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VENTURE
CAPITAL
HTW – University of Applied Sciences
International Business Law
Prof. Dr. S. Dietrich
Navi K. J. Phifer, J...
Table of Contents
1. Introduction
• Definitions
2. Venture Capital
• Historical Background
• What, Why, Who ?
• How to fin...
Definitions
enture Capital
orporate Venture Capital
rivate Equity
23.03.12 Venture Capital 3
Definitions
23.03.12 Venture Capital 4
Historical Background
1946 – 1977: started out in USA
1960s: Germany
1970 – 1971: Financial support offered
2000 – 2001: “...
VC - What, Why, Who ?
Helps to foster growth
Innovation capital“
echnology
23.03.12 Venture Capital 6
How to find VC investors?
nternet searches
ersonal contacts / recommendations
anks
23.03.12 Venture Capital 7
The Role of VC-Investors
inance
dvice
onsultation
23.03.12 Venture Capital 8
Types of VC - Financing
• Expansion Financing
• Bridge Financing
• Turnaround Financing
• Replacement Capital
23.03.12 Ven...
VC Financing - Cycle
1. Screening
2. Seed Financing
3. Early Stages
4. Growth Finance
5. Exit Strategies (Janin)
23.03.12 ...
Phase 1: Screening
usiness plan creation
elect and contact investors
creening
23.03.12 Venture Capital 11
Questions to ask before
considering VC financing
 Do we have high growth prospects and
a team ambitous enough, to grow ra...
Questions to ask before
considering VC financing
 Are we willing to sell company shares to a
private equity investor?
 D...
Phase 2: Seed Financing
& R (Development & Research)
ery high risk
ifficult to judge commercial success
23.03.12 Venture C...
Phase 3: Early Stages
ests
(esp. in pharmaceutical and bio-tech. fields)
arketing activities
23.03.12 Venture Capital 15
Phase 4: Growth Finance
ompany hits market
eeds to stay afloat and grow to compete
urther advice
23.03.12 Venture Capital ...
Phase 5: Exit Strategies
• IPOs
• Trade Sales
• Secondary Sales
• Buy Backs
• Liquidations
23.03.12 Venture Capital 17
Phase 5: Exit Strategies
• IPOs
23.03.12 18Venture Capital
Phase 5: Exit Strategies
• Trade Sales
23.03.12 19Venture Capital
Phase 5: Exit Strategies
• Secondary Sales
23.03.12 20Venture Capital
Phase 5: Exit Strategies
• Buy Backs
23.03.12 21Venture Capital
Phase 5: Exit Strategies
• Liquidations
23.03.12 22Venture Capital
Phase 5 Exit Strategies -
Statistics
• 2008, in exit volume terms:
• trade sales dominated at 35%
• sales to other private...
Advantages/Disadvantages
• The VC Investor
• Investment
• Experience, advice, mentoring
• Objectivity
• Networking
• Recru...
Advantages/Disadvantages
• Capital
• Solely for our business
• Start-up financing
• Liable equity within the company
• Imp...
Advantages/Disadvantages
• Due Diligence
Advantages Disadvantages
• Company realises:
− Where it stands in the market
− Wh...
Advantages/Disadvantages
• The Company
Advantages
• Growth
• Value
• Security
• Equity ratio
23.03.12 Venture Capital 27
Advantages/Disadvantages
• Dilution
Disadvantages
• Dilution-decrease of sth
• Anti-dilution protection
− Milestone financ...
Advantages/Disadvantages
• Contractual protection for the VC
investor
• Information rights
• Control rights
• Representati...
Advantages/Disadvantages
• Restrictions on the Transfer of Shares
by Shareholders
• The articles and shareholders‘ agreeme...
Advantages/Disadvantages
• Investor‘s Protection-Exit
• Drag-alone rights
• Tag-along rights
23.03.12 31Venture Capital
Advantages/Disadvantages
• Taxation
23.03.12 32Venture Capital
Discussion Points
• Obstacles
• Alternatives
• Our best options
23.03.12 Venture Capital 33
Conclusion
• Augumus Pecumian GmbH
23.03.12 Venture Capital 34
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Venture Capital

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Venture Capital - What it is, how it's used and strategies implemented

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Transcript of "Venture Capital"

  1. 1. VENTURE CAPITAL HTW – University of Applied Sciences International Business Law Prof. Dr. S. Dietrich Navi K. J. Phifer, Janin Viere, Lucia Soskova, Lisa Petzold
  2. 2. Table of Contents 1. Introduction • Definitions 2. Venture Capital • Historical Background • What, Why, Who ? • How to find Investors • The role of VC investors • VC financing cycle • Direct/indirect VC 23.03.12 2Venture Capital 1. Exit Strategies • IPO‘s • Trade Sales • Secondary Sale • Buy Backs • Liquidation • Advantages/Disadvantages • Discussion Points • Conclusion
  3. 3. Definitions enture Capital orporate Venture Capital rivate Equity 23.03.12 Venture Capital 3
  4. 4. Definitions 23.03.12 Venture Capital 4
  5. 5. Historical Background 1946 – 1977: started out in USA 1960s: Germany 1970 – 1971: Financial support offered 2000 – 2001: “.Com-Bubble Burst“  total investment 2000: $ 16.8bn 23.03.12 Venture Capital 5
  6. 6. VC - What, Why, Who ? Helps to foster growth Innovation capital“ echnology 23.03.12 Venture Capital 6
  7. 7. How to find VC investors? nternet searches ersonal contacts / recommendations anks 23.03.12 Venture Capital 7
  8. 8. The Role of VC-Investors inance dvice onsultation 23.03.12 Venture Capital 8
  9. 9. Types of VC - Financing • Expansion Financing • Bridge Financing • Turnaround Financing • Replacement Capital 23.03.12 Venture Capital 9
  10. 10. VC Financing - Cycle 1. Screening 2. Seed Financing 3. Early Stages 4. Growth Finance 5. Exit Strategies (Janin) 23.03.12 Venture Capital 10
  11. 11. Phase 1: Screening usiness plan creation elect and contact investors creening 23.03.12 Venture Capital 11
  12. 12. Questions to ask before considering VC financing  Do we have high growth prospects and a team ambitous enough, to grow rapidly?  Do we have a competitive edge or a unique selling product? 23.03.12 Venture Capital 12
  13. 13. Questions to ask before considering VC financing  Are we willing to sell company shares to a private equity investor?  Do we have a realistic exit opportunity for all shareholders to realise desired 23.03.12 Venture Capital 13
  14. 14. Phase 2: Seed Financing & R (Development & Research) ery high risk ifficult to judge commercial success 23.03.12 Venture Capital 14
  15. 15. Phase 3: Early Stages ests (esp. in pharmaceutical and bio-tech. fields) arketing activities 23.03.12 Venture Capital 15
  16. 16. Phase 4: Growth Finance ompany hits market eeds to stay afloat and grow to compete urther advice 23.03.12 Venture Capital 16
  17. 17. Phase 5: Exit Strategies • IPOs • Trade Sales • Secondary Sales • Buy Backs • Liquidations 23.03.12 Venture Capital 17
  18. 18. Phase 5: Exit Strategies • IPOs 23.03.12 18Venture Capital
  19. 19. Phase 5: Exit Strategies • Trade Sales 23.03.12 19Venture Capital
  20. 20. Phase 5: Exit Strategies • Secondary Sales 23.03.12 20Venture Capital
  21. 21. Phase 5: Exit Strategies • Buy Backs 23.03.12 21Venture Capital
  22. 22. Phase 5: Exit Strategies • Liquidations 23.03.12 22Venture Capital
  23. 23. Phase 5 Exit Strategies - Statistics • 2008, in exit volume terms: • trade sales dominated at 35% • sales to other private equity firms came to 30% • divestments by IPO/sale of quoted equity were 9% • trade sales dropped from 89 to 74 • sales to private equity firms increased from 10 to 29 • Total losses were down from € 139 million and 151 companies to € 118 million and 136 companies • As a result of declining share prices both declined the number of exits by IPO (from 7 to 3) and through the sale of shares (from 34 to 10). 23.03.12 Venture Capital 23
  24. 24. Advantages/Disadvantages • The VC Investor • Investment • Experience, advice, mentoring • Objectivity • Networking • Recruitment • Credibility • Shared risk 23.03.12 Venture Capital 24 Mandatory exit Loss of independence Right to lay off the workforce
  25. 25. Advantages/Disadvantages • Capital • Solely for our business • Start-up financing • Liable equity within the company • Improved rating 23.03.12 Venture Capital 25
  26. 26. Advantages/Disadvantages • Due Diligence Advantages Disadvantages • Company realises: − Where it stands in the market − What/where to improve − Possible future developments 23.03.12 Venture Capital 26 ime oney
  27. 27. Advantages/Disadvantages • The Company Advantages • Growth • Value • Security • Equity ratio 23.03.12 Venture Capital 27
  28. 28. Advantages/Disadvantages • Dilution Disadvantages • Dilution-decrease of sth • Anti-dilution protection − Milestone financing − Pay-to-play − Liquidation preferences 23.03.12 Venture Capital 28
  29. 29. Advantages/Disadvantages • Contractual protection for the VC investor • Information rights • Control rights • Representation and warranties • Anti-dilution protection 23.03.12 Venture Capital 29
  30. 30. Advantages/Disadvantages • Restrictions on the Transfer of Shares by Shareholders • The articles and shareholders‘ agreement • Exceptions − Investors‘ shares − Founders‘ shares 23.03.12 30Venture Capital
  31. 31. Advantages/Disadvantages • Investor‘s Protection-Exit • Drag-alone rights • Tag-along rights 23.03.12 31Venture Capital
  32. 32. Advantages/Disadvantages • Taxation 23.03.12 32Venture Capital
  33. 33. Discussion Points • Obstacles • Alternatives • Our best options 23.03.12 Venture Capital 33
  34. 34. Conclusion • Augumus Pecumian GmbH 23.03.12 Venture Capital 34
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