Venture Capital Investment
Venture capital investment helps in the development of innovative and entrepreneurial companies in India. It has developed out of the need to provide, risky and unconventional capital for new ventures which are based on dynamic entrepreneurship. Venture investment can be in the form of quasi equity or equity and in some cases, even straight or conditional debt, which is made to a venture backed by a professionally and technically qualified entrepreneur.
Process of Investment
Venture Capital firms receive investment proposals through financial intermediaries or directly. The process starts with desk research on the deal. In case it evinces appropriate interest, the management team is asked to come up with a suitable business model for the company keeping in view the unique aspects and prospects of the business venture. The fund examines the competence and quality of the management team of the aspiring company so as to get a perspective of the overall investment proposal and business prospects. In case the investor finds the venture a profitable proposition, a term sheet containing the terms and conditions of the proposed investment is created and negotiated with the promoters. The next step is a detailed due diligence which is assigned to independent advisors or carried out by the venture capital fund itself. This is to examine the financial, business and legal aspects of the deal in depth. The venture capital firms then have to assess the stages of requirement and the actual quantum itself and other milestones in the proposal. After the completion of due diligence, the fund may modify the terms and conditions or stipulate new conditions. Changes and modifications are negotiated with the promoters. A letter of intent is issued by the venture firm and various formalities are completed.
After the Deal
When the promoters request for venture capital investment funds, the firms release it. The functioning of the invested company is regularly monitored and the investor company may give strategic plan inputs and guidance to invested company to optimize performance.
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SMC Capitals is an Investment Banking arm of SMC Global and is a SEBI registered Merchant Banker that has published many informative articles on venture capital and venture capital investment