Stephanie McCoy March 9, 2010
<ul><li>Venture Capital Process </li></ul><ul><li>Venture Capital Investing Trends </li></ul><ul><li>Industry Compensation...
<ul><li>Venture Capital Process </li></ul>
Venture Capital Process Selecting Structuring &  Syndication Fund Raising Sourcing Creating Value Exiting
Commitment Sources Source:  Venture Economics Fund Raising
Sourcing Key Sources For Transactions <ul><li>Relationships with Entrepreneurs </li></ul><ul><li>Limited Partner Investors...
Investment Criteria <ul><li>Market Potential and Size </li></ul><ul><li>Quality of Management </li></ul><ul><li>Product/Se...
Creating Value <ul><li>Build Independent Boards </li></ul><ul><li>Guide Strategy </li></ul><ul><li>Facilitate Strategic Re...
Realization of Gains <ul><li>Sale/Merger of Portfolio Company </li></ul><ul><li>Sale of Portfolio Company Securities (Publ...
Venture Portfolio Company Returns Source: Venture Economics Exiting
  Timing of Winners and Losers  Source: Venture Economics Years Percentage of Companies 63% 12% 37% 32% 56% Exiting
Length of Time to Liquidate a Venture Capital Fund Source: NVCA – Adam Street Presentation Data sample size = 64 Data as o...
<ul><li>II. Venture Capital Investing Trends </li></ul>
Equity Difficult For Companies to Obtain Fewer deals are getting funded compounded by smaller investment sizes PWC Moneytree
Credit Virtually Unavailable 28% Annualized Decline Federal Reserve: loans to commercial and Industrial In the first half ...
<ul><li>IPO market has become virtually shut to smaller issuers (less than $50 million offering) </li></ul>IPO Market Unav...
Going, Going, Gone 2009 Estimated American Bankruptcy Institute
<ul><li>III. Industry Compensation  </li></ul>
Venture Capital Fee Structure <ul><li>Management Fees </li></ul><ul><ul><li>- Typical Venture Fund receives 2% of the Fund...
Entrepreneur Compensation <ul><li>Salary and Stock Compensation by Title </li></ul>
<ul><li>IV.  Dos and Don’ts </li></ul>
How Not to Get a VC’s Attention <ul><li>Address Plan to “Dear Sir” </li></ul><ul><li>Management team is all ex venture cap...
How to Get a VCs Attention <ul><li>A Compelling Story </li></ul><ul><li>An Unfair Advantage </li></ul><ul><li>Pinching Pen...
Stephanie McCoy March 9, 2010
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Stephanie McCoy March 9, 2010

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  • $11.3 vs $8.5 or 24% less per deal
  • According to weekly figures provided by the Federal Reserve, total loans at commercial banks have fallen at a 19% annual rate over the past three months, while loans to businesses have dropped at a 28% annualized pace. Last autumn, bank lending temporarily expanded when other sources of funding from the shadow banking system dried up after the collapse of Lehman Bros. Since then, however, total outstanding bank loans have dropped at an accelerating pace. The decline in bank lending mostly affects smaller businesses. Larger corporations have alternative sources of funding, including retained earnings, corporate bonds, securitized loans and new equity. Those other sources of capital have increased in recent months, but not enough to offset the decline in bank lending. In the first and second quarters, the U.S. private sector consumed more capital than it raised for the first time in more than 60 years. Negative net investment is &amp;quot;the hallmark of depression and difficult to reverse,&amp;quot; said economist Leigh Skene of Lombard Street Research.
  • Stephanie McCoy March 9, 2010

    1. 1. Stephanie McCoy March 9, 2010
    2. 2. <ul><li>Venture Capital Process </li></ul><ul><li>Venture Capital Investing Trends </li></ul><ul><li>Industry Compensation </li></ul><ul><li>Dos and Don’ts </li></ul>Agenda
    3. 3. <ul><li>Venture Capital Process </li></ul>
    4. 4. Venture Capital Process Selecting Structuring & Syndication Fund Raising Sourcing Creating Value Exiting
    5. 5. Commitment Sources Source: Venture Economics Fund Raising
    6. 6. Sourcing Key Sources For Transactions <ul><li>Relationships with Entrepreneurs </li></ul><ul><li>Limited Partner Investors </li></ul><ul><li>Other Venture Capital Firms </li></ul><ul><li>Accountants </li></ul><ul><li>Bankers </li></ul><ul><li>Attorneys </li></ul><ul><li>Investment Bankers </li></ul>
    7. 7. Investment Criteria <ul><li>Market Potential and Size </li></ul><ul><li>Quality of Management </li></ul><ul><li>Product/Services </li></ul><ul><li>Sustainable Competitive Advantage </li></ul><ul><li>Financial Drivers </li></ul>Selecting Structuring Syndication
    8. 8. Creating Value <ul><li>Build Independent Boards </li></ul><ul><li>Guide Strategy </li></ul><ul><li>Facilitate Strategic Relations </li></ul><ul><li>Recruit Key Managers </li></ul><ul><li>Raise Additional Debt and Equity </li></ul>Creating Value
    9. 9. Realization of Gains <ul><li>Sale/Merger of Portfolio Company </li></ul><ul><li>Sale of Portfolio Company Securities (Public Offering) </li></ul><ul><li>Private Placement of Portfolio Securities </li></ul>Exiting
    10. 10. Venture Portfolio Company Returns Source: Venture Economics Exiting
    11. 11. Timing of Winners and Losers Source: Venture Economics Years Percentage of Companies 63% 12% 37% 32% 56% Exiting
    12. 12. Length of Time to Liquidate a Venture Capital Fund Source: NVCA – Adam Street Presentation Data sample size = 64 Data as of 9/30/05
    13. 13. <ul><li>II. Venture Capital Investing Trends </li></ul>
    14. 14. Equity Difficult For Companies to Obtain Fewer deals are getting funded compounded by smaller investment sizes PWC Moneytree
    15. 15. Credit Virtually Unavailable 28% Annualized Decline Federal Reserve: loans to commercial and Industrial In the first half of 2009, companies consumed more capital than they raised for the first time in 60 years
    16. 16. <ul><li>IPO market has become virtually shut to smaller issuers (less than $50 million offering) </li></ul>IPO Market Unavailable for Small Companies Grant Thorton and Thompson Reuters
    17. 17. Going, Going, Gone 2009 Estimated American Bankruptcy Institute
    18. 18. <ul><li>III. Industry Compensation </li></ul>
    19. 19. Venture Capital Fee Structure <ul><li>Management Fees </li></ul><ul><ul><li>- Typical Venture Fund receives 2% of the Fund annually for salaries and operating expenses </li></ul></ul><ul><li>Carried Interest </li></ul><ul><li>- 20% of realized value </li></ul>
    20. 20. Entrepreneur Compensation <ul><li>Salary and Stock Compensation by Title </li></ul>
    21. 21. <ul><li>IV. Dos and Don’ts </li></ul>
    22. 22. How Not to Get a VC’s Attention <ul><li>Address Plan to “Dear Sir” </li></ul><ul><li>Management team is all ex venture capitalists </li></ul><ul><li>After reading the summary, have no idea what the company does </li></ul><ul><li>Project profitability in 6 months </li></ul><ul><li>Plan sent from jail </li></ul><ul><li>Projections exceed Microsoft’s </li></ul><ul><li>“ There is no competition” </li></ul><ul><li>Plan comes from an out of work consultant </li></ul><ul><li>Guaranteed Exit in 3 months </li></ul><ul><li>Provide VC ownership of 10% or less </li></ul>
    23. 23. How to Get a VCs Attention <ul><li>A Compelling Story </li></ul><ul><li>An Unfair Advantage </li></ul><ul><li>Pinching Pennies </li></ul><ul><li>Entrepreneurs have Skin in the Game </li></ul><ul><li>The Team has Done it Before </li></ul><ul><li>Command of the Key Business Metrics </li></ul><ul><li>Big Vision </li></ul><ul><li>Winning Attitude </li></ul><ul><li>A CEO Who Can Sell </li></ul><ul><li>Undeniable Customer Pain that will be Relieved </li></ul><ul><li>An Elevator Pitch that is Easily Repeatable </li></ul>
    24. 24. Stephanie McCoy March 9, 2010
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