VC JUNIOR The Next Generation of Venture Capital June 6, 2009 1
VENTURE CAPITAL INDUSTRY FACTS <ul><li>More than 1,400 seed and early stage companies received VC investment in 2007 </li>...
VENTURE CAPITAL FIRM SNAPSHOT Source:  http://en.wikipedia.org/wiki/Image:Venture_Capital_Fund_Diagram.png   4
VENTURE FUNDING STAGES <ul><li>Seed Money : Low level financing needed to prove a new idea (Often provided by &quot;angel ...
VENTURE SELECTION PROCESS Sponsored Support Services 8. Venture capital fund (s) 7. Local business advisors 6. Consultants...
VENTURE SELECTION PROCESS <ul><li>Fund’s Pre-determined Criteria </li></ul><ul><li>At what stage is the company? </li></ul...
VENTURE SELECTION PROCESS <ul><li>First Law.  Risk Aversion: “Accept no more than two risks per investment.” </li></ul><ul...
VENTURE SELECTION PROCESS <ul><li>Second Law.  Valuation: “ V  =  P   x   S   x   E,  where  V = valuation,  P  = problem,...
VENTURE SELECTION PROCESS <ul><li>Other Due Diligence </li></ul><ul><li>Background checks on the management team </li></ul...
VENTURE CAPITAL INDUSTRY PAINS <ul><li>Deal flow = Critical Success Factor </li></ul><ul><li>VCs look at 1,000 business pl...
12 <ul><li>Out-source preliminary vetting of business proposals </li></ul><ul><ul><li>More in-depth analysis of businesses...
STARTUP AGGREGATOR WEBSITES 13 Company Website Users Business Model Depth of Analysis Angelsoft http://www.angelsoft.net E...
RESEARCH PLAN <ul><li>Meet with Venture Capitalist(s) </li></ul><ul><ul><li>In/Validate need for analyzed business proposa...
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"VC Junior" Business Concept

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Presentation pointing to a new business opportunity in assisting venture investors with due diligence.

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"VC Junior" Business Concept

  1. 1. VC JUNIOR The Next Generation of Venture Capital June 6, 2009 1
  2. 2. VENTURE CAPITAL INDUSTRY FACTS <ul><li>More than 1,400 seed and early stage companies received VC investment in 2007 </li></ul><ul><li>One U.S. job created for every $25,000 of VC invested between 1970 and 2006 </li></ul><ul><li>Nearly 800 venture capital firms operate in the U.S. </li></ul><ul><li>Most venture capitalists were once entrepreneurs, scientists or engineers before they began investing </li></ul>3
  3. 3. VENTURE CAPITAL FIRM SNAPSHOT Source: http://en.wikipedia.org/wiki/Image:Venture_Capital_Fund_Diagram.png 4
  4. 4. VENTURE FUNDING STAGES <ul><li>Seed Money : Low level financing needed to prove a new idea (Often provided by &quot;angel investors&quot;) </li></ul><ul><li>Start-up : Early stage firms that need funding for expenses associated with marketing and product development </li></ul><ul><li>First-Round : Early sales and manufacturing funds </li></ul><ul><li>Second-Round : Working capital for early stage companies that are selling product, but not yet turning a profit </li></ul><ul><li>Third-Round : Also called Mezzanine financing, this is expansion money for a newly profitable company </li></ul><ul><li>Fourth-Round : Also called bridge financing, 4th round is intended to finance the going public process </li></ul>Source: http://en.wikipedia.org/wiki/Venture_capital 5
  5. 5. VENTURE SELECTION PROCESS Sponsored Support Services 8. Venture capital fund (s) 7. Local business advisors 6. Consultants 5. University or laboratory participation 4. Seminars 3. Luncheon or dinner club 2. Newsletter 1. Incubator Source: Silver, A. David. Venture Capital, 1985. 6
  6. 6. VENTURE SELECTION PROCESS <ul><li>Fund’s Pre-determined Criteria </li></ul><ul><li>At what stage is the company? </li></ul><ul><li>What problem is the company attempting to solve? </li></ul><ul><li>Is its solution proprietary or conveyed to the problem in a unique way? </li></ul><ul><li>Is the entrepreneurial team experienced and competent to manage a rapidly emerging company? </li></ul><ul><li>Has the company, its product or solution or its management team, been endorsed by a responsible and highly regarded customer or investor? </li></ul><ul><li>How much capital is required? </li></ul>Source: Silver, A. David. Venture Capital, 1985. 7
  7. 7. VENTURE SELECTION PROCESS <ul><li>First Law. Risk Aversion: “Accept no more than two risks per investment.” </li></ul><ul><li>The Development Risk: Can we develop the product? </li></ul><ul><li>The Manufacturing Risk: If we can develop it, can we produce it? </li></ul><ul><li>The Marketing Risk: If we can make it, can we sell it? </li></ul><ul><li>The Management Risk: If we can sell it, can we sell it at a profit? </li></ul><ul><li>The Growth Risk: If we can manage the company, can we grow it? </li></ul>Source: Silver, A. David. Venture Capital, 1985. 8
  8. 8. VENTURE SELECTION PROCESS <ul><li>Second Law. Valuation: “ V = P x S x E, where V = valuation, P = problem, S = solution, and E = entrepreneurial team.” </li></ul><ul><li>Third Law. Law of the Big- P : “Invest in big P companies, because the public market will accord to them unreasonably high V ’s, irrespective of S and E .” </li></ul><ul><li>The Audit of P . </li></ul><ul><li>The Audit of S . </li></ul><ul><li>The Audit of E . </li></ul><ul><li>The Financial Statement Audit. </li></ul><ul><li>The Legal Audit. </li></ul>Source: Silver, A. David. Venture Capital, 1985. 9
  9. 9. VENTURE SELECTION PROCESS <ul><li>Other Due Diligence </li></ul><ul><li>Background checks on the management team </li></ul><ul><li>Independent verifications of statements made in the business plan </li></ul><ul><li>Studies of the company’s product and market </li></ul><ul><li>Interviewing management and other company personnel </li></ul><ul><li>Talk to suppliers, customers, competitors, etc. </li></ul>Source: Silver, A. David. Venture Capital, 1985. 10
  10. 10. VENTURE CAPITAL INDUSTRY PAINS <ul><li>Deal flow = Critical Success Factor </li></ul><ul><li>VCs look at 1,000 business plans to select 10 businesses </li></ul><ul><li>2% management fee must last until liquidation events </li></ul><ul><li>Qualified hires can take years to train </li></ul><ul><li>Few good education solutions to “learn the ropes” </li></ul>11
  11. 11. 12 <ul><li>Out-source preliminary vetting of business proposals </li></ul><ul><ul><li>More in-depth analysis of businesses </li></ul></ul><ul><li>“ Farm Team” for VC firms </li></ul><ul><ul><li>Work-and-learn guided investment and education </li></ul></ul><ul><ul><li>Co-invest, “follow” VC firms into financing businesses; also target startups from business incubators </li></ul></ul>POTENTIAL BUSINESS OPPORTUNITIES
  12. 12. STARTUP AGGREGATOR WEBSITES 13 Company Website Users Business Model Depth of Analysis Angelsoft http://www.angelsoft.net Entrepreneurs X $250 to post plan for 30 days LOW . Entrepreneur posts 1 page summary of business and proposed deal Angels X Free* to accredited investor groups VCs X Funding Post http://www.fundingpost.com Entrepreneurs X Events and publications; $100 to post plan for 90 days; $30 per add'l month LOW . &quot;Post your Executive Summary & Ebmed Photos, A Video Pitch!&quot; Angels X Events and publications VCs X Go Big Network http://www.gobignetwork.com Entrepreneurs X Post funding requests and availability, jobs, b-plan help for $59/mo, $99/mo and $249/yr LOW . Entrepreneur posts short summary. Reverse also for investors. Angels X VCs X Student Businesses http://www.studentbusinesses.com Entrepreneurs X Free LOW . Profiles and business descriptions are reviewed before shown to investors. Angels X Subscription and sponsorship options VCs X Venture Den http://www.ventureden.com Entrepreneurs X Free (temporary) LOW . Entrepreneurs can complete a basic profile or create a video pitch profile. Angels X VCs X YouNoodle http://www.younoodle.com Entrepreneurs X Free MEDIUM . Valuation prediction, track progress, no other evaluation. Angels X Subscription and sponsorship options VCs X
  13. 13. RESEARCH PLAN <ul><li>Meet with Venture Capitalist(s) </li></ul><ul><ul><li>In/Validate need for analyzed business proposals </li></ul></ul><ul><ul><ul><li>Articulate need if it exists </li></ul></ul></ul><ul><ul><li>Explore opportunities for partnership </li></ul></ul><ul><li>Meet with Angel Investor(s) </li></ul><ul><ul><li>Same or similar needs as VCs? </li></ul></ul><ul><ul><li>Explore opportunities for partnership </li></ul></ul><ul><li>Talk to operators of listed startup aggregator websites </li></ul>14
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