VC 101
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The document discusses venture capital fundraising methodology. It describes what venture capital is, typical fund structures, where VCs invest, industry investment trends, the fundraising process, typical company profiles sought by VCs, typical deal timelines, factors considered in deal evaluation, key aspects of term sheets, and exit strategies via acquisition or IPO.
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VC 101
- 1. Venture Capital Fundraising Methodology December 12, 2011
- 2. What Is Venture Capital?
- 5. Where Do VCs Invest? Life Sciences Clean Technology Information Technology
- 6. Industry Investment Trends, 2000-10 Source: MoneyTree Report β NVCA/PWC/Thomson Reuters
- 9. Fundraising Process You set the valuation. Iβll set the terms.* *Donβt be fooled by the cover price
Editor's Notes
- - Focus by sector, stage and geography
- IT/Consumer had massive investment in late 90s. Volume and distribution has dropped significantly over time. Life Sciences has been more stable over time Industrial/Energy spiked more recently, although lack of capital efficiency scared some off in 2009 - Retailing/Distribution has practically disappeared as a category - Financial Services has dropped as well
- Anti-Dilution Full Ratchet reprices the existing preferred to match the price of the new investors, which can cause a spiraling price effect that wipes out management and common If Series A invested $5M in the last round, those shares must represent $5M of value in the new deal, so a $5M pre on the next round would give all of the value to the Series A shareholders Weighted average approach results in a more reasonable price adjustment New Conversion Price = Old Conversion Price * ((Common Outstanding + Common Issuable at Old Price)/(Common Outstanding + Common Issuable at New Price)) With Narrow-Based, Common Outstanding can include just preferred class, all preferreds, and common With Broad-Based, Common Outstanding can include all preferreds converted, common, options and warrants, which is better for Company