Venture capitalists provide the capital that builds the apps on your phone, the applications in your office, and the services in your browser. Increasingly, the cars you drive, the food you eat, and the way you communicate, and even date are a result of funded projects. However, many of us don’t know how venture capital really operates. How do VCs decide where to allocate capital? How do VCs really make money? Why do some invest early and some wait to invest later? What is an LP? What is a GP? Pre-money vs post-money?

1. VC 101: How & Why
VCs Do What They Do
(and the Key Things You Should Know as a Founder)
Dr. Sean Wise, BA, LLB, MBA, PhD
Professor of Entrepreneurship
Partner, Ryerson Futures Seed Fund

2. @SeanWise

3. Disclaimer
• The views and opinions expressed today are those of the speaker and do
not necessarily reflect the official policy or position of nay other agency,
organization, employer or company (including but not limited to: Amazon,
Ryerson, MARS and Ryerson Futures).
• The speaker makes no representations as to the accuracy, completeness,
correctness, suitability, or validity of any information shared. All
information is provided on an “as-is-basis”.
• Assumptions made in the analysis are not reflective of the position of any
entity other than the speaker. Comments made by the speaker are the
sole responsibility of the speaker. Except for slides with other companies
logos on them. In those cases, the opinions are those companies.
• The speaker reminds you that we are all critically thinking human beings
and thus the aforementioned views, opinions and comments are subject
to change, revision and rethinking.
• Further, the speaker reminds you that all humor, funny voices or snarky
comments are subjective. So when in doubt – laugh.

5. • About Me
• About You
• VC 101:
– How venture capital really operates. How do VCs
decide where to allocate capital?
– How do VCs really make money?
– Why do some invest early and some wait to invest
later?
– What is an LP? What is a GP?
– Pre-money vs post-money?
• Questions
Today’s Agenda

6. First startup at 13
Took first company public at 31
Nominated to Canada’s Top 40 under 40
Startup Canada’s National Mentor of the Year, 2014
National Fellow for Startup Communities, 2016
Coller Distinguished Visiting Professor for Venture, Tel Aviv University, 2017
Exited the last company I founded in July 2018 for $25M
A bit about me…

7. Dr. Sean Wise, 2018
A bit about me…

8. Portfolio of Recent
Investments

9. Portfolio of Recent
Investments
What we look for
• Smart founders with Deep Domain Knowledge and
Strong Networks
• Startups whose MVP is already in market with Pilot
customers
• Startups who serve the Enterprise Market through
SaaS offerings

10. About you?A bit about You

11. Being a founder is hardBeing a Founder is hard

12. VC 101

15. What is an LP?
What is a GP?

18. How does venture
capital really operate?

19. LP1 LP3LP2
FUNDGP
Provide Funds
Manage Funds
VC Math
Invest Funds
Startup Startup StartupStartupStartupStartupStartupStartupStartupStartup
Shut Down 2-3x ROINo Return Yet 10x ROI
Generate Returns

21. LP1
VC Math
Startup
3 LPs invest $100M into fund
GP
LPs charge 2/20
10 startups each get $10M
% of
Portfolio
Total
Money In
Total
Money Out
30% $30M 0
30% $30M O
20% $20M $40M
10% $10M $100M
After 5-7 years:
• Total Return = $140M
• Repaid to LPs = $100M + $20M (fees/expenses)
• Left to Distribute = $20M
• LPs get 80% = $16M
• GPs get 20% = $4M

24. How do VCs really
make money?

25. 2/20
• 2% in fees and expenses
• 20% of carried interest

26. Why do some invest
early and some wait
to invest later?

27. Investment
Hypothesis
• Investors usually have a basic premise for
making a particular investment. ... Evaluating
the accuracy of the investment hypothesis
early in the acquisition process allows the
investor to increase their returns and reduce
due diligence expenses.

29. Pre-money vs post-money?

34. This is not Dragons’ Den

35. Final Thoughts

36. Entrepreneurs change the world.
You have the potential to be an
entrepreneur. You make your dreams come
true.
All you need is the courage to start, the will
to follow through & the path to follow.
#WantrepreneurNOmore
I Believe…

37. ©2018, TORONTO, CANADA, SEAN WISE, 100 STEPS 2 STARTUP INC.
Questions?
Sean.Wise@Ryerson.ca