As a technology company, I like the idea of bootstrapping. In fact, that is how we are building I Like Fashion Retail as a company. We are bootstrapping my business thus far
Topics Discussed:
- What is Venture Capital
- Overview of VC Funds
- VC Investment Process
- VC Investing Strategies
- Other Investors
- VC Fundraising Materials
- Resources
Investment basics wayne lippman
Wayne Lippman has forty years of involvement in broad daylight bookkeeping incorporating a quarter century Price Waterhouse, where he served as an expense accomplice in the San Francisco and Oakland workplaces. He was already Managing Tax Partner of the Walnut Creek office of Price Waterhouse.
Wayne spends significant time in individual assessment getting ready for corporate officials and corporate duty anticipating firmly held organizations. He has huge involvement in investment opportunity arranging, exploration and trial credits and multi-state tax assessment. His industry experience incorporates the tax assessment of assembling, dispersion, development, high innovation, retail, benefit commercial enterprises, land organizations and endeavor reserves. Wayne is dynamic in expert associations and is a past administrator of the Taxation Committee of the California Society of Certified Public Accountants, East Bay Chapter. Wayne Lippman got a Bachelor of Arts degree in Economics from the University of California, Berkeley and a Master of Science degree in Taxation from Golden Gate University.
Topics Discussed:
- What is Venture Capital
- Overview of VC Funds
- VC Investment Process
- VC Investing Strategies
- Other Investors
- VC Fundraising Materials
- Resources
Investment basics wayne lippman
Wayne Lippman has forty years of involvement in broad daylight bookkeeping incorporating a quarter century Price Waterhouse, where he served as an expense accomplice in the San Francisco and Oakland workplaces. He was already Managing Tax Partner of the Walnut Creek office of Price Waterhouse.
Wayne spends significant time in individual assessment getting ready for corporate officials and corporate duty anticipating firmly held organizations. He has huge involvement in investment opportunity arranging, exploration and trial credits and multi-state tax assessment. His industry experience incorporates the tax assessment of assembling, dispersion, development, high innovation, retail, benefit commercial enterprises, land organizations and endeavor reserves. Wayne is dynamic in expert associations and is a past administrator of the Taxation Committee of the California Society of Certified Public Accountants, East Bay Chapter. Wayne Lippman got a Bachelor of Arts degree in Economics from the University of California, Berkeley and a Master of Science degree in Taxation from Golden Gate University.
Managing startup equity (Equity For Startups)Kesava Reddy
Among the more important decisions that an entrepreneur makes is that of raising capital. Many choices have to be made in this context: Debt versus Equity. Own funds versus Funding from outside investors and so on. These choices have long term implications for the entrepreneur as well as the start-up. Equity funding is essential for the growth of a startup. Apart from providing critical funding equity investors also often bring added value by way of connections and strategic advice.
At the same time raising equity capital means sharing control and sharing wealth with the investors in the firm. Allowing investors to engage with the management of the startup calls for a certain degree of compatibility between the investor and the management of the enterprise. Absence of such compatibility can lead to unhappy relationships between the investor and the management team.
All things considered, managing the equity of a start-up is among the most critical decisions that an entrepreneur needs to make. It involves many trade-offs on the entrepreneurial journey. Which makes Managing the Equity of A Start Up a challenge. What does dilution of equity mean? How does the arithmetic of dilution work? How does an entrepreneur decide on when to raise equity? And how much of equity to raise?
It is good to know the basics before making investments in Stock Markets. History has recorded scores of investors who have made fortune out of stock market. And if your investments are timed well, you could be the next fortune maker in the market.
Have a great idea, but not sure how to get funding to turn it into a business? This presentation highlights the many ways to find funding and focuses on the pros & cons of using venture capital to launch.
Drexel University Lecture - Private Equity OverviewJustin Shuman
A high level overview of the private equity market, how fund economics work, and what questions to ask general partners when evaluating fund investment merit.
Venture Capital 101 presentation on the basics of VC such as what venture capital is, and how it works. I delivered this presentation to a student group called InSITE that I belong to (mix of Columbia and NYU MBA and Law students). Enjoy!
-Brian Rothenberg
www.brianrothenberg.com
Just starting out on your investment journey?
Or have you been investing for a while and need a refresher?
A smart investor takes the time to be clear on the basic principles of investing and uses these to improve investing skills over time and more importantly, to avoid the costly pitfalls. And a smart investor doesn't rely on good luck. Instead, they take the time to consider their investment goals. Then they develop a plan and choose investments that align with their needs and objectives.
This workshop will cover the following areas:
Taking control!
Your money and your life
Savings and investments
Risk and diversification
Investment strategies
Managed fund, shares and property
By attending this session you will gain a better understanding of the fundamental investment principles such as gearing, asset allocation, diversification, dollar cost averaging & compounding. You will leave with a deeper understanding of these concepts which can help you, as an investor, avoid making mistakes and losing substantial sums of money.
Giving you greater confidence, peace of mind and ultimately better financial outcomes
Nick Gahan
Senior Financial Advisor
Nick is passionate about holistic advice encompassing superannuation (including SMSFs), personal insurance, investments, estate planning, retirement planning and social security and ensuring his clients are receiving comprehensive advice.
Presentation on the investment basics for Startups. Essentials of startup investments, focusing on funding cycles, risk management and investor structures.
Venture Capital Funds 101: Understanding How They Are Structured and Operated...UCICove
About UCI Applied Innovation:
UCI Applied Innovation is a dynamic, innovative central platform for the UCI campus, entrepreneurs, inventors, the business community and investors to collaborate and move UCI research from lab to market.
About the Cove @ UCI:
To accelerate collaboration by better connecting innovation partners in Orange County, UCI Applied Innovation created the Cove, a physical, state-of-the-art hub for entrepreneurs to gather and navigate the resources available both on and off campus. The Cove is headquarters for UCI Applied Innovation, as well as houses several ecosystem partners including incubators, accelerators, angel investors, venture capitalists, mentors and legal experts.
Follow us on social media:
Facebook: @UCICove
Twitter: @UCICove
Instagram: @UCICove
LinkedIn: @UCIAppliedInnovation
For more information:
cove@uci.edu
http://innovation.uci.edu/
Managing startup equity (Equity For Startups)Kesava Reddy
Among the more important decisions that an entrepreneur makes is that of raising capital. Many choices have to be made in this context: Debt versus Equity. Own funds versus Funding from outside investors and so on. These choices have long term implications for the entrepreneur as well as the start-up. Equity funding is essential for the growth of a startup. Apart from providing critical funding equity investors also often bring added value by way of connections and strategic advice.
At the same time raising equity capital means sharing control and sharing wealth with the investors in the firm. Allowing investors to engage with the management of the startup calls for a certain degree of compatibility between the investor and the management of the enterprise. Absence of such compatibility can lead to unhappy relationships between the investor and the management team.
All things considered, managing the equity of a start-up is among the most critical decisions that an entrepreneur needs to make. It involves many trade-offs on the entrepreneurial journey. Which makes Managing the Equity of A Start Up a challenge. What does dilution of equity mean? How does the arithmetic of dilution work? How does an entrepreneur decide on when to raise equity? And how much of equity to raise?
It is good to know the basics before making investments in Stock Markets. History has recorded scores of investors who have made fortune out of stock market. And if your investments are timed well, you could be the next fortune maker in the market.
Have a great idea, but not sure how to get funding to turn it into a business? This presentation highlights the many ways to find funding and focuses on the pros & cons of using venture capital to launch.
Drexel University Lecture - Private Equity OverviewJustin Shuman
A high level overview of the private equity market, how fund economics work, and what questions to ask general partners when evaluating fund investment merit.
Venture Capital 101 presentation on the basics of VC such as what venture capital is, and how it works. I delivered this presentation to a student group called InSITE that I belong to (mix of Columbia and NYU MBA and Law students). Enjoy!
-Brian Rothenberg
www.brianrothenberg.com
Just starting out on your investment journey?
Or have you been investing for a while and need a refresher?
A smart investor takes the time to be clear on the basic principles of investing and uses these to improve investing skills over time and more importantly, to avoid the costly pitfalls. And a smart investor doesn't rely on good luck. Instead, they take the time to consider their investment goals. Then they develop a plan and choose investments that align with their needs and objectives.
This workshop will cover the following areas:
Taking control!
Your money and your life
Savings and investments
Risk and diversification
Investment strategies
Managed fund, shares and property
By attending this session you will gain a better understanding of the fundamental investment principles such as gearing, asset allocation, diversification, dollar cost averaging & compounding. You will leave with a deeper understanding of these concepts which can help you, as an investor, avoid making mistakes and losing substantial sums of money.
Giving you greater confidence, peace of mind and ultimately better financial outcomes
Nick Gahan
Senior Financial Advisor
Nick is passionate about holistic advice encompassing superannuation (including SMSFs), personal insurance, investments, estate planning, retirement planning and social security and ensuring his clients are receiving comprehensive advice.
Presentation on the investment basics for Startups. Essentials of startup investments, focusing on funding cycles, risk management and investor structures.
Venture Capital Funds 101: Understanding How They Are Structured and Operated...UCICove
About UCI Applied Innovation:
UCI Applied Innovation is a dynamic, innovative central platform for the UCI campus, entrepreneurs, inventors, the business community and investors to collaborate and move UCI research from lab to market.
About the Cove @ UCI:
To accelerate collaboration by better connecting innovation partners in Orange County, UCI Applied Innovation created the Cove, a physical, state-of-the-art hub for entrepreneurs to gather and navigate the resources available both on and off campus. The Cove is headquarters for UCI Applied Innovation, as well as houses several ecosystem partners including incubators, accelerators, angel investors, venture capitalists, mentors and legal experts.
Follow us on social media:
Facebook: @UCICove
Twitter: @UCICove
Instagram: @UCICove
LinkedIn: @UCIAppliedInnovation
For more information:
cove@uci.edu
http://innovation.uci.edu/
Lecture at the Founder Institute, Paris, France
1 February 2011
http://founderinstitute.com
(cc) BY NC SA, Rodrigo SEPÚLVEDA SCHULZ
http://www.rodrigosepulveda.com
Learning how a VC firm works behind the scenes is a good way to gain important strategic insights on becoming a more attractive investment. But understanding the ins and outs of a VC firm can be easier said than done, even for entrepreneurs who spend a lot of time speaking to investors.
Kauffman Foundation Report: Poor Long-Term Returns from Venture CapitalPhilipp Klöckner
A recent report by the Ewing Marion Kauffman Foundation raises serious questions about the degree to which venture capital deserves emulation.
The report, provocatively titled “We Have Met the Enemy and He is Us”, summarizes its findings thus:
Limited Partners (LPs) — foundations, endowments, and state pension funds — invest too much capital in underperforming venture capital funds on frequently misaligned terms. Our research suggests that investors like us succumb time and again to narrative fallacies, a well-studied behavioral finance bias.
How to VC: Creating a VC fund portfolio modelDave McClure
This article aims to help VCs figure out how to size a venture capital fund, how many companies to include in your portfolio, and when and how to do follow-on investments. Most VCs aim to make a 3X (net) return on initial fund capital, at a ~20% net IRR. Note however, likely less than 10% of most VC funds achieve that goal.
Venture Financings 101 (SAFEs, Convertible Notes, Seed and Series A) | Bardia...UCICove
An introductory crash course on the typical legal and business terms involved with, and negotiated in, venture capital fundraising including SAFE, Convertible Note, Series Seed and Series A financings.
Kijana Mack Ashton Global Investment ManagementKijana Mack
Ashton Global maintains long-standing relationships based on trust. We seek to be the best emerging manager platform in the world and we are dedicated to exceeding the expectations of our investors.
https://www.ashtonglobal.com/
Ashton Global is an emerging manager platform that specializes in niche investment strategies related to small-cap stocks and special situations.
Kijana Mack – Senior Managing Director, Portfolio Manager
Kijana has 14 years of experience in institutional investment management and corporate finance. He is responsible for overall enterprise risk and portfolio risk management at Ashton Global.
https://soundcloud.com/user-364986019/kijana-mack-interview-about-emerging-managers
Ashton Global Emerging Manager Hedge FundsKijana Mack
Kijana Mack is the Founder and Senior Managing Director at Ashton Global
https://kijanamack.com/
Kijana A. Mack, an expert in the global finance and energy sectors.
Please email kijana.mack@gmail.com for more information.
The importation and exportation of foods by jimmy stepanianJimmy Stepanian
Has your brokerage started a new branch?? Then Send an Internet press release to reporters. These can be sent over company e-mail, mixing another elements of traditional press releases like ..preapproved quotes, with technology rich features like links to your company beautiful logo, a video
What is Mergers ?& Its Type By Jimmy StepanianJimmy Stepanian
Be truthful with yourself about it being the great time to look at a merger. Many company founders, especially if they have rear a business from the start, may see the ability for the business but may overlook how their role in the new comapny will change.
jimmy stepanian | Capital structure | Financial Structure | decisions | Jimmy Stepanian
Capital structure is the combination of long term capital and debt resources. Examine your balance sheet and you will find that there will be three main sources of capital.
jimmy stepanian | Real estate commercial financing ideas | Jim stepanian |Jimmy Stepanian
The best real estate pros know a top deal when they see one. What is their secret? First, they have an exit plan the best deals are the ones where you realize you can walk away from.
Important facts about fha loans by jim stepanianJimmy Stepanian
An FHA loan is a mortgage coverd by the (FHA) Federal Housing Administration. Borrowers with Federal Housing
Administration loans pay for mortgage insurance, which save the lender from a loss if the borrower revert on the loan.
Business plan presentation by jimmy stepanianJimmy Stepanian
Decreasing your credit card limit can make a large difference with how much you can borrow for your property. If you do not use any credit cards you have you may like to consider cancelling them as lenders take credit cards into account when calculating how much you can borrow regardless of whether you use these or not.
Factors affect real estate prices by jimmy stepanianJimmy Stepanian
We have all heard the phrase “location, location, location” but what does this mean in practical terms when it comes to property prices? Economists enclose “location” in something called “hedonic pricing” for most homes, this translates to some useful key factors that impact your life and your daily lifestyle
7-Commercial Real-Estate Ideas by jimmy stepanianJimmy Stepanian
Spend a day Google searching for your local, newspapers, magazines, and business gazettes. Most editorials will have a list of contacts. With this information you willl be able to email your press releases. Send these contacts a simple email containing property details, how much it sold, property photo and information on seller, buyer or leasing business. Some press releases will be picked up while others would not. The likelihood of your stories being printed will depend on the news flow for that week.
Enterprise Excellence is Inclusive Excellence.pdfKaiNexus
Enterprise excellence and inclusive excellence are closely linked, and real-world challenges have shown that both are essential to the success of any organization. To achieve enterprise excellence, organizations must focus on improving their operations and processes while creating an inclusive environment that engages everyone. In this interactive session, the facilitator will highlight commonly established business practices and how they limit our ability to engage everyone every day. More importantly, though, participants will likely gain increased awareness of what we can do differently to maximize enterprise excellence through deliberate inclusion.
What is Enterprise Excellence?
Enterprise Excellence is a holistic approach that's aimed at achieving world-class performance across all aspects of the organization.
What might I learn?
A way to engage all in creating Inclusive Excellence. Lessons from the US military and their parallels to the story of Harry Potter. How belt systems and CI teams can destroy inclusive practices. How leadership language invites people to the party. There are three things leaders can do to engage everyone every day: maximizing psychological safety to create environments where folks learn, contribute, and challenge the status quo.
Who might benefit? Anyone and everyone leading folks from the shop floor to top floor.
Dr. William Harvey is a seasoned Operations Leader with extensive experience in chemical processing, manufacturing, and operations management. At Michelman, he currently oversees multiple sites, leading teams in strategic planning and coaching/practicing continuous improvement. William is set to start his eighth year of teaching at the University of Cincinnati where he teaches marketing, finance, and management. William holds various certifications in change management, quality, leadership, operational excellence, team building, and DiSC, among others.
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Holger Mueller of Constellation Research shares his key takeaways from SAP's Sapphire confernece, held in Orlando, June 3rd till 5th 2024, in the Orange Convention Center.
Personal Brand Statement:
As an Army veteran dedicated to lifelong learning, I bring a disciplined, strategic mindset to my pursuits. I am constantly expanding my knowledge to innovate and lead effectively. My journey is driven by a commitment to excellence, and to make a meaningful impact in the world.
Discover the innovative and creative projects that highlight my journey throu...dylandmeas
Discover the innovative and creative projects that highlight my journey through Full Sail University. Below, you’ll find a collection of my work showcasing my skills and expertise in digital marketing, event planning, and media production.
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In this comprehensive presentation, we will explore strategies and practical tips for enhancing profitability in small businesses. Tailored to meet the unique challenges faced by small enterprises, this session covers various aspects that directly impact the bottom line. Attendees will learn how to optimize operational efficiency, manage expenses, and increase revenue through innovative marketing and customer engagement techniques.
Business Valuation Principles for EntrepreneursBen Wann
This insightful presentation is designed to equip entrepreneurs with the essential knowledge and tools needed to accurately value their businesses. Understanding business valuation is crucial for making informed decisions, whether you're seeking investment, planning to sell, or simply want to gauge your company's worth.
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2. A Beginner’s Guide to Venture Capital
2
• Where Does Venture Capital Money Come From?
• How are Venture Capital Funds Organized?
• How do Venture Capitalists make money Personally?
3. A Beginner’s Guide to Venture Capital
3
• Where Does Venture Capital Money Come From?
• Professional Venture Capital Firms raise money from Insurance
Companies, Educational Endowments, Pension Funds and Wealthy
Individuals.
• These organizations have an investment portfolio which they allocate
to various asset classes such as stocks (equities), bonds, real estate
etc.
• One of the assets classes is called “Alternative Investments”- venture
capital is such an investment. Perhaps 5% to 10% of the portfolio
might be allocated to Alternative Investments.
• The portfolio owners seek to obtain high returns from these more
risky Alternative Investments.
4. A Beginner’s Guide to Venture Capital
4
• How are Venture Capital Funds Organized?
• Most Venture Capital Funds are Limited Partnerships:
Venture Capital
Fund
Limited Partners
Pension Funds, Educational Endowments,
Foundations, Insurance Companies, Wealthy
Individuals
General Partners
These are the “Venture Capitalists” you will deal
with. They may have been Entrepreneurs in a
prior life or they might be financial types.
The General Partners use an Offering
Memorandum to raise a fund of a given size from
the Limited Partners by convincing them that the
GPs have a unique strategy or expertise in a
particular sector or sectors of the market. Fund
raising can take a year or more.
If the GPs are successful they will convince
enough Limited Partners to invest enough
money to achieve the size fund offered.
When this happens there is a first “close” of
the fund.
5. A Beginner’s Guide to Venture Capital
5
• What Do Venture Capitalists Do?
• Source Deals
• The GPs have to “source” deals- I.e. find investment opportunities. This is
done in a variety of ways- referrals from trusted sources (other funds,
entrepreneurs they have invested in before, lawyers, accountants etc.)
• Make Investment Decisions
• From the opportunities identified the GPs pick the ones they think will be the
“winners”. They might look at 50 or 100 opportunities for each one they
invest in.
6. A Beginner’s Guide to Venture Capital
6
• What Do Venture Capitalists Do?
• Manage The Investment
• The GP/VCs have a fiduciary duty to the LPs to “manage” the investment.
This means they usually sit on the Board of Directors. Given this time
commitment a VC might only be able to handle 6 to 10 portfolio investment
companies at a time.
• Harvest The Investment
• As you will see in the following slides, the GP/VCs win only if they can get
their money out of the investment (“harvest the investment”). This usually
takes the form of an acquisition of the portfolio company or taking the
portfolio company public in an Initial Public Offering (IPO). Note: even
the most successful funds rarely have even 1/3 of their portfolio
investments become successful – i.e even with careful vetting 2 out of 3
investments are not “wins”.
7. A Beginner’s Guide to Venture Capital
7
• Economics of the Venture Capital Fund - CAPITAL
• Capital Commitments
• The Limited Partners do not actually invest money in the Fund at the closing.
They legally commit to provide a certain amount of capital when they are
called upon. This is called a Limited Partner’s Capital Commitment.
• Capital Calls
• When the General Partners find what they think is a good investment
opportunity they make a “Capital Call” on the Limited Partners. Example: a
Fund has $500M of capital and the GP/VCs what to make an investment of
$10M. A Limited Partner with a Capital Commitment of $50M will be required
to send $1M to the General Partners: 50M/500M = 10% times 10M = $1M
8. A Beginner’s Guide to Venture Capital
8
• Economics of the Venture Capital Fund – VC Compensation
• Management Fees
• The General Partners receive an annual Management Fee, which is usually a
percentage of the Capital Commitments to the Fund.
• A typical fee is 2.5%. On a $400M fund this $10M per year.
• The Management Fee is used by the General Partners to run the Fund
business –e.g. it pays the salaries of the General Partners, the Associates, the
Support Staff and the office rent.
• Number of General Partners
• The number of GP/VCs in a Fund is a function of the size of the Fund and the
size of investments the Fund makes. For example, a $500M Fund might have
5 GP/VCs, each investing $100M of the Fund’s Capital
9. A Beginner’s Guide to Venture Capital
9
• Economics of the Venture Capital Fund – VC Compensation
• Splitting the Returns
• The GP/VCs make investments and they hopefully harvest some of those.
• The returns from the investment are split between the Limited Partners and
the General Partners. A typical arrangement is as follows:
• The Limited Partners receive 99% of all the returns and the GP/VCs
receive 1% of all returns until the Limited Partners receive back 100% of
their Capital (plus in some cases “interest” on that Capital).
• Thereafter the splits go 80% to the Limited Partners and 20% to the
GP/VCs. This 20% part is called the GP’s “Carried Interest”
• Venture Capitalists with a great track record will receive a higher Carried
Interest- e.g. 30%
10. A Beginner’s Guide to Venture Capital
10
• Economics of the Venture Capital Fund – VC Compensation
• Compensation Drives Behavior
• The Split Formula provides a heavy incentive for the GP/VCs to invest in
situations that can be Big Hits. Reason: They don’t make money unless they
return Big Returns to the Limited Partners.
• Examples
• Assume the Fund has invested $400M in 20 companies ($20M per company on
average).
• Assume that each of the Fund’s investment provides it with a 50% ownership
interest in a portfolio company.
• Assume that 25% of the companies are successful and the Fund can harvest
those investments – i.e. 5 of the 20 companies are successful.
11. A Beginner’s Guide to Venture Capital
11
• Economics of the Venture Capital Fund – VC Compensation
• Example (continued)
• Assume the average “win” returns to the Fund 5 times the amount invested.
In our example, the $20M becomes $100M.
• Note: If the Fund owns 50% of a company then the value of the company at harvest
has to be $200M in order for the Fund to receive 5 times its investment.
Venture Partners Fund 1
Capital Commitments: 400
Winning Investments:
Company
Amount
Invested % Ownership
Return
Multiple
Investment
Value at
Harvest
Value of
Company
1 20 50% 5 100 200
2 20 50% 5 100 200
3 20 50% 5 100 200
4 20 50% 5 100 200
5 20 50% 5 100 200
100 500
12. A Beginner’s Guide to Venture Capital
12
• Economics of the Venture Capital Fund – VC Compensation
• Example (continued)
• This is how the Return Splits would work:
• Recall: 99% of the returns go to the Limited Partners until they receive back their invested Capital then
the upside is split with the General Partners
• In this case the LPs are probably somewhat happy - they get a 19% return - and the
GPs make $23M. (note: this example ignores the time value of money).
Venture Partners Fund 1
Capital Commitments: 400
Winning Investments:
Company
Amount
Invested % Ownership
Return
Multiple
Investment
Value at
Harvest
1 20 50% 5 100
2 20 50% 5 100
3 20 50% 5 100
4 20 50% 5 100
5 20 50% 5 100
100 500
Return Splits
Returns $ % $ %
Return of Capital: 404 400 99% 4 1%
Upside, if any: 96 77 80% 19 20%
500 477 23
LP % Return: 19%
Limited Partners General Partners
13. A Beginner’s Guide to Venture Capital
The Nuts and Bolts of Business Plans – MIT
Course 15.S21 (formerly 15.975)
Joe Hadzima
13
• Economics of the Venture Capital Fund – VC Compensation
• Sensitivity of Returns
• Notice what happens if the 5 winning investments pay out at lower multiples:
• The reward system makes the VCs “swing for the fences” – they need to find
companies that can be really big.
Venture Partners Fund 1
Capital Commitments: 400
Winning Investments:
Company
Amount
Invested % Ownership
Return
Multiple
Investment
Value at
Harvest
Value of
Company
1 20 50% 5 100 200
2 20 50% 4 80 160
3 20 50% 4 80 160
4 20 50% 3 60 120
5 20 50% 3 60 120
100 380
Return Splits
Returns $ % $ %
Return of Capital: 380 376.2 99% 4 1%
Upside, if any: 0 0 80% 0 20%
380 376 4
LP % Return: -6%
Limited Partners General Partners
Venture Partners Fund 1
Capital Commitments: 400
Winning Investments:
Company
Amount
Invested % Ownership
Return
Multiple
Investment
Value at
Harvest
Value of
Company
1 20 50% 4 80 160
2 20 50% 4 80 160
3 20 50% 3 60 120
4 20 50% 3 60 120
5 20 50% 3 60 120
100 340
Return Splits
Returns $ % $ %
Return of Capital: 340 336.6 99% 3 1%
Upside, if any: 0 0 80% 0 20%
340 337 3
LP % Return: -16%
Limited Partners General Partners
14. A Beginner’s Guide to Venture Capital
14
• Fund Investment Cycle
• Fund Life
• Most Funds have a 10 year life. At the end of 10 years they are liquidated.
• Funds plan to harvest winners in 5 to 7 years or less.
• Initial Portfolio Investments
• For Early Stage Funds it is typical for the Fund to reserve $2-$3 for every $1
invested. For example if the Fund invests $2m in Round 1 they will reserve
another $4m -$6m for follow-on rounds. So a $400M Fund might invest
$100M in the first rounds of portfolio companies and $300M in follow on
rounds.
• Timing of Initial Investments
• A Fund usually makes its initial investments in the first 3 years of the Fund life
cycle. During the remaining life of the Fund follow-on investments are made
and the portfolio companies are positioned for “harvest”
15. A Beginner’s Guide to Venture Capital
15
• Follow-On Funds
• Once the initial investments have been made in Fund 1, the VCs are motivated
to raise Fund 2 so they can make investments in new opportunities and get
additional Management Fees.
• Hopefully there are some early successes in Fund 1 so they can go to their
LPs and get them to invest in Fund 2.
• Through this layering of Funds the GPs build up their total Capital Under
Management.
Year Year Year Year Year Year Year Year Year Year
1 2 3 4 5 6 7 8 9 10 Totals
Fund 1 Initial Investments 30 30 30 90
Fund 1 Follow On 50 110 150 310
Fund 2 Initial Investments 30 30 30 90
Fund 2 Follow On 50 110 150 310
Fund 3 Initial Investments 30 30 30 90
Fund 3 Follow On 50 110 150 310
16. A Beginner’s Guide to Venture Capital
16
• Things For the Entrepreneur To Think About
• Does Your Plan Fit the Needs of the Venture Capital Fund?
• As you can see they need to see Big Returns. If your Plan can justify this
and you need lots of capital to achieve your Plan then VC may be the way
to go.
• You may be able to grow a successful company and make a lot of money
without having to scale to the size that will interest Venture Capital.
• Are You Ready For Venture Capital?
• As you can see VCs have a relatively short time fuse to success- a 10 year
Fund and the need to show some “Winners” early in order to raise the Next
Fund.
• Result: You have to be ready to move quickly, there will not be much time
to recover from errors in the plan or execution.
17. A Beginner’s Guide to Venture Capital
17
• Things For the Entrepreneur To Think About
• Are You Prepared to Become a Minority Stockholder?
• As the examples show, in order to generate returns for their Limited
Partners the GP/VCs have to invest a large amount and this usually means
they will obtain a significant percentage of the company over time.
• Having a small piece of a Big Pie can make you rich but you have to be
mentally prepared to become a Minority Stockholder.
• Make Sure the VC You Work With Can Add Value
• Experienced Venture Capitalists can provide valuable advice and guidance,
saving you time and preventing mistakes. They also have contacts with
potential customers, Wall Street and acquirers.
18. A Beginner’s Guide to Venture Capital
18
• Things For the Entrepreneur To Think About
• Understand Where in the Fund Life Cycle You Are
• As shown, you want to catch a Fund during its initial investment phase so
check out where the Fund is in its Life Cycle.
• All Financing Sources Are Not The Same
• The Compensation and Return arrangements in a VC Fund drives a certain
type of behavior. Learn and understand this so you make an informed
decision.
• Talk to Portfolio Company CEOs
• You can answer these and other questions by talking to the CEOs of
companies that the Venture Fund has invested in. Most VC Firms have
websites that list their current and past portfolio companies.
19. A Beginner’s Guide to Venture Capital
19
• In Conclusion
• All Financing Sources Are Not The Same
• The Compensation and Return arrangements in a VC Fund drives a certain
type of behavior. Learn and understand this so you make an informed
decision.
• Talk to Portfolio Company CEOs
• You can answer these and other questions by talking to the CEOs of
companies that the Venture Fund has invested in. Most VC Firms have
websites that list their current and past portfolio companies.