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Topic : Venture capital in India
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Created by : Shesh Mani, Portfolio Manager, Blackstone Group  | 11 29 2008 04:39:02 +0000
Industry : Hedge Funds/VCs/Private EquityFunctional Area : VC funding(Entrepreneurship)
Activity:  3954 views;  last activity : 07 06 2010 20:18:09 +0000

A lot of companies say they can provide venture capital funding or its equivalent to new dot-com start-ups, or even for new ideas. What are the pros and cons of this?

 
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The advantage of venture capital investment is that you get money that enables you to expand your business and obtain market share before someone beats you to it. Venture capital is not a loan that needs to be repaid; This provides tremendous leverage to expand on other’s money.


By Shesh Mani, Portfolio Manager, Blackstone Group  11 29 2008 04:39:02 +0000
 
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The disadvantage is that you are no longer the sole owner of your company and may lose control. Moreover, a VC may move your company towards an Initial Public Offering (IPO) of publicly traded shares faster than might be best for the long-term health of the business.


By Deepak Tripathi, Portfolio Manager, Sun Group  11 29 2008 04:40:21 +0000
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Venture capitalists (VCs) invest their money in exchange for equity (an ownership share) in your company. VCs get their cash out only when your business is acquired by another company or "goes public," that is, when its shares can be publicly traded on a stock exchange.


By Vikrant Panwar, Portfolio Manager, IL&FS Venture Corporation  | 11 29 2008 04:39:40 +0000
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It is a good source of capital for startups with huge growth potential, especially technology driven ones. They also provide management assistance , strategic advice and active involvement in addition.

The important disadvantages are complex process, loss of effective control, very high cost in the long run, charges irrespective of the success of the deal and will always be concerned about proper exit than long term growth of the company


By Padmanabhan R, Articled / Audit assistant, Finance student  | 08 04 2009 19:41:28 +0000
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I am sure you know that ICICI Venture offloaded 8-10% of their holdings to Azim Premji investments in the Subhiksha trading of Chennai.I am sure that ICICI venture were sitting in all board meetings of the company and had the information that the company was cash strapped.


By ramachandran venkat narayanan, Chartered Accountant/CPA, Right Track Consulting  | 05 08 2009 04:18:08 +0000
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In order to hang onto as much of your company as possible, "bootstrap," that is, raise funds from your own assets, and from family and friends. Warning: don't raise money with credit cards; the interest is exorbitant and will quickly destroy you and your business. The best time to seek outside investment is after you have already developed a viable business that now needs capital to grow marketshare or build inventory. Most traditional VCs won't touch a company that hasn't been around for at least two years.


By Milind Khaire, Portfolio Manager, IL&FS Venture Corporation  | 11 29 2008 04:40:42 +0000
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