The emerging industry of Greek start-ups has gained remarkable ground, but also a lot of government recognition and kind of support during the last years: “A strong culture of innovation and entrepreneurship drives the public and private sectors to join forces through Elevate Greece and reach out into global markets, promoting Greece as a major innovation hub in Southeast Europe” (Source: https://elevategreece.gov.gr). But start-ups need, amongst others, to get supported with alternative funding methods: at the early stages of development, raising debt capital is extremely difficult for young companies, especially those with business models that aren’t fully proven, or firms that haven’t reached their break-even. This is where Venture Capital (VC) plays a huge role by making risky investments in start-ups and young companies in return for equity ownership. The role is not limited to the capital contribution, VC also provides mentorship, industry connections, and a support network that enables the expansion of young business models. Therefore VC is not only beneficial to entrepreneurs, but it also has a positive impact on economic and business development. This document summarizes the essentials of VC principles, activities, and methods and is based on VC guidelines published by international associations.

1. THE ESSENTIALS OF
VENTURE CAPITAL
Costas Kappos, Senior Executive and Advisor, 2021

2. Costas Kappos, Senior Executive and Advisor, 2021
OVERVIEW OF
PROFESSIONAL STANDARDS FOR
VENTURE CAPITAL
2

3. Costas Kappos, Senior Executive and Advisor, 2021
3 WHAT IS VENTURE CAPITAL?
● Venture capital firms are professional, institutional managers of risk capital that enable and support the most
innovative and promising companies. Venture capital supports new ideas that:
○ Could not be financed with traditional bank financing;
○ Threaten established products and services in a corporation or industry; and
○ Typically require five to eight years (or longer!) to reach maturity.
● Venture capital is quite unique as an institutional investor asset class:
○ Venture capital funds make equity investments in a company whose stock is essentially illiquid and
worthless until a company matures five to eight years down the road.
○ Follow on investment provides additional funding as the company grows. These “rounds,” typically
occurring every year or two, are also based on equity in the company, with the shares allocated among
the investors and management team based on an agreed “valuation.”
○ However, unless a company is acquired or goes public, there is little actual value. Venture capital is a
long-term investment.

4. Costas Kappos, Senior Executive and Advisor, 2021
4
LP = Limited Partners = Investors
GP = General Partners = Managers

5. Costas Kappos, Senior Executive and Advisor, 2021
VENTURE CAPITAL CODE OF
CONDUCT
ACT WITH
INTEGRITY
DISCLOSE
CONFLICTS OF
INTEREST
MAINTAIN
CONFIDENTIALITY
KEEP YOUR
PROMISES
ACT IN FAIRNESS
DO NOT HARM TO
THE INDUSTRY

6. Costas Kappos, Senior Executive and Advisor, 2021
VENTURE CAPITAL ACTIVITIES
6
Fundraising Investing
Managing
investments
Disposing
Investments
● Process and resources
planning
● Investment strategy
● Fund marketing
● Investors targeting
● Terms of investment
● Fundraising documents
and data rooms
● Terms in the fund
documents
● Presentation to
investors
● Track records
● Forecasts
● Due diligence
● Responsible
investment
● Investment decision
● Investment agreement
● Board appointment
and other actions
consent
● Corporate strategy
● Divestment planning
● Investment monitoring
● ESG factors
● Board structure &
membership
● Follow-on investments
● Reporting to investors
● Underperforming
investments
● Divestment decision
● Implementation of the
divestment plan
● Warranties
● Cash vs.
share/earn-outs
● Timing
● Distribution provision
to investors

7. Costas Kappos, Senior Executive and Advisor, 2021
FUNDRAISING ACTIVITIES
7
Fundraising Investing
Managing
investments
Disposing
Investments
● Fundraising documents:
○ Investment strategy (policy, criteria, period)
○ Team
○ Conflict of interest resolution procedures
○ Limited Partners Advisory Committee (LPAC)
○ Reporting for Investors
○ Financial terms (costs, management fees,
distribution procedures)
○ Risk factors affecting the kind of investments
of the fund
○ Regulatory and tax
● Target investors:
○ Balanced
○ Diversified
○ Compliance with laws / anti-laundering
○ Terms / different by investors
○ Presentations compliance with laws
○ Confidentiality of fund’s track records
○ Forecast of fund’s likely performance

8. Costas Kappos, Senior Executive and Advisor, 2021
INVESTING ACTIVITIES
8
Fundraising Investing
Managing
investments
Disposing
Investments
● Investment decision:
○ Successful DD & Business Plan
assumptions confirmation
○ Experience of the senior
executives to evaluate
critically the DD information
○ Fitting to investment criteria
set
○ Based on a written and well
documented investment
proposal
● Due Diligence (DD):
○ Commercial
○ Market(s)
○ Financial
○ R&D, Technology
○ Legal, Tax, Regulatory
○ IT
○ Intellectual property
○ Management capability
○ Environmental, social and
governance (ESG)
○ Also: check BP assumptions,
sensitivity and potential
returns
● Investment agreement:
○ Control of the portfolio
company (PC)
○ Share transfer and rights
○ PC management incentives
○ Management responsibilities
division
○ Investment performance
milestones
○ Agreements with lenders to
PC and intercreditor
agreements
○ Exit provisions

9. Costas Kappos, Senior Executive and Advisor, 2021
MANAGING INVESTMENTS
ACTIVITIES
9
Fundraising Investing
Managing
investments
Disposing
Investments
● Investment monitoring:
○ Key Performance Indicators
(KPIs)
○ Financial and non-financial
reporting
■ Internally
■ To investors
○ Regular internal performance
analysis vs. investment thesis
○ Ensure and apply appropriate
corporate governance rules
and procedures
○ Follow-on investments
(if/when necessary)
● Potential fund’s activism by PC:
○ Possibly diversified Board
appointments
○ Alignment of the BoD with the
fund’s interests
○ Fund’s Board appointees must
be familiar with the PC
matters
○ Internal committees
appointments
○ Strategy revision(s) or
refinement
○ Recommended: in advance
exit strategy and divestment
planning agreement
● Underperforming investments:
○ Increase frequency and depth
of monitoring
○ Discuss strategies and tactics
to get turnaround
○ Agree remedial actions
(consultants, new
approaches, new
opportunities)
○ Troubleshooting measures;
management changes
○ Settlements with banks and
other creditors

10. Costas Kappos, Senior Executive and Advisor, 2021
DISPOSING INVESTMENTS
ACTIVITIES
10
Fundraising Investing
Managing
investments
Disposing
Investments
● Distributions to investors:
○ Fund provisions on
distributions to investors
○ Distributions to be made as
soon as possible after the
investment realization
● Divestment decision making:
○ Although is already
considered in the investment
phase, it is dynamic process
reflecting the actual
development of the PC
○ The decision process mirrors
the investment decision
process
○ Cash exit is preferred vs.
shares/earn-outs
● Reporting to the investors:
○ Predefined frequency,
content, form, valuation rules
○ Proactively transparent to
investors
○ Communication with
investors over data rooms,
and annual meetings
○ Establishment of an Investor
Advisory Committee

11. Costas Kappos, Senior Executive and Advisor, 2021
11 DUE DILIGENCE FOR STARTUPS?
● Due diligence is an investigation, audit, or review performed to confirm the facts of a matter under consideration. In the
financial world, due diligence requires an examination of financial records before entering into a proposed transaction with
another party.
● When considering investing in a startup, some typical due diligence steps aren't possible because the company doesn't
have the track record. Here are some startup-specific due diligence moves:
○ Include an exit strategy. More than 50% of startups fail within the first two years. Plan a strategy to recover your
money should the business fail.
○ Consider entering into a partnership: Partners split the capital and risk, so they lose less if the business fails.
○ Figure out the harvest strategy for your investment. Promising businesses may fail due to a change in
technology, government policy, or market conditions. Be on the lookout for new trends, technologies, and
brands, and get ready to harvest when you find that the business may not thrive with the changes.
○ Choose a startup with promising products. Since most investments are harvested after five years, it is advisable
to invest in products that have an increasing return on investment (ROI) for that period.
○ In lieu of hard numbers on past performance, look at the growth plan of the business and evaluate whether it
appears to be realistic.

12. Costas Kappos, Senior Executive and Advisor, 2021
INVESTMENTS APPRAISAL CRITERIA
12
Strategy
03
● Market / verticals trends
● Competitive position
● Growth strategy
● Customer management
Operation
02
● Revenue / profitability plan
● Expense management
● Operational plans
● Process quality and efficiency
Management
01
● Quality of management and key staff
● Planning and accountability
● Compensation
● Information management and reporting
Transactions
04
● Value realization
● Accretive add-on acquisitions
● Exit time (envisaged)
Cost
05
● Financing cost
● Input-output ratio
● Assess structure

13. Costas Kappos, Senior Executive and Advisor, 2021
VENTURE CAPITAL
INVESTMENT LIFE CYCLE
13

14. Costas Kappos, Senior Executive and Advisor, 2021
INDICATIVE VENTURE CAPITAL
ORGANIZATIONAL STRUCTURE
14
CEO
Operations
Investment
Committee
Investments
Management
Portfolio
Management
Financial and
Accounting
Administration
and Back Office
BoD
Fundraising
Communication
Compliance
Advisory
Committee
Internal Audit

15. Costas Kappos, Senior Executive and Advisor, 2021
OVERVIEW OF
VENTURE CAPITAL INVESTMENT
VALUATION TECHNIQUES
15

16. Costas Kappos, Senior Executive and Advisor, 2021
16 VALUATION APPROACHES
The economic/income-based valuation of an
asset has two distinct components:
● the cash flows (or earnings) attributable to
the assets; and
● capitalisation of those cash flows (or
earnings).
Alternatively can be used:
● Excess earnings,
● Relief from royalty,
● Project/asset cash flow analysis (direct or
indirect), and
● Greenfield project analysis.
1.Income Approach
Discounted Cash Flows Method
● As per this approach, the value of an asset
is determined by reference to the prices
paid for comparable assets in recent
transactions.
● However, the use of this methodology is, in
practice, often limited by the scarcity of
comparable transactions, the lack of
publicly available information for such
transactions, or other relevant issues.
2.Market Approach
Capital Market Multiples Method
Comparable Transaction Method
Stock Market Capitalization
● This approach uses the concept of
replacement or reproduction cost as an
indicator of value of an asset. The main
premise of this approach is that a prudent
investor would pay no more for an asset
under examination, than the amount for
which this asset could be replaced or
reproduced.
● Adjustments are then made to reflect the
reduction in value resulting from physical
deterioration and functional or economic
obsolescence.
3.Cost Approach
Adjusted Net Book Value Method

17. Costas Kappos, Senior Executive and Advisor, 2021
17 RELATED TERMS: DCF AND WCC
Weighted average cost of capital
(WACC)
● The weighted average cost of capital (WACC) is a
calculation of a firm's cost of capital in which each
category of capital is proportionately weighted.
● All sources of capital, including common stock,
preferred stock, bonds, and any other long-term debt,
are included in a WACC calculation.
● A firm’s WACC increases as the beta and rate of return
on equity increase because an increase in WACC
denotes a decrease in valuation and an increase in
risk.
Discounted cash flow (DCF)
● Discounted cash flow (DCF) helps determine the value of
an investment based on its future cash flows.
● The present value of expected future cash flows is arrived
at by using a discount rate to calculate the discounted
cash flow.
● If the discounted cash flow is above the current cost of the
investment, the opportunity could result in positive
returns.
● Companies typically use the weighted average cost of
capital for the discount rate, as it takes into consideration
the rate of return expected by shareholders.

18. Costas Kappos, Senior Executive and Advisor, 2021
18 IRR VS. ROI
Internal Rate of Return (IRR)
● The internal Rate of Return (IRR) is a metric used in
financial analysis to estimate the profitability of potential
investments. The internal rate of return is a discount rate
that makes the net present value (NPV) of all cash flows
equal to zero in a discounted cash flow analysis.
● IRR is the annual rate of growth an investment is expected
to generate. IRR is calculated using the same concept as
NPV, except it sets the NPV equal to zero.
● IRR is ideal for analyzing capital budgeting projects to
understand and compare potential rates of annual return
over time.
● Most companies will require an IRR calculation to be
above the WACC.
Return on Investment (ROI)
● Return on Investment (ROI) is a performance measure
used to evaluate the efficiency of an investment or
compare the efficiency of a number of different
investments.
● ROI tries to directly measure the amount of return on a
particular investment, relative to the investment’s cost.
● To calculate ROI, the benefit (or return) of an investment
is divided by the cost of the investment. The result is
expressed as a percentage or a ratio.

19. Costas Kappos, Senior Executive and Advisor, 2021
SOURCES FOR THIS DOCUMENT
19

20. Costas Kappos, Senior Executive and Advisor, 2021
DISCLAIMER
20
While the information contained in this document has been obtained from sources believed to be reliable, I
disclaim all warranties as to the accuracy, completeness or adequacy of such information.