Professional Documents
Culture Documents
PRESENDTED BY :
MUHAMMAD QASIM
What is Venture?
A venture is a project or activity which is
new, exciting, and difficult because
it involves the risk of failure.
What is Capital?
Factors of production that are used to create
goods or services
What is Venture Capital?
Venture capital is financing that investors provide
to startup companies and small businesses that are believed to
have long-term growth potential. For startups without access
to capital markets, venture capital is an essential source of
money. Risk is typically high for investors, but the downside for
the startup is that these venture capitalists usually get a say in
company decisions.
Venture capital investment is also referred to risk capital or
patient risk capital, as it includes the risk of losing the money if
the venture doesn't succeed
Example of Venture Capital?
• Mark zuckerberg founder of Facebook and Jim Breyer , a starting Facebook
( FB ) investor.
• Jack Dorsey founder of twitter and Peter Fenton an investor in Twitter (
TWTR ).
Venture Capitalist
• A venture capitalist is an investor who either offers to fund to
startup venture or help little organization that needs to extend
yet don't approach regards markets. The venture capitalist
will put resources into such organization since they can get a
huge advantage for their undertakings if these organizations
are a win.
Deal Origination
Screening
Evaluation
Deal Negotiation
Post Investment
Activity
Exit Plan.
How does a Venture Capital firm work?
There are two key segments inside VC fund: general and limited partners. The
general partners are the general population responsible for settling on
venture decisions and working with new organizations to create and meet
their goals. On the other hand, there are limited partners, the people, and
association who give the capital imperative to complete those investments.
How do Venture Capital firms make money?
The way Venture Capital funds are two overlaps:
• Management fee
• Carries (carried interest).
Management fee
• Management fees are usually defined as the ‘cost of having your assets
professionally managed
• VC funds typically pay an annual management fee to the fund’s
management company
• As a form of salary and a way to cover organizational and fund expenses
• Management fees are usually calculated on a percentage of the capital
commitments of the fund, or about 2 to 2.5 per cent.
Carries (carried interest)
• Share of the profits of an investment that is paid to the investment
manager in excess of the amount that the manager contributes to the
partnership
• Carried interesting in Venture Capital is usually 20 to 25 per cent, meaning
that while 20% of the profits go to the general partners, 80% belongs to
the limited partners.
Advantages and Disadvantages of Venture Capital
Advantages of VC
• VC funding is not a loan scheme, there is no repay
schedule
• VCs have consultants and professionals on their staff
that has deep knowledge of specific markets
• They bring wealth and expertise to the company
• Large sum of equity finance can be provided
• In addition to capital, it provides valuable information,
resources, technical assistance to make a business
successful
• Economic growth
• Venture capitalists are typically well connected in the
business community. Tapping into these connections
could have tremendous benefits.
Advantages and Disadvantages of Venture Capital
Disadvantages of VC
• As the investors become part owners, the autonomy
and control of the founder is lost
• It is a lengthy and complex process
• It is an uncertain form of financing
• Benefit from such financing can be realized in long run
only
• Depending on the size of the VC firm’s stake in your
company, which could be more than 50%, you could
lose management control. Essentially, you could be
giving up ownership of your own business.
• Would you rather own your own business or partner in
a larger, potentially more successful one?
Venture Capital Investing in Pakistan
• Venture capital companies and venture capital funds are of recent
origin in Pakistan, as their history dates back only to the early
1990s.
• The lawful structure for the foundation of venture capital
organizations was set up out of the blue by July 2000
• venture capital to the general slower financial development amid
the 1990s and the absence of qualified professional venture
capitalist educated about the operation of venture capital in rising
economies.
• The business culture of Pakistan isn't energetic about the more
dangerous endeavors of a business person
• The lack of qualified professional venture capitalists
knowledgeable about the operation of venture capital in emerging
economies.
• A financing gap occurs when capital sources such as self-raised or
retained earnings are exhausted. Venture capital companies could
be one of the ways to bridge this financing gap in a commercial
capacity.
Venture Capital Investing in Pakistan
• The Pakistan Economic Survey (2005)
• The Pakistan Economic Survey (2005) notes that "Venture Capital
Companies and other Financial Institutions (FIs) fulfill only 18 to
21% of fund requirements of the domestic software houses..
• The venture capital companies to concentrate on this sector,
specially in aiding the local companies in product development
• In Pakistan, the stringent collateral requirements of banks and
other FIs limit new start-ups' as well as existing SMEs' access to
financing.
• SMEs mostly rely on self-financing or retained earnings (Pakistani
Economic Survey, 2005).
• The government of Pakistan, as part of its programs to promote the
venture capital industry, granted a tax exemption for venture capital
investment for a period of seven years from 1 July 2000 to 30 June
2007.
• The total assets of venture capital companies witnessed the
highest one-time Pakistani venture capitalists investment criteria
annual growth of 218% from Pakistan Rupees (PRs)1005 million in
Fiscal year 2004 to PRs 3,200 million in /.
Venture Capital Investing in Pakistan
Profile of respondent venture capital companies (VCCs)
Venture Capital Investing in Pakistan
• Strength
• Better economic growth in last 6 years
• Growth and consolidation of banking sector
• Better spending on higher education
• Weaknesses:
• Lack of entrepreneurship
• Shortage of skilled human resource
• Lack of innovation and R&D among enterprises
• Limited knowledge based sectors
• Risky investment and few exit opportunities
• Opportunities:
• Increase in foreign direct investment
• Young entrepreneurs willing to share the success
• Growth potential in many sectors of economy
• Threats:
• Law and order situation
• Political Instability
Pakistan has a weak and volatile venture capital market
Challenges and Opportunities for Venture Capital in Pakistan
• The venture capital firms are focusing and can focus more for attractive opportunities
are telecom, IT, IT related products and services.
• Research, bio technology, textile, retailing, renewable energy (solar and wind)
• With GDP growth of more than 6 percent in last five years, Pakistan has been able to
attract domestic as well as foreign investment.
• Banking sector has grown more than 30-40 percent in last 5 years and this has also
attracted foreign banks to acquire local banks or start their operations in Pakistan.
• U.S $ 12 billion foreign direct investment in Pakistan in last five years in oil and gas,
banking and telecom sector.
• Government of Pakistan has been successful in improving physical infrastructure,
many projects are already completed and others projects are in final stage of
completion.
• .Mutual funds, asset management companies and private equity companies have also
witnessed growth in last few years.
• This is the ideal time for venture capital industry to grow when we have many
positives like business friendly government policies, government funding for sector
development programs, high growth in financial sector, better standing of IT sector in
local market, creation of business and technology incubators and overall economic
development
Dotzero
• Dotzero primarily invest in early-stage companies that their service, product or idea has mass
appeal.
• Once they decide to invest, we are laser-focused on helping seed stage companies become the next
big thing.
• Dotzero building a future where founders can work together to get the holistic advice, data.
History of Dotzero
• When Farzal Dojki was studying entrepreneurial ecosystems in the United States, he became
fascinated with the concept of coworking.
• Farzal Dojki Back at home in Karachi, Pakistan’s biggest metropolis, he considered starting the
city’s first coworking space.
• Aside from the security concerns, the prospect of failure weighed heavily on Dojki’s mind.
• Although Suite401 had the honor of being Pakistan’s first coworking space, it unfortunately closed
its doors in 2010.
• After working at different startups, Dojki started his own company, Next Generation Innovations,
He also noticed that other Pakistani companies faced the same problem.
• In July 2013, Dot Zero's opened its doors as Pakistan’s first community space for entrepreneurs.
• One of Dot Zero's goals is to help startups grow so they can in turn become drivers of socio-
economic growth.
• According to the Pakistan Startup Report of 2014, the number of startups has increased
exponentially in the past year. Two other incubator spaces have opened in Karachi
• Dotzero is playing an important part in improving the trust Karachi its have in such ventures and
the people involved
Dotzero
Startup Grind
Invest2Innovate
Pakistan Innovation Fund
P@SHA
OPEN Karachi
MIT Enterprise Forum
Pakistan
NewG
Eisenhower Fellowships
Plan9
Dotzero source of Funding
Conclusion
• Venture capital can play a more Innovation and improvement part in a
creating nation like Pakistan.
• Who wish to begin their own venture with or without high teach content,
however including high risk. This would empower the entrepreneurial soul.
• It isn't just at first funding which is required from the venture capitalist,
however they ought to likewise at the same time give the administration
and marketing expertise real basic part of the venture capitalist,
• Venture capital companies should also make efforts to understand the
cultural attitude of Pakistani entrepreneurs and SMEs; and also the
business dynamics of the country, which govern these companies
• According to SMEDA survey, only 25% SMEs have ever approached
banks for lending
• There is certainly room for venture capital because access to formal credit
is linked with collateral, documentation and business history. venture
capital is totally new phenomenon for them.
• So, new wave of young, educated entrepreneurs with different attitude will
accept venture capital
• Converting dreams into reality will also require political stability; better law
and order situation along with direct and indirect support from government;
and active involvement of private sector to timely identify right kind of
opportunities.