Capital Investment – Dutch Uncles

What Does A Rights Issue Mean?

Aakash Sharma — Sat, 25 Sep 2021 08:35:09 +0000

A ‘Rights Issue’ is a way for companies to raise money. In a rights issue subscription offer, the company entitles shareholders to buy new shares at a discount to the existing offering. This practice is more common in companies with limited liquidity that exercise the right to raise funds under challenging times.

A rights Issue allows shareholders to buy new stocks lower than the market price on a specified future date. In simple terms, the company enables shareholders to increase their portfolio shares holdings at a special discount.

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The rights issue is a proposal to subsisting shareholders to acquire additional new shares in the company. This issue provides existing shareholders with securities known as rights.

Why do companies offer a Rights Issue?

Companies often issue rights offering to raise more money. They majorly take this route for fulfilling fund requirements and support the operations and services of the firm. Companies with bad financial health and troubled conditions for a myriad of reasons often use rights issues to pay a debt, especially if they can no longer borrow from other sources.

However, the rights issuing process is not always conducted due to inadequate financial conditions. Companies with a good history also use it to raise funds to compete or develop new products by licensing new entities. This ultimately creates substantial monetary value for shareholders.

Company-Shareholder relationship concerning right issue

The issuance of rights affects two essential aspects of a company: market capitalisation and equity capital. As share capital increases in a rights issue, the company’s capital base expands with newly issued shares.

A company’s market capitalisation effect is based on understanding the market. Theoretically, any new rights issue by a company is more prone to garnering negative consequences. Therefore, the market capitalisation value does not decrease as the number of shares increases post rights issuance.

However, suppose the influence of the market suggests that there are good reasons for raising capital by the issue. In this case, the share price may rise, causing the market cap to increase.

If shareholders do not want to exercise the right to buy the new-discounted shares, they can sell the rights on the stock exchange as they are tradeable entities. Alternatively, investors can allow the rights issue to lapse.

What should an investor be concerned about in case of a rights issue?

Investors should be careful when their invested company issues rights before acting on the offering. Rights issues for extra shares are separate from the bonuses that companies pay to equity holders. It would help if you only accepted the rights issue offering after learning the motives behind the fund-raising process. If you are confident that the company is doing well financially and on a growth trajectory, you can accept the offer. But, if the share price has fallen below the subscription price, it may be cheaper for an investor to buy the stock on the open market instead of the rights offering.

Process of applying

For investors, the process of applying for a rights issue is done through Applications Supported by Blocked Amount (ASBA). If your bank approves it, you can administer it online, just like an IPO. If not, then a courier of the Composite Application Form (CAF) from RTA (Registrar and Transfer Agent) of the company is needed.

You are required to complete the form, which has the rights issue information displayed on it. The basics include the Rights Issue ratio and the book closure date. You must submit it at a Self Certified Syndicate Banks (SCSB) branch. The list of banks is given on the application form.

Example

Suppose an investor A had 100 shares of Company X at a total investment of Rs. 40,000. S/he bought the shares at Rs. 400 per share. The stock amount did not vary between the purchase date and the date the rights were issued.

Considering a 1:1 subscription rights issue at a proposal price of Rs. 200, A will be informed by a broker-dealer that s/he can pay for an additional 100 shares of the firm at the offer (discount) price.

Now, if s/he exercises this option, s/he will have to pay an additional Rs. 20,000 to acquire the shares, thus effectively bringing the average acquisition cost for the 200 shares to Rs. 300 per share.

40,000+20,000 /200 => 300 (here, average cost of acquisition = initial total cost + cost after rights issue / cost of one share after rights issue).

Thus, A will effectively acquire the shares at a discounted price of Rs. 300 as part of Company X’s rights issue against the market price of Rs. 400.

Benefits

- A company can grant rights offering to its shareholders at a discounted price without incurring underwriting fees.
- It is a quick source of funding. Shareholders of the company can buy new shares in the related issue at a discount for a specified period.
- Companies can raise capital without increasing debt. The extent of the right issue is essentially in the form of equity, and it eliminates any range for debt.

Disadvantages

- It may reduce the share of current shareholders. Existing shareholders can either “subscribe” to the rights issue or “ignore” it. If a shareholder ignores the offering, the shareholding percentage dilutes. If more shareholders’ ignore’ the issue, there are chances of stake dilution of the existing shareholders.
- After the right issue, some shares are introduced at a reduced rate. This changes the previous price of the shares by dilution. The new shares spread a company’s profits over a larger shares pool; hence, the dilution.
- It could indicate a corporate income crisis. In case of a fiscal emergency, companies generally choose to explore the rights issue option. Such an offering could lead shareholders to assume that the company is struggling, and they might sell their shares, leading to further share price reduction.

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Long-Term Capital Gain Tax (LTCG): Explained

Aakash Sharma — Fri, 24 Sep 2021 05:35:09 +0000

Long-term capital gains (LTCGs) are the realised profits on investments that have been held for more than 12 months at the time of sale. Profits on security holdings that are less than one year old are known as short-term investment gains. Long-term capital gains are generally taxed less than short-term capital gains.

Long-term capital gains (LTCG) on equity

The long-term gains from the sale of public shares and equity-based mutual funds used to be outside the purview of taxation before 2018. But the introduction of Section 112A in the Finance Act, 2018, following the year’s union budget, mandated levying the LTCG tax on such assets. However, the new legislation provided tax exemption on long term capital gains up to Rs 1 lakh. Any amount exceeding this limit is taxed at 10%.

Important things to know about the long-term capital gains tax rules in India

- The 10% taxation of long-term capital gains (LTCGS) started from 1st April 2018.
- Long-term capital gains tax is applicable on profits from shares and mutual funds held for over one year (365 days).
- LTCG tax is applicable on Equity Linked Savings Scheme (ELSS). Unit Linked Insurance Plans (ULIPs) are exempted from this tax practice.
- Indexation benefits, which help generate inflation adjusted returns, are not applicable for LTCG taxation, unlike real estate.
- LTCGs up to Rs. 1 lakh are entirely tax-free.
- Securities Transaction Tax (STT) must be paid along with LTCG tax.

Understanding the Long-Term Capital Gain (LTCG) tax

The long-term capital gains are figured out by the difference between the selling price and the purchase price. This number tells whether you have made a net profit or a net loss on the sale of your invested assets. As a taxpayer, you are legally bound to declare the total capital gains for the fiscal year because capital gains are considered as taxable income.

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Due to changes in the tax laws in 2018, long-term capital gains are taxed at a lower rate of 10% compared to the 15% of short-term capital gains.

In terms of capital losses, both short-term and long-term losses play an essential role in helping investors reduce taxes. Investors can use the tax-loss harvesting techniques to offset gains and pay fewer taxes on capital gains in the long and short term.

A working example of long-term capital gains tax

For the calculation of capital gains, the government introduced the Grandfather Concept. Under it, 31st January 2018 was chosen as the base date for deciding the fair market value of equity (share price/Net asset value) for LTCGs. This meant that the net asset value (NAV) or share prices were calculated with 31st January 2018 as the reference date.

The move was introduced to delineate the cost of acquisition of holdings concerning historical costs and fair market value (or the current price) of securities. The historical cost is related to the actual price when a transaction is executed.

On the other hand, fair value refers to the real value of an asset in the current market. The higher of these two costs is used as the basis for calculating capital gains.

Suppose you bought shares worth Rs. 3 lakhs on 1st September 2020. After holding your shares for over one year, you decide to sell them at Rs. 5 lakhs on 31st September 2021.

Since you have held the stock for over one year (1st September 2020 to 31st September 2021 > 1 year), the profit on this transaction will be a long-term capital gain.

On the sale, you will receive a profit of => Rs. 5 lakh – Rs. 3 lakhs = Rs. 2 lakhs

As the profit has occurred over the long term, the LTCG tax will be applied to it. The taxation rules state that the first Rs. 1 lakh gains are untaxable. So, your LTCG tax will be calculated on the rest of the profit, which is,

Rs. 2 lakh – Rs. 1 lakh = Rs. 1 lakh (1,00,000)

Thus, your LTCG tax will be 10% of 1,00,000 = Rs. 10,000

In the same example, consider a case where your profit is less than Rs. 1 lakh. You bought the shares at Rs. 3 lakhs, and after one year, you sell them at Rs. 3.8 lakhs

Gains = Rs. 3.8 lakhs – Rs. 3 lakhs = Rs. 0.8 lakh (or Rs. 80,000)

Here too, the LTCG tax will be applied as the holding period is over one year. But the levied LTCG tax here will be 0 as the minimum limit for LTCG tax is Rs. 1 lakh. Any equity gains below this amount are not taxable.

Exemptions

In the case of the sale of shares, you may be allowed to deduct these expenses:

- Broker’s commission related to the shares sold
- STT or securities transaction tax is not allowed as a deductible expense

But in general, long-term capital gains on security holdings and trades are not exempted from tax. However, as mentioned above, LTCG tax is not levied up to the Rs. 1 lakh profit mark. Individuals in specific income levels can be exempted from paying income taxes for short-term capital gains on shares.

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Indian Angel Network – Money, Mentoring and Market Access

Anju Nambiar — Wed, 14 Jul 2021 08:48:11 +0000

Start-ups rarely get chosen by angel investors for funding. However, a lot of Venture Capitalists (VCs) and micro-VCs are emerging specifically for idea stage start-ups in India. The Indian Angel Network (IAN) has been actively investing in promising early-stage start-ups especially in the technology space and supporting them with mentoring and market access along with money.

However, getting shortlisted by IAN requires start-up founders to be very precocious and start-up ideas to be very promising. Shortlisted start-ups can enjoy value-add by IAN and even get introduced to other investors by the latter.

Who is Indian Angel Network?

IAN is a network of angel investors in India comprising hundreds of investors across multiple countries who are primarily interested in funding early-stage start-ups. It is Asia’s largest network of Angel Investors and includes highly successful CEOs and entrepreneurs based in India and elsewhere.

Why was IAN formed?

IAN was initially formed to discover, cross-refer and link start-ups in Asian countries mainly in India and Bangladesh. IAN was also formed with a vision to create an environment conducive for venture investing in the start-up ecosystems of these regions.

The founding team of IAN

The founding team of IAN includes Padamaja Ruparel, Raman Roy and Saurabh Srivastava. Raman Roy is well known as the pioneer of the Indian BPO industry and Saurabh Srivastava is one of India’s leading entrepreneurs and investors.

Padmaja Ruparel

Padmaja Ruparel is the co-founder and President of the IAN Fund, an early-stage investment fund by the Indian Angel Network. She is recognised as an authority figure in the Indian entrepreneurial ecosystem.

Successful start-up funding and sectors covered by IAN

IAN has covered a wide variety of industry sectors including manufacturing, cyber security, ed-tech, hospitality and new-age technology like AI (Artificial Intelligence) and drone technology. Start-ups funded by IAN that made it big include high value companies like Kwench, LBB, TagBox, Propelld, FabAlley, MySpinny, Wow! Momo, Box8, Uniphore and Native Special.

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Start-ups funded by IAN that made it big include high value companies like Kwench, LBB, TagBox, Propelld, FabAlley, MySpinny, Wow! Momo, Box8, Uniphore, and Native Special.

What’s in it for me?

IAN’s portfolio is large and diverse. From Agri-Tech to Travel, they have touched every segment and they have a number of strategic investments in their kitty. They have invested in companies at different growth stages including idea and prototype stage, Early revenue, and Revenue Generating Growth. At each stage, your company needs to exhibit certain traits and characteristics to attract funding from IAN.

Idea and prototype stage companies

Idea and early-stage start-ups by first-time entrepreneurs can raise angel funding by bringing the right talent to the table. Although young companies come under the ‘high risk asset class’ for angel investors like IAN, it’s natural that only a select few idea stage start-ups will be chosen.

It is imperative that you are well prepared before meeting with the angel investor. You need to thoroughly think through the process and know the business model of your start-up like the back of your hand. For prototype stage companies, if you don’t yet have a product, you must at least have an endorsement or proposition of the product.

At the idea stage, your start-up needs to be clear on its cash rules for approaching angel investors. You need to study your target market carefully, have a strong customer acquisition and price strategy, a great team, a robust product delivery model and transparency about company expenses. Have all revenue related information in a single place. Also ensure that your pitch is well rehearsed and your pitch deck is pinpoint precise.

Early Revenue – Use case

Oliveboard, an EdTech start-up raised INR 23 Cr. in Pre-Series A fundraising led by IAN. They were funded by IAN at the early revenue stage since they have ventured into the government job preparation industry in India which is a lucrative market estimated to be worth INR 400 B. This market has strong growth drivers for two reasons:

- The closure of offline coaching centres
- The strong internet penetration in Tier 2 and 3 cities

Revenue Generating Growth – Use case

goSTOPS, a Backpacker Hostel Brand targeting the GenZ population recently raised Pre-Series A funding led by IAN. goSTOPS is currently at the revenue generation growth stage and was chosen by IAN due to their strong market standing and innovative business model. Start-ups and entrepreneurs can be funded by IAN if they have the potential to be at the forefront of a particular industry segment or market.

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It’s not the Lion, it’s Tiger Global King of the Jungle

Anju Nambiar — Thu, 01 Jul 2021 10:30:28 +0000

Tiger Global’s aggression in Indian Start-ups is keeping the fat pay checks coming, but the impact of this aggression is yet to be gauged in the long run. The Indian Start-up Ecosystem is abuzz with talks about Tiger Global. They have been showing their bullishness in India and are set to play a pivotal role in the next generation of Indian start-ups.

The No. 1 Investor in Start-ups this year

Tiger Global is currently the top investor in Indian start-ups, especially in unicorn start-ups. It has ousted ‘Sequoia Capital’ from its position to assume the title of being the top investor in 2021. This year, they have already participated in 15 start-up funding deals. Among these deals, 9 of them were unicorn start-ups funded by Tiger in the first half of this year. The Unicorn league in the Indian start-up ecosystem has about 52 start-ups, out of 25 have received funding from Tiger making it a 50% shareholder in the unicorn club.

Start-ups funded by Tiger Global since 2020

Freshly funded by Tiger this year are GoMechanic (car services platform), ClassPlus (a B2B ed-tech start-up headquartered in Noida), and Kutumb, a Community Platform and Social Networking App. Not too long ago Plum (health insurance start-up) also bagged investment led by Tiger Global. Tiger Global’s portfolio mainly comprises Unicorns and Soonicorns (soon to be unicorns) in India. Other start-ups which received funding this year by Tiger Global include:

Innovaccer (health tech)
Infra.Market (real estate tech)
Groww (fintech)
ShareChat (regional language social media)
ChargeBee (enterprise SaaS)
Zomato (food tech)
Urban Company (online marketplace)
Gupshup (messaging services)
Moglix (B2B commerce)
CRED (fintech)
Koo (social networking)
ProgCap (fintech) and
Apna (professional networking)

In the year 2020, Tiger has invested in 13 Indian start-ups.

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Tiger Global is currently the top investor in Indian start-ups, especially in unicorn start-ups.

What’s in it for me?

It’s a fact that Tiger Global is interested mainly in later stage start-ups and in post Initial Public Offering (IPO) deals. Although the investment rounds and the valuations look fabulous on paper, the truth is that Tiger makes ‘structured investments with exclusive rights for downside protection’. It may seem on the surface that Tiger is placing bets instead of making strategic investments. But if truth be told, they are making informed choices and choosing deals with ‘momentum in diverse sectors’ which have ‘volume scale’.

In the recent past, Tiger has maintained diversity in the sectors which start-ups belong to and the stage they are in while investing. As a case study, if we look at the sectors which Tiger Global has invested in since the pandemic began (ed-tech, job tech and fintech), these are the industries which have been successful during the pandemic. These are the most promising industries which will receive future investments from Tiger. D2C companies with pan India presence and global market opportunities have a high chance of gaining Tiger Global’s interest.

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For 2021, These are the New Entrants in Fintech

Anju Nambiar — Sat, 29 May 2021 11:35:04 +0000

Fintech is one of the hot Indian sectors of 2021. It has survived the first wave of Covid last year successfully with just a few minor speed bumps. This year too, the Fintech industry looks promising. Zeta is the 14th latest entrant from Fintech to India’s unicorn league of start-ups. Some of the biggest names like CRED and Bharath Pe together with other Indian start-ups have managed to raise a total of $22.8 B for the first quarter of 2021 which is the highest for the industry. New Fintech start-ups have been incorporated this year as per the official data records of the Ministry of Corporate Affairs (MoCA). Here are some of the new entrants in fintech for 2021

Singhvi Fintech Private Limited

Registered on the 14th of April 2021, Singhvi Fintech is a new entrant in financial intermediation. The company is based in Chennai, Tamil Nadu and is incorporated as a Private Limited firm. The company has declared a paid-up capital of INR 100,000 and Authorised capital of INR 10,00,000.

Kwik Fintech Private Limited

The next new entrant to Fintech in 2021 is a start-up from Uttar Pradesh called Kwik Fintech. Incorporated on the 13th of April 2021, Kwik Fintech’s paid up capital and authorised capital both stand at INR 100,000. The directors of Kwik Fintech are Srijan Mittal and Deepak Chaudhary.

IDB Fintech Private Limited

Another start-up from Uttar Pradesh, IDB Fintech was registered with MoCA on the 9th of January 2021. IDB Fintech’s paid-up capital is INR 10,000 and authorized capital declared is INR 100,000. The leadership team of IDB include Abhinav Sharma and Saroj Sharma.

YT Revenue Fintech Private Limited

YT Revenue is a fintech start-up based in Maharashtra. It was incorporated on the 6th of January 2021. It has declared authorised share capital and paid-up capital of INR 100,000 each. The start-up is aimed at helping customers take profitable business decisions. They also have a Chartered Accountancy wing which undertakes Accounting, Audit, and Assurance services. YT Revenue provides financial consultations and offers a wide range of finance products and services like Insurance, Mutual Funds, and Education Planning.

Visionnxt Fintech Private Limited

Visionnxt is a Delhi based fintech start-up incorporated on the 6th of January 2021. They are involved in financial intermediation services and have declared Authorised and Paid-up capital of INR 15,00,000 and 5,00,000 respectively. Jayant Vittal Kaup and Urvashi Gandotra are registered as the directors of the company on MoCA.

Singhvi Fintech Private Limited

Singhvi Fintech was registered on the 14th of April 2021 and is a start-up based in Chennai, Tamil Nadu. The company’s authorised capital is INR 10,00,000 and paid-up capital is INR 1,00,000. The leadership team of SInghvi Fintech include Dharmichand Singhvi and Rishab Singhvi.

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New Fintech start-ups have been incorporated this year as per the official data records of the Ministry of Corporate Affairs (MoCA).

What’s in it for me?

Industry players need to be aware of yearly new entrants. This is from a threat perspective as well as from a need for general awareness regarding competition, new products and services. If direct competition has sprung up, you can tweak and differentiate your products. When new start-ups enter the market, you can expect price fluctuations from suppliers due to higher demand. You can also prevent your market share from being usurped by the new entrant by changing your strategy at the opportune time.

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Five Reasons You Should Raise Capital for Your Startup

Roopali Kotwal — Mon, 26 Apr 2021 05:35:03 +0000

An Idea is conceived but, to materialise it into a successful startup you need strong determination and most importantly enough ‘Capital’ which is a very practical aspect in any business. No doubt, it is going to be very challenging for entrepreneurs at all stages of the business cycle. However, the below stated reasons shall provide an insight to why it is important to raise the capital.

Reasons to Raise Capital

To meet the daily and long term cost

Requirement of office space, equipment, inventory and licenses along with product development are the practical aspects that will need funding.

To scale the business

Being ahead of time is always appreciated in any field. If you are the first one in the marketplace, you will be the pathbreaker. To scale up the business i.e., to increase the product visibility and to attract potential clients/consumers before your competitors in the market, would require capital. Hence, funding from venture capital will be the most relevant step.

To build credibility

A startup with a revolutionary business idea and strong business plan will attract investments from venture capitalists. The big and new investments in the potential idea shall build credibility and shall enhance the image of your start-up.

Expert advice and extended network

Scope of going faulty is less when you have experts to advise on the business strategies. And, with an extended network of experienced people, you have an option to consult them anytime along with the funding you receive. Think about this!

To identify business risks and decision making

Timely identification of business risks can save a lot of time, effort and money. Strategic and expert guidance shall help to identify the risks in the business and provide a scope to make decisions at an early stage.

When to Raise Capital?

The best time to raise capital is when you are clear in your thoughts – you know what you need to do, how much money you need to get to a milestone, what is the business plan you will follow and how the return on the investment (ROI) will be calculated.

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Being ahead of time is always appreciated in any field. If you are the first one in the marketplace, you will be the Pathbreaker.

Ways to Raise Capital

Bootstrapping, angel investments, raising funds from family and friends or traditional bank loan processes shall help to launch the business. However, for mentorship and further funding, business incubators and accelerators along with the venture capitalists play a pivotal role in the growth of the startup. One may use the crowdfunding platform to increase the visibility of the product and to attract additional investors for the next round of funding.

What’s in it for me?

Depending on the stage of your startup i.e. early/late stage, the ways of the investment may vary. But, raising capital in any scenario is a must.

As an entrepreneur, to launch a startup with, for example, a revolutionary consumer tech product and to get to a milestone, you must ask yourself – if you need funds? If yes, when, why and how to raise the capital? Simultaneously, you must think about the ways to generate the ROI. Raising capital from investment firms means lump sum payment with a comfortable repayment plan. You may not need to pay monthly instalments to pay off the investment amount received. Hence, you may use the capital for building the startup but it can turn into a huge liability in absence of clarity of thought on business plan and ROI.

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What is the Rs. 945 Crore Startup India Seed Fund Scheme?

Aakash Sharma — Fri, 23 Apr 2021 12:35:04 +0000

The Startup India Seed Fund Scheme (SISFS) aims to provide Rs. 945 crore over five years to help 3,600 entrepreneurs through 300 incubators. The guideline is exhibited under the auspices of the financial department, the Department for Promotion of Industry and Internal Trade (DPIIT).

The DPIIT will invest in qualified start-ups to support concepts, prototype development, product testing, market penetration and marketing guides. The plan was given the nod on 19 April 2021 and will be considered in effect from 1 April 2021.

Objectives of Startup India Seed Fund Scheme

The scheme’s funding plan aims to build a robust start-up ecosystem, especially in non-urban areas in India. Start-ups selected under the scheme would preferably be from sectors including social influence, waste management, water control, economic inclusion, education, agriculture, food processing, biotechnology, healthcare, power, mobility, security, space, railways, oil and gas, textiles, etc.

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The scheme will handhold and financially support early-stage start-ups across 300 incubation centres, almost three months after the Centre announced the plan.

Who will be the beneficiaries of the Startup India Seed Fund Scheme?

The fund will support start-ups in the sectors mentioned above that have not received venture capital funding like e-commerce, food technology, tourism, and education. Edtech, food distribution, digital wallet, fantasy games, e-commerce and logistics are the main categories that have attracted the most money in 2020.

SISFS will provide funding to promote innovation, advocate reform ideas, drive implementation and start an economic revolution. It will also create a robust start-up ecosystem, especially in areas outside the metropolitan areas where resources are often inadequate. The cross of the scheme is to encourage rural innovators for their development and profit.

What positive impact can the Startup India Seed Fund Scheme have on the business ecosystem?

The fund pledges to give up to Rs. 5 crores to specialised incubators selected by the SISFS panel of experts. This will give companies grants up to Rs. 20 lakh to validate their concept, develop the original models and test products.

Besides, the SISFS investment of Rs. 50 lakh will enable entrepreneurs to access markets, boost sales, and scale up through convertible securities or debt instruments. This will also play an equally significant role for young entrepreneurs affected by the catastrophic COVID-19 induced financial disaster in allowing them to succeed.

How can Start-ups and Incubators avail the benefits?

Parameters for Start-ups

Some of the many rules include-

A start-up, recognised by DPIIT, incorporated not more than two years ago when applying.

The start-up must have a trade idea to develop a product or a service with a business fit, viable commercialisation, and scope of scaling.

The start-up should be using technology in its core product or service, business model, distribution model, or methodology to solve the targeted problem.

Parameters for Incubators

Some of the many rules include-

The incubator must be a legitimate entity.

The incubator should be workable for at least two years on the date of request to the scheme.

The incubator must have the equipment to seat at least 25 individuals.

Interested entities need to sign up on the Startup India Seed Fund Scheme portal and register there.

In a nutshell, the Startup India Seed Fund Scheme is a promising way forward for new entrepreneurs as easy availability of capital is essential for entrepreneurs at the early stages of growth of an enterprise, and the scheme promises only that. The fund will help those who fail to raise funds from venture capital firms and give them a competing chance in the business realm.

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What is Venture Capital in Entrepreneurship?

Aakash Sharma — Sat, 17 Apr 2021 04:35:05 +0000

Start-ups and emerging companies with growth potential need significant investment for attaining success and wealthy investors usually come into the scene to invest in companies that portray promising long term growth. This capital investment is known as Venture Capital and the investors are known as Venture Capitalists. Venture capital entrepreneurship opportunities are necessary in the business world.

Venture Capitalists (VCs) are the most attractive form of financial resources for many start-up entrepreneurs. This investment model is known for providing early support to high-growth companies, and many well-known business success stories attribute their growth to venture capital financing.

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Venture Capital can provide the best financing, advice and credibility. The fact that a company has the support of Venture Capital means that it has a lot of opportunities for rapid and profitable growth.

Types of Venture Capital Funding

Seed (Initial) Capital: This is the capital infusion by VCs at the initial stage, and the amount invested is usually narrow.

Start-up Capital: This capital includes funds granted by VCs for recruiting team members (managers etc.), carrying out additional market research and introducing products or services to be sold.

Early Stage Capital: With a few years of experience, VC funds at this level help start-ups to move for progressing sales, increase productivity, and improve business performance.

Expansion Capital: At this point, once a start-up is established, VCs help the company enter new markets and take their marketing efforts to a new level.

What is the role of Venture Capital?

Good venture capital entrepreneurship investors help start-ups in several fundamental ways. VCs understand and modify start-up’s financial models for better results and expansion propulsions when it comes to seed funding. They also help founders build a robust internal company economy. This chiefly includes balancing costs associated with income and critical elements of the company’s business model.

Advantages of VC in Entrepreneurship

The advantages of using the venture capital model in fundraising are as follows:

Venture capital firms offer the best expansion opportunities for start-ups.

Valuable suggestions drawn from years of experience of VCs are constructive in creating networks and connections.

As there is no obligation for repayment due to VCs’ stake in start-ups, these investors’ trustworthiness is immense.

Disadvantages of VC

However, like the two sides of a coin, venture capital has some drawbacks as well, including:

Due to shares and stake sharing, the risk of dilution of ownership and control looms for start-ups.

Venture capital fundraising is generally long and complicated. Venture capitalists take a lot of time to make decisions, and communicating with them is often tedious and stressful.

In many cases, VCs’ invested capital requires a high initial return, making it difficult for start-ups to diversify into the money to snowball.

In short, good venture capital investors can contribute a lot more than just capital to start-ups. By integrating private equity and venture capital investment programs into various government programs, early-stage start-ups can get support in terms of supervision, associations, and community to become successful.

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Personal Finance Habits an Entrepreneur Should Develop

Monica Behura — Sun, 28 Feb 2021 00:35:03 +0000

No matter how many millions or billions an entrepreneur stacks up, without a solid financial planning in both personal and business front, he/she could end up like Anil Ambani. This pandemic of 2020 has taught us to live an economical life, cutting out the unnecessary stating that frugality is the word for future. Therefore, a prudent finance growth plan, with an imprint that less is more, and that money will multi-fold, securing the future even in uncertain times apart from growing the wealth will be key.

With all the money in the world, a net worth of $87.6 billion as of 2020, Warren Buffett, CEO, Berkshire Hathaway, one of the richest men on earth is well known for his frugal lifestyle. It’s a known fact that Buffett lives in a modest home he bought in 1958 and drives his old Cadillac. He never had the desire to own multiple homes or a fleet of cars. He saved his penny to earn and grow his wealth to billions only to donate 99% of his riches to philanthropy.

Financial planning is an exercise that keeps your business growing in terms of profitability and revenue growth. It makes an entrepreneur’s ability to predict, foresee and plan for potential roadblocks, and helps in evolving strategies to overcome the bumps.

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By looking for opportunities to get more value at a lower price like buying quality merchandise when it is marked down.

- Warren Buffett

Devise your Personal Finance Plan

Personal financial planning not just involves investing money, there are various facets to it, that is inclusive of growing wealth, money goals, wealth protection, and retirement planning.

Money Goals

Having written financial goals for the targeted month or year- either short or long term to improve personal wealth by a certain amount or percentage, gives a direction to your actions. Scattering your wealth in different baskets helps to grow your money as in stocks, real estate, bonds, mutual funds, fixed deposits, etc.

Budget spending and plan savings

Budgeting one’s spending and savings is a must. Experts say when you are mindful of both these habits, tracking these will help contribute to wealth growth.

Disseminate risks with multiple income plans

With this strategy, entrepreneurs are earning money through multiple businesses and reaping interest incomes through various investments, and with capital gains. In this way, entrepreneurs are diversifying and lowering their personal financial risk.

It is just like one’s business diversification. For instance, recently Electric car maker, Elon Musk invested $1.5 billion on Bitcoin, a calculated risk that could yield him either billions more in the foreseeable future or the money could tank. Either way, it is another revenue stream, an additional profit opportunity.

In growing one’s wealth, the entrepreneur needs to consider his objectives, investment timelines, his tolerance to risks involved. In short, choose the most suitable financial plans. However, note that holding money in the stationary form will yield no benefits. Investing in mutual funds, fixed deposits, real estate, startups will get interest income and profit percentage.

Investing in Bitcoin (cryptocurrencies)

Bitcoin is the largest cryptocurrency by market value, and it is receiving a lot of support from big companies like Tesla, Paypal and Mastercard. But before investing in this tricky business, do your due diligence. It can be as lucrative or risky as any other investment.

Safeguarding Wealth

Implementing safeguards around wealth that are invested becomes imperative, therefore placing it under an insurance policy that is designed to protect one’s finances- namely, health, life, trauma, and income protection insurance in case of any adverse circumstances.

Debt Reduction

An entrepreneur should get its debt under control, otherwise, he will continue paying interests on the debt. So, reducing one’s debts should be a part of one’s financial plan.

Living a thrifty lifestyle

Being thrifty is a virtue. Minimizing one’s needs so that he can maximize the amount into investments. Developing a frugal lifestyle is an art one can develop with long term planning, budgeting expenses, finding ways to reduce unnecessary expenses.

Keeping expenses below income

Living below your means is the way one can surplus on savings and cut down on unnecessary expenses. This will allow one to repay debt, save for rainy days, add to the emergency fund or make an investment in a lucrative deal.

Retirement Planning

Retirement planning is an important aspect of personal financial planning for any entrepreneur. A good retirement plan should ensure one’s income requirements at the age of retirement and what measures need to be taken to attain retirement goals.

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This pandemic of 2020 has taught us to live an economical life, cutting out the unnecessary stating that frugality is the word for future.

Keep tabs on business’s money-generating abilities

The ultimate goal of entrepreneurs is to convert sources of business wealth into personal wealth. Therefore, to conduct weekly and monthly check-ups on finances to ensure that one is reaching pre-defined goals. Taking stock of one’s expenses, income, employee hiring costs, and contractor fees is to make sure that business is working for the owner and not for other people.

Be smart about loans

In order to avoid the debt trap, do not overburden yourself with loans that are not essential to run the business, so avoid loans that are not adding to your sales directly or indirectly, and the pandemic has already taught us the importance of debt-free and economical life.

Time Is Money

An entrepreneur has to make sure that the time he/she spends is monetized properly, spending time in marketing or branding activities only or doing real business, needs to be prioritized. It should all result in a real money-making business immediately or sooner than later. Business means profit through legit sources.

Make a will

Making a will before tax implications could leave the entrepreneur’s legal heirs and beneficiaries exposed to tax liabilities that could leave them next to nothing from the total value of assets. So, solid functional estate planning needs to be done.

Tax benefits

One has to separate personal and business finances for greater tax benefits, the ability to take advantage of tax deductions is a huge plus for entrepreneurs. Keeping accurate records of personal and business expenses will assist in the event of a tax audit, keeping a check will ward off the tax guys.

Fintech- a tool to manage money

Fintech today is transforming financial management capabilities of entrepreneurs and businesses. There are various personal finance tools and services that are constantly evolving that helps manage money better. This trend has been beneficial for businesses, particularly smaller enterprises, making finance automation, data analysis, and flexible financing options within reach.

Protect assets from personal creditors

Personal assets can be at risk if an entrepreneur is sued for personal wrongdoing or as a result of a personal guarantee. However, there are ways to protect personal assets from these types of claims. One can consult with an estate planner or a bankruptcy attorney to prepare a structure to further shield assets from liability of business obligations.

Keeping up-to-date

An entrepreneur should ensure that all aspects of the plans are regularly reviewed and kept up to date with any regulatory changes that could occur anytime.

Cost Effectiveness

Entrepreneurs should use cost benefit analysis before making final decisions when it comes to their personal finance. One should avoid paying more than the expected returns.

Pay yourself salary

An entrepreneur should only pay himself out of profits, not revenue. Don’t cut a big slice of profit as a paycheck or bonus, rather invest that money for it to grow.

Making more money

An entrepreneur’s mind should always keep ticking on how to maximize investment returns and knowing one’s priority on whether to invest the profits or revenue earned from business on new bonds, real estate, or in a company or to buy an expensive car. Maximizing income for the next few years before indulging in luxury should be made clear.

The Golden Rules of Warren Buffett

Going back to Warren Buffett, his personal finance habits are as renowned as his investment strategies. From spending wisely to living under your means and developing healthy money habits, Buffett’s thumb rules are textbook stuff for inculcating great personal finance habits meant not only for entrepreneurs but for the layman.

Warren Buffets Rules are as follows that lay groundwork for every entrepreneur’s personal finance habits:

Don’t lose money

Warren Buffett’s number one rule is: Don’t lose money. And this rule applies to investing- if one is working to get out from a loss, it’s much harder to get back from where you started.

Get high value at a low price

Another Buffett principle: “Price is what you pay; value is what you get,” Buffett wrote to his shareholders long back. Losing money can happen when the price one is paying doesn’t match the value you’re getting, for instance, when one is paying high interest on a loan debt.

Instead, practice frugality like Buffett- “by looking for opportunities to get more value at a lower price like buying quality merchandise when it is marked down,” Buffett had said.

Healthy money habits

Buffett advocates to inculcate good saving habits from early life. He says to pay attention to money habits and work to strengthen those that help your finances and break those that hurt your finances.

Avoid credit card debt

Buffett said in a 1991 speech, “You really don’t need leverage (borrowed money) in this world much. If you’re smart, you’re going to make a lot of money without borrowing.” Buffett is especially wary of credit cards. His advice is to avoid them altogether.

Stack up cash reserves

Buffett’s key to ensuring security is to always keep cash reserves on hand. He once revealed that Berkshire Hathaway always maintained to the tune of double digit billion dollars in cash reserves. This helped the company sail through the great recession of 2008. He therefore advises entrepreneurs and businesses to maintain cash balance for rainy days such as the pandemic of 2020.

Invest in yourself

Investing in oneself, to improve one’s talent, will yield big returns, tenfold more, Buffett believed. He said unlike any other assets and investments, nobody can tax it away.

Learn, stay informed about money

Warren Buffett might not invest in cars or fostering an expensive hobby but he sure does spend his money on books from where he learns about managing money. Buffett is an institution in himself, an icon for the business community globally.

Buffett advocates learning more, educating oneself about managing money, and personal finance. He once said, “Risk comes from not knowing what you’re doing. The more you know about personal finance, the more security you’ll have as you minimize risks.”

Give back to humanity

Buffett practices what he preaches. The 90-year-old has donated 99% of his wealth to humanitarian activities. He is the Founder of The Giving Pledge along with Bill Gates which is a promise that more than 130 billionaires so far have made to give their fortunes away.

Money- a long term game plan

Buffett, in his 2014 letter to shareholders, said people should “invest with a multi-decade horizon, their focus should remain fixed on attaining significant gains in purchasing power over their investing lifetime,” rather than on moments of stock market volatility or economic crisis.

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Google to Invest $15 million in India’s SME: How Will It Benefit Small Businesses?

Smruthi Krishnan — Wed, 24 Feb 2021 12:35:05 +0000

Google has planned to invest $15 million (nearly Rs 109 crore) as funding for small and micro enterprises in India to bring back their businesses in the post-COVID-19 market. The company is already in talks with several local partners in India to diversify funding and reach out to as many SMEs as possible.

American multinational technology company specializes in Internet-related services and products especially online advertising technologies, a search engine and cloud computing. It announced its partnership with the European Investment Fund (EIF) along with two other organisations in Latin America and Asia to facilitate $75 million as funding provisions to small and medium-sized companies that were hit by the coronavirus pandemic.

These funds are part of the original $800 million initiative which was announced by Google in March 2020 when the pandemic shut down companies and offices leading to losses in businesses. The initiative to focus on SMEs is to provide them with essential funds that can help them revive their business and survive in case of such unprecedented times in the future.

The crux of Google’s Initiative

Google had announced an investment fund plan of more than $800 million to support small businesses when the pandemic struck the world last year. It has always tried to work towards the upliftment and development of small businesses across the world. The funding by Google will help small and medium scale enterprises in India to revive post-pandemic as many of them have been suffering losses and lack of demand.

With these funds, they can undergo a digital transformation for their company which will help them scale online, innovate and develop better technology and expand their customer base thus inducing demand. This will also help them access the required capital to recover and also build resiliency for the future. Last year, Google planned to invest nearly $10 billion under the Google for India digitisation fund over the next seven years to help India go digital in businesses. This new funding scheme will focus on bringing about digitalisation within the SMEs as well.

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Google is already in talks with several local partners in India to diversify funding and reach out to as many SMEs as possible.

How does Google plan to go ahead with the funding?

Google has planned to invest their funds in three different ways which include an amalgamation of equity investment, partnerships and an operational infrastructure ecosystem in India. They can invest and partner up with several Fintech platforms that are already working towards the same cause.

For instance, Mastercard and Razorpay have recently teamed up to help MSMEs to go digital in India. They can also tap on various banking systems, both digital and traditional ones to transform the operational infrastructure in the business market.

SMEs need funds and guidance to scale their business now more than ever. Google’s initiative will prove to be a blessing for these companies especially post the colossal damage caused by the COVID pandemic.

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