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Process of investment by VC investors
VC funds receive the proposals for investment either directly or
through nancialintermediaries. The process of investment by a VC
funds begins with desk researchon a deal. In case the deal evinces
interest of VC funds, the Management Team isrequested to
present the Business model of company, unique aspects of business,
future
prospects and the investment proposal. During interaction, VC
fund assesses theuality ! competence of "anagement team with a view
to get perspective onoverall business prospects of investment
proposal. In case, after discussions with"anagement team, VC
investor nds the deal as investible proposition, a
documentcontaining terms of proposed investment known as term
sheet, is devised andnegotiated with #romoters for their
concurrence.
VC funds take up the venture for detailed due$diligence after
getting nalconcurrence of %ntrepreneurs on terms of proposed
investment negotiated withthem. The detailed due diligence of
pro&ect is carried out by VC funds themselves orassigned to
independent 'dvisors. The detailed due diligence of pro&ect is
carriedout to e(amine )usiness, nancial and legal aspects of
proposed investment. During
the process of due diligence, VC funds also assess reuirement of
funds, stages !uantum of investment and related milestones for
investment. The investeecompany is e(pected to provide all the
cooperation to VC fund* independent 'dvisorcarrying out due
diligence of its venture and e(plain material
transactionsundertaken by the company in the past.
+n successful completion of due diligence, depending on ndings
and in process ofgetting internal approvals for investment, VC
funds may modify or stipulate suchother conditions as are
considered appropriate by them for investment in thecompany and
accordingly negotiate changes* modications in the term sheet
withthe %ntrepreneurs also called #romoters-. In case revised terms
for investment areagreeable to %ntrepreneurs, VC funds issue etter
of Intent for investment and
reuire investee companies to complete formalities for availing
investment. Theseformalities include e(ecution of legal agreements
by #romoters* Investeecompanies, passing of reuisite )oard*
Company/s resolution, obtaining approval of0ovt. ! other statutory
approvals, etc. for facilitating investment.
Thereafter, on reuest by companies for release the
investment, VC funds, sub&ectto compliance of pre$disbursement
conditions and achievement of milestonesstipulated for same,
undertake investment in the company.
During currency of investment, VC funds regularly monitor
functioning of Investeecompanies, give inputs on strategic plans
and guide companies for optimi1ing theirperformance. VC funds also
pursue the Investee companies to orient their business
plans ! achieve performance targets to ualify for bringing out
Initial #ublic o2ersI#+s- and get listed on stock e(changes for
providing e(it from investment to VCfunds.
The process of investment and level of participation of VC
funds in management ofventure indicated above is illustrative and
may vary depending on merits of aventure or strategy of a VC
fund.
