EXIT & IPOs

There are not many exit route for VCs in India.This could be one of the reason for VCs not to invest in Indian companies vigorously.

Possible exit could be :

1. Selling of investment to other VCs or investors
2. Selling of investment to promoters (Though difficult)
3. Initial Public Offering (IPO)

Each selling off requires valuation of business.Some time VCs offer certain % of its holding to other new investors or promters to get back investments.Generaly VCs requires 30 to 40% annual return.

IPO is also not easy always. Proper pricing and timing is very crucial. Issue of shares at premium requires certain perfomance criteria.Though to encourage VCs in India SEBI relaxed the premium criteria and investment of 10 % or more in a company by VCs can issue shares at premium.

Option one could be dangerours for promoters because there is a danger of company falls into wrong hands. Usually this is done in consultation with promoters.Even VCs offer first right to promoters before selling to private investors or other VCs.

At each stage of valuation promoters have to be very careful.Lower valuation means giving away more % of shares in the company.

So be tactful & smart. Everyone but promoters wants cheaper valuation.