Venture Capital

A venture capitalist (VC) is a private equity investor that provides capital to companies with
high growth potential in exchange for an equity stake. This could be funding startup
ventures or supporting small companies that wish to expand but do not have access to
equities markets.

Understanding Venture Capitalists

Venture capitalist firms are usually formed as limited partnerships (LPs) where the partners
invest in the VC fund. The fund normally has a committee that is tasked with making
investment decisions. Once promising emerging growth companies have been identified,
the pooled investor capital is deployed to fund these firms in exchange for a sizable stake of
equity.
Contrary to common belief. VCs do not normally fund startups from the onset. Rather, they
seek to target firms that are at the stage where they are looking to commercialize their idea.
The VC fund will buy a stake in these firms, nurture their growth, and look to cash out with a
substantial return on investment (ROI).
Venture capitalists typically look for companies with a strong management team, a large
potential market, and a unique product or service with a strong competitive advantage.
They also look for opportunities in industries that they are familiar with, and the chance to
own a large percentage of the company so that they can influence its direction.

Stages of Venture Capital Financing

1. Pre-Seed/Accelerator-stage Capital
Pre-Seed-stage is capital provided to an entrepreneur to help them develop an idea. Many
entrepreneurs interested in raising venture capital funding will enter business incubators
(accelerators), which provide various services and resources for entrepreneurs to connect
them with venture firms and networks that will help them develop their business idea and
product.
2. Seed-stage Capital
Seed-stage capital is the capital provided to help an entrepreneur (or prospective
entrepreneur) develop their idea into an early-stage product. Seed stage capital usually
funds the research and development (R&D) of new products and services and research into
prospective markets.

3. Early-stage Capital
Early-stage capital is venture capital provided to set up initial operation and basic
production. Early-stage capital supports product development, marketing, commercial
manufacturing, and sales.
This kind of financing will usually come in the form of a Series A or Series B round.
4. Later-stage Capital
Later-stage capital is the venture capital provided after the business generates revenues but
before an Initial Public Offering (IPO).
It includes capital needed for initial expansion (second-stage capital), capital needed for
major expansions, product improvement, major marketing campaigns, mergers &
acquisitions (third-stage capital), and capital needed to go public (mezzanine or bridge
capital).

Top Active Venture Capital Firms In India for Early Stage Startups &
Small Businesses
1) ACCEL
PARTNERS
Accel Partners is one
of the oldest venture
capital firms in India
with more than
three decades in the
startup ecosystem.
Headquartered in
California, this VC
firm has backed hundreds of companies and focuses primarily on internet technology
companies.
The investment bracket at Accel Partners ranges from $500K to $50 Million depending on
the nature of the company.
Domain of Investment – Infrastructure, Mobile & Software, Internet and Consumer
Services
Startups Funded – Myntra, BookMyShow, BabyOYE, Freshdesk, Flipkart etc.

2) SEQUOIA CAPITAL
Sequoia Capital India is an affiliation of Sequoia Capital that is based in California. This VC
firm specialises in startup funding at the early, seed and also in the growth stage with fixed
investment structure for each of these stages.
Investment Domain – Healthcare, Consumer Internet, Financial Sector and Technology
Startups Funded – JustDial, Zomato, Practo, Groupon etc.

3) Nexus Venture Partners

Nexus venture is another name in the
list of top venture capital firms in India
to look out for. They primarily invest in
small businesses and startup in their
early stages that standout in innovation
and differentiability. Nexus Venture
Partners can invest from $500,000 to
$10 million.
Investment Domain – Data Security,
Mobile, Infrastructure, Bio Data
Analytics, Agribusiness, Consumer and
Business Services
Startups Funded – Craftsvilla, Snapdeal,
Shopclues, etc.
4) BLUME VENTURES
Blume Ventures, established in 2011, is one of the top venture capital firms in India that is
referred to as the ‘Founder’s VC’. With over a decade’s experience in startup funding, here
they also offer complete support and mentoring to such upcoming entrepreneurs.
Blume Ventures has funded over 60 different startups with potential ideas and helped them
to establish themselves in the competitive market.
Investment Domain – Mobile Applications, Internet & Software Sectors, Telecommunication
Equipments, Research and Development
Startups Funded – Cashify, HealthifyMe, TaxiForSure, Belong etc.

What Is Private Equity?

Private equity is an alternative investment class that invests in or acquires private
companies that are not listed on a public stock exchange. Private equity funds invest in
private companies or engage in buyouts of public companies.
Institutional and retail investors provide the capital for
private equity, and the capital can be utilized to fund
new technology, make acquisitions, expand working
capital, and bolster and solidify a balance sheet.

Types of Private Equity

Distressed Funding

Also known as vulture financing, distressed funding is

often available to companies that have filed for
Chapter 11 bankruptcy. Funding is invested in troubled
companies with underperforming business units or
assets to turn them around by making necessary
changes to their management or operations and then
selling their assets for a profit.
Leveraged Buyouts

The most popular form of private equity funding is a

leveraged buyout purchase of a company, using a
combination of debt and equity to finance the
transaction. Debt financing may account for as much
as 90% of the funding. The intention is the
improvement of the business and its financial health
and reselling it for a profit to an interested party or
through an IPO.
Real Estate Private Equity

Real estate private equity funds require higher minimum capital for investment as
compared to other funding categories in private equity. Investor funds are also secured for
several years in this type of funding. According to research firm Preqin, real estate funds in
private equity are expected to grow by 50% by 2023 to reach a market size of $1.2 trillion.
Fund of Funds
This type of funding focuses on investing in other funds, primarily mutual funds, and hedge
funds, offering a backdoor entry to an investor who cannot afford the minimum capital
requirements in equity funds.

Cryptocurrency – meaning and definition

Cryptocurrency, sometimes called crypto-currency or crypto, is any form of currency that
exists digitally or virtually and uses cryptography to secure transactions. Cryptocurrencies
don't have a central issuing or regulating authority, instead using a decentralized system to
record transactions and issue new units.

How does cryptocurrency work?

Cryptocurrencies run on a distributed public ledger called blockchain, a record of all
transactions updated and held by currency holders.
Units of cryptocurrency are created through a process called mining, which involves using
computer power to solve complicated mathematical problems that generate coins. Users
can also buy the currencies from brokers, then store and spend them using cryptographic
wallets.
If you own cryptocurrency, you don’t own anything tangible. What you own is a key that
allows you to move a record or a unit of measure from one person to another without a
trusted third party.
Although Bitcoin has been around since 2009, cryptocurrencies and applications of
blockchain technology are still emerging in financial terms, and more uses are expected in
the future. Transactions including bonds, stocks, and other financial assets could eventually
be traded using the technology.
What is cryptocurrency mining?
Most cryptocurrencies are ‘mined’ via a decentralized (also known as peer-to-peer) network
of computers. But mining doesn’t just generate more bitcoin or Ethereum - it’s also the
mechanism that updates and secures the network by constantly verifying the public
blockchain ledger and adding new transactions.
Technically, anyone with a computer and an internet connection can become a miner. But
before you get excited, it’s worth noting that mining is not always profitable. Depending on
which cryptocurrency you’re mining, how fast your computer is, and the cost of electricity in
your area, you may end up spending more on mining than you earn back in cryptocurrency.
As a result, most crypto mining these days is done by companies that specialize in it, or by
large groups of individuals who all contribute their computing power.
How does the network encourage miners to participate in maintaining the blockchain?
Again, taking Bitcoin as an example, the network holds a lottery in which all the mining rigs
around the world race to become the first to solve a math problem, which also verifies and
updates the blockchain with new transactions. Each winner is awarded new bitcoin, which
can then make its way into the broader marketplace.

Cryptocurrency examples
There are thousands of cryptocurrencies. Some of the best known include:

Bitcoin:
Founded in 2009, Bitcoin was the first cryptocurrency and is still the most commonly traded.
The currency was developed by Satoshi Nakamoto – widely believed to be a pseudonym for
an individual or group of people whose precise identity remains unknown.
Ethereum:
Developed in 2015, Ethereum is a blockchain platform with its own cryptocurrency, called
Ether (ETH) or Ethereum. It is the most popular cryptocurrency after Bitcoin.
Litecoin:
This currency is most similar to bitcoin but has moved more quickly to develop new
innovations, including faster payments and processes to allow more transactions.
Ripple
It is a distributed ledger system that was founded in 2012. Ripple can be used to track
different kinds of transactions, not just cryptocurrency. The company behind it has worked
with various banks and financial institutions.
Non-Bitcoin cryptocurrencies are collectively known as “altcoins” to distinguish them from
the original.