Types of Venture Capital Assistance 🛠️

VCs don't just buy shares. They structure the deal in different ways to protect their money.

1. Equity Financing (Most Common) 🍰

• VC buys Equity Shares.
• Risk: If company fails, money lost.
• Reward: If company grows, share price skyrockets.
• Control: VC gets voting rights and Board seat.

2. Conditional Loan 💸

• A loan with No Interest initially.
• Repayment: If the project generates sales, VC gets a Royalty (percentage of sales) usually between 2% to 15%.
• Condition: If project fails, loan may be written off.
• Benefit: Startup doesn't have burden of fixed interest.

3. Income Note 🎵

• A hybrid instrument.
• Combination: Low Interest Rate + Royalty on Sales.
• Provides some minimum income to VC plus upside potential.

4. Participating Debentures 📄

• Debentures that pay interest.
• Plus: Right to participate in profits (Dividend) if profit exceeds a certain level.

5. Convertible Instruments 🔄

• CCPS (Compulsorily Convertible Preference Shares).
• Initially it is a Preference Share (Fixed Dividend).
• Later, it converts into Equity automatically.
• Most popular in Indian startup ecosystem.

Quiz Time! 🎯

💡 Final Wisdom: "VCs are creative financiers. They design instruments that protect their downside (Preference) while keeping the upside (Conversion to Equity) open!" 🛡️🚀

Next up: Leasing - Why buy when you can rent? 🏗️