venture and growth capital. equity investments  holding on to ‘what you’ve got’  equity...

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  • Slide 1
  • Venture and Growth Capital
  • Slide 2
  • Equity Investments Holding on to what youve got Equity investments are a trade-off game
  • Slide 3
  • Do you really want an investor? Question: Would you rather have a small slice of a large pie, or have the entire hostess fruit pie to yourself? Do you NEED the money? Do you WANT outsiders involved in your business? WHO do you dare bring into your circle?
  • Slide 4
  • Angels Definition: Individual. Not an organization. Significant source of startup financing. Find an angel with expertise as well as cash. Terrific source for smaller startup needs and EARLY stage financing. (Usually smaller amounts) They are usually experts in your industrybeware! Networking is your only hope of finding them
  • Slide 5
  • Venture Capital Venture Capital is a Process. Firms look for opportunities to add to the chain of value creation. Fairly recent phenomena (last 2-3 decades have seen the majority of VC activity)
  • Slide 6
  • Definitions Venture Capital: An Organization that makes equity investments in startup companies, seeking a high return. Private Funds Corporate Funds Lead Funds Niche Funds
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  • VC Fund Structure Investor(s): Provide money Process is called raising a fund Venture Firm / Partners: Do the Work Screen opportunities Close deals Manage portfolio companies
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  • Compensation and Investor Returns Partners receive an annual management fee (usually around 2%). Partners get (on average) 20% of capital gains of the fund. Investors receive remainder of the capital gains. Distributions are made over very long time frames (sometimes decades).this is NOT a highly liquid investment vehicle!
  • Slide 9
  • Industry Overview Total of $21.2 Billion invested in 2002 Compares to $41.3 Billion in 2001 2003 figure is nearly identical with 1998s amount Look here for detail on where the money went (or see handout): DocID/1BE29A405A1233D485256CBC006B65B2 DocID/1BE29A405A1233D485256CBC006B65B2
  • Slide 10
  • Recent Statistics
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  • Participation by Industry Medical Devices Technology High Tech: Softbank: Biotechnology: Directory: spatcher?next=vcDirectory spatcher?next=vcDirectory Example firm: Fuqua:
  • Slide 12
  • A look at typical VC firms Kleiner Perkins (The Leader) Wasatch Ventures (Local) Charles River (East Coast) Sequoia Capital (Jobs at partner companies)
  • Slide 13
  • Typical Venture target Low risk, versus potential return Industry or strategy fit High potential Fit with Venture firms goals on stage, amount, control, and growth rate Has a business plan that got an A in B475
  • Slide 14
  • Stage Preferences of VCs Some prefer very late stages (Mezzanine) such as Softbank, in order to lower risk. Some companies seek earlier stage financing, accepting inherently higher risk, hoping for much higher returns. Some will go all the way through the process with youothers will drop out
  • Slide 15
  • Where do these people hide? VC Finding tools National organizations (see next slide) Magazines (Venture, Inc., Forbes, RedHerring, VCJournal) Broker / Dealers Consultants Investment Bankers COMPANIES in your industry may have a VC arm Intel Capital:
  • Slide 16
  • Key Organizations NVCA Venture Economics Price Waterhouse Regional Venture Organizations VC Journal Red Herring
  • Slide 17
  • Typical Deal Flow Contact / Intro Business Plan review / Meet management Due diligence Valuation / Negotiation stage (depends on lead) Closing Managing the investment Exit (it may be a decade before you hit this stage)
  • Slide 18
  • Due Diligence Background checks on management Verification of patents / agreements Complete disclosure of financials Review of ALL agreements (lease, customer, etc.) Review of corporate structure / minutes Review of pending litigation
  • Slide 19
  • Benefits of Dealing with VC Help with Strategy Very Experienced Partner Board participation Network of industry contacts Help recruiting key employees Access to markets, suppliers, customers, key industry figures
  • Slide 20
  • Drawbacks to VC funding It aint just your show anymore Depends on bargaining position / strength of your company
  • Slide 21
  • Increasing your odds Focus on a high growth opportunity with very high top-line potential Leverage relationships to find the right VC Make sure your business plan really works Seek VCs that fit your company Revenues today greatly increase your chances funding and your ultimate valuation Do your own due diligence Demand that the VC deliver Value beyond the cash
  • Slide 22
  • Final Note: If youre serious about VC: Do a whole bunch of reading to come up to speed on the VC industry and current environment. Consider working with a broker or consultant who has a proven track record of investment placement


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