Structuring the Deal Financial Instruments
The structuring of the deal refers to the financial through which venture capital investment is made. The availability of a wide variety of instruments provides considerable flexibility in structuring a venture capital deal. From the points of view of nature, the financial instruments a VCI can choose from, can be broadly equity and debt instruments.
(1) Ordinary equity shares; (2) Non voting equity shares which are entitled to indent but carry no voting rights: (3) Deferred ordinary shares on which the ordinary are deferred for a specified period until the happening of a certain event such as on the stock exchange or the sale of the company; (4) Preferred ordinary shares the voting rights, such shares also carry rights to a modest fixed dividend; (5) Equity e investors in debentures bonds: to acquire ordinary shares at a future date; (6) preference shares; (7) Cumulative convertible preference shares which are converted into after a specified time; (8) Participating preference shares which, in addition to the entitled to an extra dividend after the payment of dividend to the equity (9) Cumulative convertible participatory preferred ordinary shares combine the dividend and cumulative as well as participative features and (10) Convertible may be preference shares have two elements, namely, convertibility into equity at of time and redeemability on the expiry of a certain period. The redeemable part coupon rate by way of preference dividend. Of the types of equity linked financial equity warrants, non voting equity shares and cumulative convertible participating shares can be used to structure a flexible venture capital real.