Birla School of Management

MBA
SECTION A

Fill in the blanks:

1.TDICI was incorporated in January 1988 with the support of the Government and the Private
Sector.

2.Venture capital firms finance both early and later stage investments to maintain a balance
between risk and potential return on investment.

3.For the VC industry, the new end-use restrictions are particularly harmful as funds raised
via preferential shares cannot be used for general corporate purposes.

4.One aspect of financing is to provide funds for the purchase of equity shares of owners.

5.Venture Capital Institutions (VCIs) provide larger funds during expansion financing.

6.Mezzanine financing refers to the financing of an enterprise which has overcome the
highly risky stage and have recorded profits but cannot go public.

SECTION B

1. What is the basis of lending venture capital? Are internet/technology companies

given first priority for funding these days?
Answer: Basis of Lending Venture Capital: Venture capitalists (VCs) provide funding to
startups and early-stage companies in exchange for equity ownership. The basis for
lending venture capital typically involves assessing factors like the strength of the
business idea, the market potential, the quality of the management team, and the
growth prospects of the company. While internet and technology companies have
attracted significant VC funding in recent years due to their high growth potential, VCs
also invest in various other sectors based on their perceived potential for innovation and
profitability.
2. Where do venture capitalists get their money from? Do you think venture capitalists
in India have been investing it in the right places?
Answer: Source of Venture Capital Funds in India: Venture capitalists raise their funds
from various sources, including high-net-worth individuals, institutional investors (like
 pension funds and endowments), and corporate investors. In India, the sources of VC
funds are similar. Whether they have been investing in the right places is a matter of
ongoing debate and depends on individual investment strategies and the performance
of the companies in their portfolios.
3. After making a detailed analysis of this unit, what do you think are the main types of
companies and industries that venture capitalists invest in?
Answer:Main Types of Companies and Industries VCs Invest In: Venture capitalists often
invest in companies with high growth potential, disruptive technologies, and scalable
business models. While the specific industries can vary, common sectors include technology
(software, biotech, fintech), healthcare, clean energy, consumer goods, and more. They
tend to focus on startups and early-stage companies poised for rapid expansion.
4. . How do venture capitalists realize a return on their investment?
Answer: Realizing a Return on Investment (ROI): VCs realize a return on their investment
when the companies they've funded achieve successful outcomes. This can occur through
various means:
IPO (Initial Public Offering): The startup goes public, and VCs can sell their shares at a profit.
Acquisition: The startup is acquired by a larger company, providing a return to the VCs.
Secondary Sales: VCs may sell their ownership stake to other investors.
Dividends or Distributions: In some cases, companies may distribute profits to shareholders.
5. What are the difference between venture capital and private equity? What impact
does corporate venture investing have on the venture industry?
Answer: Difference Between Venture Capital and Private Equity:
Venture Capital: VCs invest in startups and early-stage companies with high growth
potential. They typically take equity stakes and are actively involved in the company's
growth.
Private Equity: PE firms invest in more mature companies, often with the goal of improving
their operations or efficiency. They may take control of the company and use various
strategies to increase its value.
Impact of Corporate Venture Investing: Corporate venture capital (CVC) refers to
investments made by established corporations in startups. It can have a positive impact on
the venture industry by providing startups with funding, resources, and potential
partnerships. However, it can also create conflicts of interest if the corporate investor's
goals don't align with the startup's long-term success.

SECTION C
Govt Plans ` 3,000-cr Venture Capital Fund for Drug Discovery Government is willing to look
at the industry's demand for a single regulatory authority to do away with multiple
regulatory bodies. The Government is planning to set up a ` 3,000-crore venture capital fund
to give a fillip to drug discovery and strengthen the pharma infrastructure in the country.
The National Institute of Public Finance & Policy (NIPFP) is set to finalise the bid
document and the expression of interest for setting up the find will be issued this month.
Speaking at the National Convention on Biopharma, organised by the Department of
Pharmaceuticals and FICCI, Mr Ashok Kumar, Secretary, Department of Pharmaceuticals, said
that the Government had issued an expression of interest for technical and financial bids for
the selection of a global level consultant (GLC) for preparation of a detailed project report
(DPR) for developing India as a drug discovery and pharma innovation hub by 2020. The
selection of a consultant would be made this month and the report is expected to be ready
by year end. Mr Kumar also said that the Government was willing to look at the
industry's demand for a single regulatory authority to do away with multiple regulatory
bodies. The biopharma market in India is growing at 15 percent annually. By 2020, the
market is projected to be worth over $200 billion, driven by a shift in usage from
conventional drugs to biopharma products. Mr. Kumar released the 'Vision 2020'
paper on a bio pharma strategy for India, prepared by PricewaterhouseCoopers and
Association of Biotechnology Led Enterprises (ABLE). The document spells out the challenges
before the biopharma industry and suggests key action areas. For the medium term, it
suggests that in the area of research and development, India would need to build protein
characterisation laboratories and GLP-certified animal study facilities; create a national
animal breeding facility, expand viral testing facilities; provide financial assistance for
ensuring compliance with global standards; promote the development of pro-clinical
providers; provide practical support for clinical trials and simplify the procedures for
importing and exporting biologics. As for the regulatory framework, the report states that it
is imperative to simplify the procedure for approving biologics; create an independent
inspection facility and modify the regulations on process validation. The report states that if
India was to become the world leading provider of affordable biopharmaceutical products by
2020, it cannot simply count on biosimilars and vaccines; it must also become a source of
innovation. More specifically, it should aim to have at least 10 original biologics on the local
market and at least two on the global market by 2020.

SECTION D

Technology Development & Information Company of India Ltd. T DICI was incorporated
in January 1988 with the support of the ICICI and the UTI. The country' s first venture
fund managed by the TDICI called VECAUS (Venture Capital Units Scheme) was started with
an initial corpus of ` 20 crore and was completely committed to 37 small and medium
enterprises. The first project of the TDICI was loan and equity to a computer software
company called Kal Consultants. Present Status: At present the TDICI is administering two
UTI -mobilised funds under VECAUS-I and II, totalling ` 120 crore. the ` 20 crore invested
under the first fund, VECAUSI, has already yielded returns totalling ` 16 crore to its investors.
Some of the projects financed by the TDICI are discussed below: MASTEK, a Mumbai based
software firm, in which the TDICI invested ` 42 lakh in equity in 1989, went public just three
years later, in November 1992. It showed an annual growth of 70-80 percent in the turnover.
TEMPTATION FOODS, located in PUNE, which exports frozen vegetables and fruits, went
public in November 1992. The TDICI invested ` 50 lakh in its equity. RISHABH INSTRUMENTS
of Nasik got ` 40 lakh from the TDICI. It manufactures a range of meters used in power
stations in collaboration with the ABB Metra Watt of Germany. After making cash losses
totalling ` 25 lakh in two bad years, it turned around in 1989 and showed an increase of over
70 percent in the turnover. SYNERGY ART FOUNDATION, which runs art galleries in Mumbai
and Chennai and plans to set up in Pune and Delhi too, had received ` 25 lakh from the TDICI
as convertible loans which were converted into equity on march 31, 1994. Most of this
money has been used for the company' s innovative art library scheme at least
paintings to corporate clients.
Questions
1. How has TDICI gained through its venture funds?
2. How do you think can TDICI gain further
Answers:
1. TDICI has gained through its venture funds by investing in promising small and
medium enterprises (SMEs) and startups. Some key ways it has gained include:
 Financial Returns: TDICI's initial investment of ₹20 crore in the VECAUS
(Venture Capital Units Scheme) fund has yielded returns totalling ₹16 crore,
indicating a profitable venture.
 Supporting Growth: By providing equity and financial support to companies
like MASTEK, TEMPTATION FOODS, and RISHABH INSTRUMENTS, TDICI helped
these firms grow and eventually go public, potentially increasing the value of
its investments.
2. To further enhance its gains, TDICI can consider the following strategies:
 Diversification: Expanding its investment portfolio into diverse industries and
sectors can spread risk and increase the potential for high returns.
 Active Management: Continuously monitoring and actively participating in
the growth and management of its portfolio companies can help improve
their performance and, in turn, increase TDICI's returns.
 Supporting Innovation: Focusing on innovative and high-potential startups
can lead to substantial gains. TDICI can identify and invest in companies with
disruptive technologies or business models.
  Exit Strategies: Developing effective exit strategies, such as selling its equity
stakes in portfolio companies through initial public offerings (IPOs) or mergers
and acquisitions, can unlock value and generate profits.
 Risk Management: Carefully assessing and managing risks associated with its
investments is crucial. TDICI should have a robust risk management
framework in place to mitigate potential losses.
 Building Strong Partnerships: Collaborating with other venture capital firms,
industry experts, and government initiatives can provide access to a wider
pool of opportunities and expertise.
By adopting these strategies and staying aligned with market trends and opportunities, TDICI
can continue to grow its gains and support the development of the Indian startup and SME
ecosystem.