enture Capital is one of those things that’s often discussed, but maybe not completely understood. You’ll often hear about a company being “venture backed” or famous venture capital firms that make hugely profitable investments in things like Facebook. It’s rare, though, to see a breakdown of how the venture capital industry actually works. For instance, what’s the difference between a venture capital firm and an angel investor? How does a company end up getting venture capital funding? How much money is exchanged? Where does it take place? Is it all in Silicon Valley? You’ll be surprised how much venture capital money is in places like Texas and the Midwest. Source: http://blog.surepayroll.com/look-inside-venture-capital-industry/

1. VEENTTUREE
CAPPIITTALL
IIndussttRY
Investors are not looking to be
involved in the business they’ve
invested in forever. Typically the
investment life-cycle has an entry
and exit strategy planned out in
advance. {
{
As part of the fourth stage
of the investment life-cycle,
there are typical stages for
the release of funds into
the business.
47%
$6 Billion
Software
TWO DIFFERENT TYPES
OF VENTURE CAPITALISTS
Investment
Life-Cycle
Common Stages of
Venture Capital
Investing?
SEED STAGE: capital
provided, usually directed
toward early development,
products, research, and/or
developing a business plan
Total Investments
As of the first two quarters in 2014 venture
Capitalists have invested approximately
$1.8 Billion
$1 Billion
$747 M
JAN FEB MAR APR MAY JUN
Where Is The Money?
In 2nd Quarter
A LOOK INTO THE
Venture capitalism is a way for young
companies or startups to receive funding
from investors that provide the capital
necessary to grow or expand a fledgling
business. Venture capitalism is traditionally
seen as a high risk, high reward type of
investment and investors are typically seated
on the board of the company with a say in
decisions and partial equity.
The top 10 regions of investments by venture capitalists:
SAN DIEGO
The Firms Behind
the Money
1 Andreessen Horowitz
2 New Enterprise Associates
Although venture capitalism is high risk, high reward, it
is a huge business and is responsible for funding many
of the businesses that would otherwise fail. Small
businesses are crucial to the US economy, and venture
capitalism supports that ecosystem.
$7.1 billion
$1.3 billion
$1.2 billion
$538 million
$497 million
$411 million
$364 million
$354 million
8%
Media
6%
IT
$247 million
$222 million
SILICON VALLEY
NEW ENGLAND
NEW YORK METRO
LA / ORANGE COUNTY
MIDWEST
NORTHEAST
SOUTHEAST
TEXAS
$9.8 Billion
In 1st Quarter
14%
$13 Billion Biotech
BUSINESS PLAN
SUBMITTED: venture
capitalists review the business
plan and speak with the
entrepreneurs
1
EXIT: Sometimes known as a liquidity event;
at maturation, the venture funds exit the
business, through IPOs (Initial Public
Offerings), acquisitions, and mergers
5
INVESTMENT: capital is
provided to the business,
usually as a part of a deal
trading equity and/or debt
3
EXECUTION: The investor(s)
become actively involved,
providing funds, advice, and
oversee milestone completion
4
DUE DILIGENCE: the prospective investor
looks into the business in great detail to get
a full picture of the company’s strengths,
weaknesses, and operations
2
Life-cycles typically last
about 10 years, but can be
longer or shorter
depending on each
{
Focus on young startups or
high-growth companies
Take high risks at the hope
of high reward
Participate in boards,
management, structuring,
and decision making
Plan for longer investment
maturation
Invest capital
3
4
EARLY STAGE: capital provided to support growth in
capabilities, encompasses start-ups that need support for
product development and marketing, as well as first stages
that need support for manufacturing and are testing, or
beginning testing
LATER STAGE:
capital provided
for companies
that are in
business but
possibly not
turning a profit
A. THIRD STAGE:
capital provided
for expansions,
improvements,
and marketing
B. EXPANSION
STAGE:
encompasses
second and third
stages
C. MEZZANINE
OR BRIDGE
STAGE: capital
provided to go
public
IT’S ALL IN THE
NUMBERS
investopedia.com/terms/v/venturecapital.asp
sba.gov/content/venture-capital
securedocs.com/blog/2013/11/vc-fund-lifecycle/
investopedia.com/exam-guide/cfa-level-1/alternative-investments/venture-capital-investing-stages.asp
pwcmoneytree.com/CurrentQuarter/ByIndustry
pwc.com/en_US/us/health-industries/publications/assets/pwc-moneytree-venture-funding-q3-2013.pdf
cbinsights.com/blog/active-venture-capital-firms-h1-2014-silicon-valley-york-massachusetts/
entrepreneur.com/vc100
created by
1
2
FORMATIVE STAGE:
This stage includes the
seed and early stages
$596 million 45 deals
$563 million 34 deals $533 million 34 deals
$491million 31 deals
$440 million 57 deals $427 million 40 deals
$325 million 28 deals $319 million 36 deals
33 deals
$488 million
$667 million 82 deals
3 Google Venture
5 Lightspeed Venture Partners
8 General Catalyst Partners
9 Battery Ventures 10 Khosla Venture
4 Kleiner Perkins Caufield & Byers
6 Accel Partners
7 First Round Capital
Who is behind the funding? In
2013, the top 10 most active
venture capital firms were. {
VENTURE CAPITAL FIRMS
A group or partnership of
investors
ANGEL INVESTORS
Individuals with high net worth
looking for high returns on their
investments; often former
entrepreneurs
DC/METROPLEX