VC unlikely to make a bet on multiple risk factors Team Technology and Product risk Competitive Risk Market and Business Model risk Exit Risk Product ready / close to being ready & customer traction Some validation of assumptions, business model, market size Presence of Business and Operations guy on team
Tablets. Ecommerce. Mobile Advertising.
TiEcon Delhi 2013 - The Art & Science of Fund Raising by Alok Mittal
Venture Catalysts for Next-Gen Market
Leaders » 26 year old firm with offices in California | NY Corridor | India | Israel » $3.5 billion under management across 9 funds » Typical first cheque: $2M - $5M » 135+ liquidity events 53 IPOs | 85 M&As » Invested in over 250 companies 2
Venture Investment Process 15 days
30 – 45 days Deal Identification / Preliminary Analysis Deal Validation Due Diligence 60 days Prelim Market Analysis Discussion : Internal + External Experts Investment Committee & Issue of Term Sheet & Closure Typically 1% of deals get through the funnel Deep Dive: Team, Market, Differentiation, Traction, Financials Fact Validation. Accounting & Legal Diligence Background checks
Term Sheet Overview Letter of
Intent to invest in a given opportunity on specific terms and conditions » Valuation » Type of Instrument (equity, preference, convertible » » » » » » debentures) Liquidation Preference Anti Dilution Provision Drag Along ROFR – Right of First Refusal, Co-Sale Rights (Tags) Affirmative Rights ESOP What happens when things go wrong?
Legal Due Diligence Overview The
financier’s perspective » Need to know what they are getting into – sometimes irrespective of percentage holding. Insider trading sensitivities. » Need to assess high, medium and low risks; i.e. show stoppers, conditions precedent and conditions subsequent » Focus areas are investment approvals, financial transparency, corporate governance, regulatory breaches, contractual liabilities, loan defaults, rights of existing investors (if any), share and land title verifications and insurance.