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Venture exit strategy
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- 2. Venture Capital • Meaning– VC is long term risk capital to finance high technology projects which involve risks but at the same time has strong potential for growth. • Venture capitalist are professional investors , who pool their resources including managerial abilities to assist new entrepreneurs in early years of project. • Definition – “A financing institution which joins an entrepreneur as a co-promoter in a project & share the risks & rewards of enterprise.” 2/12/2015 2
- 3. Forms of VentureCapital investments Debt • Loan contract between the business and the venture capital firm high interest rates Equity • Venture capital firm purchases an ownership share of the business generally in the form of private placement stock Preferred stock • The favored type of venture capital investment provides interest yields and seniority to capital in the event that the firm fails, but with an equity interest if the firm succeeds. 2/12/2015 3
- 4. Features of VentureCapital • High tech areas. • Long term start up. • Return is possible only when share of company is sold at market price. • Also participate in management affairs of business. • Reduce uncertainties. • Encourages, nurture and help the entrepreneur grow. • Act as co-partner. 2/12/2015 4
- 5. The Process 2/12/2015 5Source:Tiger olfactory Network (Beijing)
- 6. Exit IPO Promoters buybackTrade sale Buy back of equity by company Post investment activities Deal structuring Evaluation Screening Deal origination Venture Capital Process 2/12/2015 6
- 7. Venture Capital ExitOptions 7 Initial public offer(IPOs) Mergers & Acquisition Shares buy back Sale to Other Strategic Investor sales in OTC market management buy outs 2/12/2015
- 8. IPO • Also calledas Stock Market launch. • Involves a private company offering its shares to the public for purchase for the first time. • Referred to as taking a company public. • The original investors in the private company can make fortunes because the new stock is worth much more than their original investments. 2/12/2015 8
- 9. Mergers & Acquisitions •A merger is a combination of two companies to form a new company. • An acquisition is the purchase of one company by another in which no new company is formed. 2/12/2015 9
- 10. Shares Buyback • Thepromoters buy back VC stake at predetermined price and keep the ownership control with him. • VC consider it as an exit option only when promoters are in position to mobilise funds for buy back of equity held by the venture investors. 2/12/2015 10
- 11. Sales to otherStrategic Investors • VC sells his stake to the strategic buyer who already owns a business or has plans to enter target industry. • The benefit is typically liquidity because if VC sell the company to a strategic acquirer he/she might be able to sell most or all of their stock. • The acquirer may or may not retain the management team, and may or may not make substantial changes in the company's operations, staff, and business lines. 2/12/2015 11
- 12. Sales in OTCMarket • OTC(Over-The-Counter) can be used to refer to stocks that trade via a dealer network as opposed to on a centralized exchange. • OTC markets are typically bifurcated into the customer market – where dealers trade with their clients such as corporations and institutions – and the interdealer market, where dealers trade with each other. • The price a dealer quotes to a client may very well differ from the price it quotes to another dealer. 2/12/2015 12
- 13. Management Buyouts • Atransaction where a company’s management team purchases the assets and operations of the business they manage. • A management buyout (MBO) is appealing to professional managers because of the greater potential rewards from being owners of the business rather than employees. • The financing required for an MBO is usually a combination of debt and equity that is derived from the buyers, financiers and sometimes the seller. • The advantage of MBO is that as the existing managers are acquiring the business, they have a much better understanding of it and there is no learning curve involved. • Another advantage is that the company’s debt load may be lower, giving it more financial flexibility. 2/12/2015 13
- 14. Reliance Venture Asset ManagementLtd. • Launched in 2006. • A corporate venture capital company based in Mumbai. • Promoted by the Reliance ADA Group. • Ranked 30th in the Red Herring Top 100 Global Venture Capital Firms in 2009-2010. • Focus is both - on established as well as emerging or disruptive technologies and business model. 2/12/2015 14
- 15. Mission: • To helpbuild businesses that not only deliver outstanding financial value but also emerge as category leaders. Vision: • To build a global enterprise for all our stakeholders. • A great future for our country. • To give millions of young Indians the power to shape their destiny. • The means to realize their full potential. 2/12/2015 15
- 16. Investment Process Stage 0-Business Plan Submission The business plan should contain the following: • A two page Executive Summary • 5 – 6 slides covering business offering, team, top level financials, market opportunity and competitive advantage Stage 1- Initial Meeting with Entrepreneur / Team 20-25 slides presentation, which clearly covers the following: • Product / Solution Offering • Market Opportunity • Management Team • Technology Overview • Business Model • Product / Solution roadmap • Financials • Competition Analysis2/12/2015 16
- 17. Stage 2- InvestmentOpportunity Evaluation • Detailed Business Case • Face to face meetings with key personnel • Formal Presentation to broader team • Identifying key hires and organization structure • Develop mutually agreed upon milestones Stage 3- Post Investment Roadmap • Working closely to initiate and augment the business. • Regularly monitor the progress and issues, if any. 2/12/2015 17
- 18. Sequans Communications • Foundedin 2003. • A leading developer and supplier of single- mode LTE chipset solutions that are highly cost and power efficient. • Two distinct LTE product lines: 1) Streamrich LTE for feature-rich mobile computing and home/portable router devices 2) Streamlite LTE for cost-sensitive M2M devices and the Internet of Things. 2/12/2015 18
- 19. RVAM & SequansCommunications • RVAM entered venturing along with investors like Alcatel Lucent, Motorola, Societe General Asset Management, Swiss Com, CDC Enterprises, Add Partners, Cap-Decisif, Kennet Venture Partners, Vision Capital and I-Source Gestion, in 2007 with an average of about $2 per share. • RVAM exits in Sequans Communications in 2011 by entering in IPO in New York Stock Exchange. • RVAM sold its share for about $8 giving a return of close to $6 a share. • Share price as on 29 sept. 2014 is $2.03 2/12/2015 19Source: www.livemint.com
- 20. • Revenue of$93.7 million in 2011 increased 37% over 2010 revenue. • Revenue of $5.1 million increased 13% compared to the first quarter of 2014. • Its value at the time of exit was 285.95M • Its valve as on 26 sept 2014 is 94.77M C:UsersuserDesktopFinal Prospectus.htm 2/12/2015 20Source: www.marketwatch.com
- 21. 2/12/2015 21Source: www.nasdaq.com Shareprice of Sequans Communications
- 22. 2/12/2015 22Source: www.ycharts.com Valueof Sequans Communications
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