1. 1
Executive MBA
Class Presentation
By
Coşkun Akdeniz
Bilgi University
November 2001
VENTURE CAPITAL & PRIVATE
EQUITY
WHAT IS VENTURE CAPITAL

2. 2
INVESTMENT PROCESS: A TYPICAL VC INVESTMENT
START UP
CO
Entrepreneur Venture Fund
Big Idea,
Small Money
Corporate Governance,
Large Amount of
Money

3. 3
Management
Fee 2,5 % VC FUNDManagement
Company
EXIT
Investors:
Capital +80%
Management
Co.
20%
Distribution,
Carried
Interest
Portfolio
#4
Portfolio
#2
Portfolio
#3
Portfolio
#1
Founders Investors
P.Co Bank FofF P.Co T VC co. PP
Source: KAPİTALNET
non-active
INVESTMENT PROCESS : FUND STRUCTURE

4. 4
INVESTMENT PROCESS : TIMELINE
Organization
& Formation
Months 1-6
Fund
Raising
Months 6-18
Portfolio
Investments
Years 1-4
Portfolio
Management
Years 1-7
Portfolio
Exit
Years 3-10
1 2 3 4 5
Source: KAPİTALNET

5. 5
INVESTMENT PROCESS: WATERFRONT COVERAGE
Tech. Fund I
100 Mln
Innovative Technology Funds
Maturity / Value
V
e
h
i
c
l
e
/
R
i
s
k
Early Stage Mid Stage Late Stage
IPO
( USD )
Source: KAPİTALNET
Tech. Growth
Fund II
300 Mln
Big Tech. Co
Fund III
150 Mln

6. 6
FUND RAISING BY VENTURE CAPITALIST
DEAL GENERATION
INITIAL SCREENING
SECOND SCREENING,VALUATION AND DUE DILIGENCE
DEAL APPROVAL AND STRUCTURING
POST INVESTMENT MONITORING
INVESTMENT REALISATION
ENTREPRENEUR’S EXIT AND ASSESSMENT BY
VENTURE CAPITALIST
VC FUND RAISING, DEAL APPRAISAL, MONITORING AND SERIAL ENTREPRENEURS
POST EXIT MONITORING BY
VENTURE CAPITALIST
POST EXIT CAREER – RETIREMENT; CONSULTANCY;
INVESTMENT BY ANOTHER VENTURE CAPİTALİST;
MANAGERIAL CAREER
G
o
v
e
r
n
a
n
c
e
b
y
F
u
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d
e
r
s
R
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p
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t
i
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g
t
o
F
u
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d
e
r
s
S
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i
a
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E
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p
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r
s
Source: Wright and Robbie, Journal of Finance Accounting, JuneJuly 1998 KAPİTALNET

7. 7
- 4 out of 40,000 ideas get funded by VCs,
- Only about 4,000 ideas reach the pre-business plan
stage,
- 400 write some kind business plan,
- 40 get some funding by angels and other sources,
- Only 4 get funded by VCs.........
STATISTICALLY SPEAKING

8. 8
BUSINESS PLAN DEVELOPMENT

9. 9
MAGIC
Investor must visualize and be committed
to your dream. Convey this through the
following components:
- Company: business purpose, objectives, history, legal
structure, and ownership.
- Products or Services: general description, technical
specifications, and proprietary position.

10. 10
MAGIC (Con’t)
- Competitive Advantages: management team strengths,
market opportunity, product/service uniqueness and
sustainability, and the business model.
- Operational Strategy: operational plans, strategic
partners, and government regulations.

11. 11
MARKET
Key market sections:
- Industry Overview: description, structure, and size of
targeted industry and markets
- Customer: description, segmentation, and size of
targeted and future customer groups.
- Competition: current and potential competitors,
including their positioning and advantages.

12. 12
MARKET (Con’t)
- Marketing Strategy: advertising, promotion,
public relations, and media programs.
- Sales Strategy: distribution channels and
strategic partnering.

13. 13
MONEY
Key money sections:
- Revenue Model: pricing and volume assumptions and
revenue streams.
- Financial Statements: 3 to 5 years of key historical and
projected statements of income, statements of cash
flow, and balance sheets.

14. 14
MONEY (Con’t)
- Previous Financing: amount and timing of capital
investments and the type of provider. Company
Valuation: “pre-money” company valuation and
comparable companies.
- Capital Requirements: amount of capital required for
existing and future rounds.
- Uses of Funds: distribution of required capital

15. 15
MONEY (Con’t)
- Exit Strategy: description and timeframe of probable
liquidity event, such as an IPO or acquisition.

16. 16
MANAGEMENT
Key management sections:
- Executive Officers/Senior Managers: professional and
academic experience.
- Board of Directors/Advisory Board: experienced,
diverse and active.
- Future Staffing: expansion and succession plans for key
staff.

17. 17
BUSINESS PLAN SUMMARY
- Venture capital providers receive hundreds of
investment plans a year.
- But, typically request and review the business plan’s
“executive summary”.
- Executive summary indicates the investment
opportunity’s compatibility with the venture capital
provider.

18. 18
BUSINESS PLAN SUMMARY ( Con’t)
- If the executive summary sparks their interest, will
request the complete business plan
- Many are rejected because they lack pertinent
investment information.

19. 19
Expecting Class Contribution!
Use the course book and other case papers provided to
develop your own original presentations.
You may refer to the attached information.
No more than 8 to 10 slides.
Course Instructor