Detailed ppt on the topic venture capital

1. VENTURE
CAPITAL
FINANCIAL INSTITUTIONS AND MARKETS
Definition & Importance, History, Funding process, Types, VC Firm structure, Selection
criteria, Due diligence ,Advantages and Disadvantages, Risks & Rewards, Exit strategy

2. Definition
A form of private equity and a type of financing that investors provide to startup companies
and small businesses that are believed to have long-term growth potential.
PRIVATE EQUITY STARTUP FINANCING GROWTH POTENTIAL
Investments in companies
not publicly traded
Targeted at early-stage
ventures
Funding supplied by
venture capitalists
Selected for their anticipated
significant expansion

3. Importance
Venture capital plays a vital role in financial institutions and markets, offering opportunities for
high-risk, high-reward investments in innovative startups and small businesses
Venture
Capital
Risk-Taking and
Innovation
Diversification of Investment
Portfolio
Access to Early-Stage
Opportunities
Potential for High Returns
Driving Economic Growth
Attracting Talent and
Entrepreneurship
01
02
03
04
05
06

4. 1946 1960s-1980s 1990s Early 2000s Mid-2000s 2010s Present
Formation
of ARDC
Golden
Age
Dot-com
Boom
Dot-com
Bust
Recovery
Rise of
Mega-
Rounds
Continued
Importance
American
Research and
Development
Corporation is
founded by
George Dorio
History & Evolution
Venture capital's journey, from the birth of formal investment with ARDC in 1946 to today's era
of mega-funds, underscores its pivotal role in fueling innovation and entrepreneurship.
Emergence of
pioneering VC
firms like Kleiner
Perkins, Sequoia
Capital, and
others
The dot-com
boom sees a
surge in venture
capital
investment
The dot-com
bust leads to a
downturn in
venture capital
investment
Venture capital
rebounds by
emergence of
new
technologies
like social media
Rise of mega-
rounds with
larger
investments in
late-stage
startups
Venture capital
remains a
cornerstone of
the startup
ecosystem

5. Funding Process
Funding process is iterative and dynamic, with VCs continuously sourcing, evaluating, and
managing investments to maximize returns and support the growth of innovative startups
Referrals, networking,
and pitch events
Deal Sourcing
Market size, competitive
landscape, team
capabilities
Due Diligence
Conditions of the
investment, including
valuation, ownership
stake
Term Sheet
Negotiation
Final decision based
on risk-return profile
Investment
Decision
Investment amount,
equity stake, board
representation
Deal Structuring
Legal Documents,
Funds Transfer
Investment
Closing
Network, Expertise &
Resources
Post-Investment
Support
Monitoring, Strategic
Input, Follow-on
Funding
IPO (Initial Public
Offering, Acquisition,
Secondary Sale
Exit
Regular Assessment,
Strategic Adjustments &
Portfolio Optimization
Portfolio Review
Portfolio
Management

6. 1
Pre-Seed Funding
2
Seed Funding
3
Startup Capital
4
Early Stage Funding
9
Late Stage Funding
8
Series C
5
Series A
TYPES OF VENTURE CAPITAL FUNDINGS
With Their Timeline
6
Series B
7
Expansion Capital

7. Passion and Expertise
Clear Path to
Profitability
Scalability
Track Records
Complementary Skills
Innovative
Idea and
Technology
Go-To-Market Strategy
Strong
Founding Team
Compelling
Product Or Service
Viable
Business Model
Large Market
Opportunity
Strong
Value
Proposition
What do VCs look in startups?

8. Due Diligence in Venture Capital
Due diligence is a process undertaken by venture capitalists (VCs) to thoroughly examine a potential investment in a
startup. It's essentially a deep dive into the company's inner workings, assessing its strengths, weaknesses, opportunities,
and threats (SWOT analysis).
Reduces Risk
Informs Investment Decisions
Protects Reputation
Uncovers Hidden Gems
IMPORTANCE
Management Team
Financial Health
Market Opportunity
Product or Service
Technology
Initial Review
Information Request
Management Meetings
Customer/Partner Validation
Market Research
Negotiation and Deal Structuring
Analysts
Associates
External Consultants
COVERAGE
PROCESS PERFORMED BY

9. Risk Rewards
High Failure Rate Potential for High Returns
Market Volatility Portfolio Diversification
Uncertain Future Innovation and Disruption
Illiquidity Strategic Partnerships
Regulatory Changes Competitive Advantage
Risk & Rewards
Venture capital
investments are often
illiquid, meaning they
cannot be easily sold
or converted into cash
Illiquidity
01
Reducing overall
investment risk by
spreading investments
across multiple startups
and industries
Diversification
02

10. Exit Strategy
I A S R B
IPO Acquisition Secondary Sale Recapitalization Banakruptcy
Sell shares to
public markets
It provides liquidity
for investors and
founders, potential
for significant
returns
Sell company to
another entity
Can result in
immediate returns,
but may not
maximize potential
value
Sell shares to
another investor
No need for an IPO
or acquisition and
can occur at any
stage of the
company's growth
Reinvest in the
company to fuel
growth
May delay liquidity
for investors, but
can enhance long-
term value
Liquidate assets
and wind down
operations
Results in the loss
of investment for
VC

11. Fund Performance
Success of individual investments
Revenue growth, market share,
and profitability, drives higher
returns.
Alignment with market
opportunities
Industry focus, stage preference,
and geographic scope
External factors affecting
performance
Economic cycles, industry trends,
and regulations
Frequency and success of exits
Frequency and success of exits,
like IPOs and acquisitions
Impact on investment
opportunities
Larger fund size provides more
capital but may lead to dilution
Portfolio Company Performance Investment Strategy Market Conditions
Exit Success Rate Fund Size and Structure

12. Faster Growth
Access to Capital
Validation and
Market Recognition
Expertise and Guidance
Exit Strategy Support
Network and
Credibility
Scales operations and marketing for
quicker expansion.
Grants significant funding for rapid growth
VC funding signifies a promising and credible
business idea.
Support in planning for future acquisitions or
IPOs.
Mentorship, strategic advice from experienced
investors
Access to valuable connections and
partnerships.
Advantages

13. Conflict of Interest
Loss of Equity and Control
Lengthy Decision-Making
Pressure and Scrutiny
Time Consuming Process
Stringent Terms and
Conditions
Potential conflict between founder's
vision and VC's goals.
Founders give up ownership stake in
exchange for funding
Involvement of VCs in decision making
makes the process lengthier and slower
VC funding involves due diligence which
takes a lot of time
Constant pressure to deliver high returns for
VCs
Limited flexibility in how to
utilize the invested capital.
Disadvantages

14. Slowdown in Funding
After a boom in 2021, there's been a moderation
in global VC funding in 2023 due to inflation,
rising interest rates, and economic uncertainty.
Rise of alternative funding
There's a growing interest in alternative funding
options like debt financing and revenue-based
financing.
Geopolitical tensions
Global events like the war in Ukraine can
disrupt investment flows and create
uncertainty in certain regions.
Focus on profitability
Investors are becoming more cautious and
prioritizing companies with a clearer path to
profitability.
Increased focus on emerging sectors
Areas like climate tech, healthcare, and
artificial intelligence (AI) are attracting
significant VC investment.
Industry Trends
02 03 05
04

15. Flipkart received initial
funding from VC firms like
Accel Partners and Tiger
Global Management,
recognizing its potential to
disrupt India's e-
commerce market.
History and Early
VC Firms
01
Venture capital funding
provided capital in
exchange for equity,
fueling Flipkart's rapid
growth and scalability in
the competitive e-
commerce landscape.
Funding
Process
02
Venture capital funding
provided capital in
exchange for equity,
fueling Flipkart's rapid
growth and scalability in
the competitive e-
commerce landscape.
Types of
Funding
03
These firms were attracted by
Flipkart's disruptive business
model, strong leadership, and
potential for market
dominance, conducting
rigorous due diligence before
investing.
VC Selection
Criteria
04
Before funding, Accel Partners
and Tiger Global Management
evaluated Flipkart's market
opportunity, competitive
landscape, and scalability to
ensure alignment with their
investment objectives.
Due
Diligence
05
While venture capital
provided access to capital,
expertise, and industry
connections, Flipkart faced
challenges such as
dilution of ownership and
pressure to deliver high
growth and returns.
Advantages and
Disadvantages
06
Venture capital investment
in Flipkart carried risks
such as market volatility
and competition, but
successful execution led
to substantial rewards for
investors
Risks &
Rewards
07
Walmart's acquisition of
Flipkart in 2018 for $16
billion provided liquidity to
investors, validating
Flipkart's success and
highlighting the potential
for high returns in venture
capital investments
Exit
Strategy
08
Flipkart's successful exit
contributed to the overall
performance of venture
capital funds managed by
Accel Partners and Tiger
Global Management,
showcasing the potential for
high rewards
Fund
Performance
09
Flipkart's journey reflects
trends like globalization of
investments and the rise of e-
commerce startups, with
strategic exits playing a crucial
role in generating returns and
shaping industry dynamics
Industry
Trends
10
Case Study: Flipkart

16. Case Study: Flipkart
Sachin and Binny
Bansal found Flipkart
as an online bookstore
01 02 03 05
04
2009 2010-2012 2018
2013-2017
2007
Accel Partners leads
Flipkart's Series A
funding round with $1
million
Flipkart expands
product offerings and
technology
infrastructure with VC
funding
Tiger Global
Management and other
VCs invest in Flipkart to
fuel its rapid growth
and scalability
Walmart acquires
Flipkart for $16 billion,
providing liquidity to
investors and validating
Flipkart's success.

17. Varun Pandey BMS/21/34
Tanmay Lalwani BMS/21/61
Thank
You.
Submitted to : Dr. Shipra Agrawal
Paper: Financial Institutions and markets