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GROWTH CAPITAL
GROWTH CAPITAL
Growth capital (also called expansion capital and growth equity) is a type of private equity investment, investing in relatively mature companies that are looking for capital to expand or restructure operations, enter new markets or finance a significant acquisition without a change of control of the business. Companies that seek growth capital, will often do so in order to finance a transformational event in their lifecycle.These companies are likely to be more mature than venture capital funded companies, able to generate revenue and operating profits but unable to generate sufficient cash to fund major expansions, acquisitions or other investments Growth capital is often structured as either common equity or preferred equity, although certain investors will use various hybrid securities that include a contractual return (i.e., interest payments) in addition to an ownership interest in the company.
VENTURE CAPITAL
INTRODUCTION
y
The venture capital investment helps for the growth of innovative entrepreneurships in India. Venture capital means risk capital The risk envisaged may be very high may be so high as to result in total loss or very less so as to result in high gains
MEANING
Venture
capital means funds made available for startup firms and small businesses with exceptional growth potential. capital is money provided by professionals who alongside management invest in young, rapidly growing companies that have the potential to develop into significant economic contributors.
Venture
What kind of businesses are attractive WHAT KIND OF BUSINESSES ARE to venture capitalists? CAPITALISTS? ATTRACTIVE TO VENTURE
Venture
capitalist prefer to invest in "entrepreneurial businesses. it is more about the investment's aspirations and potential for growth, rather than by current size. Venture capital investors are only interested in companies with high growth prospects, which are managed by experienced and ambitious teams who are capable of turning their business plan into reality.
FEATURES
Investment made in equity, investors wait for 5-7 years to reap the benefits of capital gain y Investments are made in innovative projects y Investors does not interfere in day-to-day business y Capital need not be repaid in the course of business but realized through exist route (stock exchange)
y
ADVANTAGES
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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.
Less fluid Requires high return rate Invested based on long-run future Concerned with product and market potential Venture capitalist and partner are co-workers More fluid Bears lower return Invested based on immediate future Concerned with past performance Loaning bank is creditor Requires collateral
Traditional capital
was
formally
The government levied a 5 per cent cess on all knowhow import payments to create the venture fund. ICICI started VC activity in the same year Later on ICICI floated a separateVC company - TDICI
CATEORIZATION OF VCFS
1)Those promoted by the Central Government controlled development finance institutions. For example: - ICICI Venture Funds Ltd. - IFCI Venture Capital Funds Ltd (IVCF) - SIDBI Venture Capital Ltd (SVCL)
2)Those promoted by State Government controlled development finance institutions. For example: - Punjab Infotech Venture Fund - Gujarat Venture Finance Ltd (GVFL) - Kerala Venture Capital Fund Pvt Ltd. 3) Those promoted by public banks. For example: - Canbank Venture Capital Fund - SBI Capital Market Ltd
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