Venture Capital

1
Venture Capital

• Nasscom Product Forum
• December 10, 2003
• Bangalore

2
About JumpStartUp

• 45m Early Stage IT Focused Fund
• Operational since July 2000
• 13 Investments (approx. 20 m) till date
• Cross-border investing focus
• Invests up to 2m per round
• Deep technology and VC investment experience
• Backed by leading global investors

3
Financing Framework

• Friends and family (Angels)
• Incubator programmes
• Special Schemes PATSER (DSIR), TDF
• Venture capital
• Banking finance
• Corporate investments

4
The VC Framework

• Build a portfolio of investments in focus area
• High risk investments (tech, market, execution,
  liquidity) with enormous upside potential
• Significant failure ratio
• Few winners return several times the investment
• Time period of 3-6 years to exit
• Extremely selective in investments

5
VCs Approach

• Follow a disciplined approach in selection
• Focus on certain market segments (stage, tech,
  etc)
• Partnership approach
• Brings experience and networks to the table
• Work closely with the portfolio to build value
• Strategic interventions to protect/enhance value
• Long term perspective in managing investments
• VCs are successful by the Company they keep

6
The VC Landscape

• Domestic VC Sidbi, UTI Ventures, Canbank, ILFS
• International VCs Jumpstartup, Westbridge,
  Acer..
• Private equity investors General Atlantic..
• Banks and others (co investors)

7

• What do VCs look for ?

8
Necessary conditions.

• Founders and Management team
• Large/Growing market opportunity
• Competitive Advantage
• technology
• market
• model
• Sustainable growth rates and profit margins
• Attractive entry valuation

9
Necessary conditions.

• Demonstration of
• Commitment
• Working as a team
• Flexibility
• Frugality
• Alignment of interest and transparency
• Business plan specifics
• Exit potential

10
Entrepreneur - Introspection

• Is there a large and growing opportunity?
• Is the team fully committed to the cause?
• Is the teams cumulative experience and skills
  relevant and complete?
• Can the Business Plan be validated?
• Am I ready to share and grow?

11
Practical discussion topics ( FAQs)
12
Angel Investors

• Individuals/Private investors/Companies
• Investment decisions are quick
• Source of BP validation
• Ability to reach the proof of concept stage
• Assist in initial stages of organisation and
  growth
• Angels do not kiss strangers

13
Fund raising cycle

• Budget 3-6 months for fund raising
• No/intial interest in a week
• Multiple intensive interactions Due Diligence
• Progress to Term sheet in 4-10 weeks
• Closing in additional 4-10 weeks
• Seek advice if you are a first time entrepreneur

14
Product Vs Service

• Few focused product companies
• Fundamental differences
• Mindset
• Financing
• Skills
• Time-frame
• Difficult to combine both lines of business
• Low risk taking ability derived from poor
  exposure to markets
• Stay focused

15
Intermediaries

• Friendly CAs to a big names
• Part and parcel of the Indian system
• Additional vetting of the plan
• Success based fees
• Chose one based on past track record

16
Our beliefs

• VCs have to play a significant role in the
  emergence of Indian IP companies
• Start-up ecosystem enriched by expanding talent
  pool
• The ecosystem is evolving and will have to mature
• VC assisted entrepreneurship growth is here to
  stay