Business Innovation Research) and

STTR (Small business Technology Transfer) programs offer competitive

federal funding awards to stimulate technological innovation and provide


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opportunities for small businesses. You can learn more about these programs

at SBIRworld.com.

7. State Funding

If youre not having any luck finding funding from the federal government

take a look at what your state has to offer. There is a list of links to state

development agencies that offer an array of grants and financial assistance

for small businessessonsAbout.com.

. 8. Community Banks

These smaller banks may have fewer products than their financial institution

counterparts but they offer a great opportunity to build banking relationships

and are generally more flexible with payment plans and interest rates.

9. Micro loans

These types of loans can range from hundreds of dollars to low six-figure

amounts. Although some lenders regard micro loans to be a waste of time

because the amount is so low, these can be a real boon for a startup business

or one that just needs to add some extra cash flow.

10. Finance Debt


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It may be more expensive in the long run than purchasing, but financing

your equipment, facilities and receivables can free up cash in the short term

or reduce the amount of money that you need to raise.

11. Friends

Ask your friends if they have any extra money that they would like to

invest. Assure them that you will pay them back with interest or offer them

stock options or a share of the profits in return.


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CONCLUSION

The study provides that the maturity if the still nascent Indian Venture

Capital market is imminent.

Venture Capitalists in Indian have notice of newer avenues and regions to

expand. Venture Capitalists have moved beyond IT service but are cautious

in exploring the right business model, for finding opportunities that generate

better returns for their investors.

In terms of impediments to expansion, few concerning factors to include;

Venture Capitalists unfavorable political and regulatory environment

compared to other countries, difficulty in achieving successful exists and

administrative delays in documentation and approval.

In spite of few non attracting factors, Indian opportunities are no doubt

promising which is evident by the large number of new entrants in past years

as well in coming days. Nonetheless the market is challenging for successful

investment.

Therefore Venture capitalists responses are upbeat about the attractiveness

of the India as a place to do the business.


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BIBLIOGRAPHY

WEBSITE:

www.sebi.gov.in

www.ivca.org

www.nenonline.org.

www.indiavca.org.

www.vcindia.com

www.ventureintelligence.in

www.vccircle.com
http://www.nenonline.org/http://www.nenonline.org/http://www.nenonline.org/


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