This document discusses securitization and venture capital. It defines securitization as the process of packaging and selling loans and receivables as asset-backed securities. This allows institutions to remove assets from their balance sheets in exchange for cash. Venture capital is defined as long-term risk capital invested in startups with potential for growth. Venture capitalists provide funding and managerial assistance to young companies in exchange for equity stakes. The document outlines the stages of securitization and steps in the venture capital process, including deal origination, screening, evaluation, negotiation, and exit planning.
This document discusses securitization and venture capital. It defines securitization as the process of packaging and selling loans and receivables as asset-backed securities. This allows institutions to remove assets from their balance sheets in exchange for cash. Venture capital is defined as long-term risk capital invested in startups with potential for growth. Venture capitalists provide funding and managerial assistance to young companies in exchange for equity stakes. The document outlines the stages of securitization and steps in the venture capital process, including deal origination, screening, evaluation, negotiation, and exit planning.
This document discusses securitization and venture capital. It defines securitization as the process of packaging and selling loans and receivables as asset-backed securities. This allows institutions to remove assets from their balance sheets in exchange for cash. Venture capital is defined as long-term risk capital invested in startups with potential for growth. Venture capitalists provide funding and managerial assistance to young companies in exchange for equity stakes. The document outlines the stages of securitization and steps in the venture capital process, including deal origination, screening, evaluation, negotiation, and exit planning.
Meaning ⚫ Process of liquidating the illiquid long term assets to smaller securities. ⚫ Eg. Long term hire purchase is converted into small value shares which can be traded. ⚫ Cyclical process ⚫ Long term assets removed from balance sheet and they are replaced with liquid cash. ⚫ Recycling of funds at a reasonable cost. ⚫ Credit risk diversification Definition Securitisation ⚫ It is a structured process in which loans and receivables are packed, underwritten and sold in the form of asset backed securities. ⚫ Acc to Scott and Andersen, It is the process in which the assets of the financial institutions or banks are removed from the balance sheet of the lending institutions and are funded by investors who purchase the negotiable financial instrument with recourse or without recourse. How it works? Stages ⚫ Identification ⚫ Transfer ⚫ Issue ⚫ Redemption ⚫ Credit rating Types ⚫ Pass through and pay through certificates ⚫ Pref stocks ⚫ CPs. Venture capital Concept ⚫ It is an investment in a new venture which lacks stability.
⚫ A VC joins a start up entrepreneur and shares the risks
associated with it.
⚫ Start up companies with a growth potential requires an
amount of investment. Investors who are having surplus funds will like to invest their money in such businesses with a long-term growth perspective. This capital is known as venture capital and the investors are called venture capitalists.
⚫ The venture itself is risky and the investments are risky
as they are illiquid, but they are capable of giving very high returns if invested in the right venture. The returns to the venture capitalists depend upon the growth of the company. Venture capitalists have the power to influence major decisions of the companies they are investing in as it is their money. Meaning ⚫ VC is a long term risk capital to finance high technology projects which involve risk but strong potential to grow ⚫ VC pool their resources and also provide managerial assistance ⚫ Once company starts making profit they exit Definition of a vc company ⚫ VC company is a FI which joins an entrepreneur as a co promoter in a project and shares the risks and rewards of the enterprise. Features ⚫ Equity ⚫ High risk ⚫ Commercialisation ⚫ Co promoter ⚫ Cont. Involvement ⚫ Dis investment ⚫ Manage ⚫ Small and medium enterprises Steps ⚫ 1. Deal Origination ⚫ 2. Screening ⚫ 3. Evaluation ⚫ 4. Deal Negotiation ⚫ 5. Post Investment Activity ⚫ 6. Exit Plan Process VC and Business Angels ⚫ Individual vs. fund Business angels are individuals, often successful business people, who are using their own funds to invest in businesses. Venture capitalists manage the pooled money of others in a professionally-managed fund. ⚫ Early-stage vs. established businesses Angel investors and venture capital funds focus on businesses in different life cycles. Business angels invest in early-stage business and startups. VCs are less interested in early-stage businesses and prefer more established businesses. ⚫ Invested amount Business angels operate individually and sometimes in angel groups or angel networks. The amount they invest is less. Capital provided by venture capital funds are more. ⚫ Role in the business Both receive shares of the company when investing. Venture capitalists often require a seat on the board, where business angels will function more as a mentor, to coach and advice the entrepreneurs running the business. venture capitalists will exercise more control over the business than angel investors. The State Of Indian Startup Ecosystem Report of 2020: INC42plus ⚫ Indian startups have raised $63 Bn across 400 deals between 2014 to H1 2020 ⚫ There are nearly 849 VC funds and 2,751 angel investors investing in India ⚫ Sequoia Capital ⚫ Blume ventures ⚫ Accel Partners ⚫ Premji Invest ⚫ HR Fund ⚫ Tiger Global ⚫ SAIF partners Tiger Global Deals: 97 Notable Investments: Urban Company, Flipkart, Moglix, OPEN, Ninjacart, Razorpay Key Sectors: Internet, Software, Consumer, Financial Technology Stage: Growth, Late Stage, Private Equity, Post- IPO: Tiger Global Management is an investment firm that deployed capital globally in both public and private markets. The company is said to have invested in nearly 442 companies across the globe with 7 designated funds. It has also witnessed 64 exits since its inception in 2001. Stanford University report There’s almost 90% of the investment deals that are somewhere between breaking even and making loss. Thank You