Venture Capital 101 for Finance Students
-
Upload
nicole-gravagna-phd -
Category
Economy & Finance
-
view
253 -
download
3
description
Transcript of Venture Capital 101 for Finance Students
![Page 1: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/1.jpg)
STARTUP INVESTINGNicole Gravagna, Ph.D.
Coauthor of Venture Capital for Dummies !
Tweet this: @NicoleGravagna
![Page 2: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/2.jpg)
VENTURE CAPITAL• Introduced in the 1940’s
• Funding structure that allows for new companies to develop intense technologies that take years to mature into a product
• Recent trend is to invest earlier
• VC investing will keep evolving with changing economic pressures
![Page 3: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/3.jpg)
![Page 4: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/4.jpg)
![Page 5: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/5.jpg)
TECHNOLOGIES• Oil&Gas
• LifeScience/Biotech
• Clean Energy
• Social Media/Apps
• Consumer goods/wearables/internet of things
• Financial/transactions/lending
![Page 6: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/6.jpg)
VC INVESTMENT PROFILE
• Upfront investment
• Technology risk
• Market risk
• Execution risk
• ROI possibilities in the multiples
![Page 7: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/7.jpg)
BECOME A STARTUP EXPERTthis is not corporate business at all
![Page 8: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/8.jpg)
–Steve Blank
“A startup is a company designed to search for a repeatable and scalable business model.”
![Page 9: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/9.jpg)
THE VC GAMEIt’s not what you think
![Page 10: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/10.jpg)
VC SKILLS NEEDED
• Strong stage-appropriate business knowledge
• Finance head
• Deep understanding of the technology
• Personal trust from the LPs
![Page 11: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/11.jpg)
VC ECONOMICSDependent on stage of company
![Page 12: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/12.jpg)
DIFFERENT ECONOMIC PRESSURES
Stage of companyearly late
$$$$
$
100k100 companies
8 companies25M
10M Fund200M Fund
![Page 13: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/13.jpg)
DIFFERENT ECONOMIC PRESSURES
Stage of companyearly late
$$$$
$
100k100 companies
8 companies25M
10M Fund200M Fund
Spray and pray!
More chances to win More management
More chaos More failure
![Page 14: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/14.jpg)
DIFFERENT ECONOMIC PRESSURES
Stage of companyearly late
$$$$
$
100k100 companies
8 companies25M
10M Fund200M Fund
Conservative
Big fund to raise Less management later companies Less risk in each
Fewer chances to win
![Page 15: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/15.jpg)
VENTURE CAPITAL
101 +2 3 4 5 6 7 8 90 0
Lifecycle of a fund
Create the mission, vision, entity, and marketing materials to sell the dream. Start raising money.
Year 0
![Page 16: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/16.jpg)
VENTURE CAPITAL
101 +2 3 4 5 6 7 8 90 0
Lifecycle of a fund
Keep raising money, begin sourcing deals
Also Year 0
![Page 17: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/17.jpg)
VENTURE CAPITAL
101 +2 3 4 5 6 7 8 90 0
Lifecycle of a fund
Close the fund, source deals, become very visible to entrepreneurs. Maybe invest in 1 or 2.
Year 1
![Page 18: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/18.jpg)
VENTURE CAPITAL
101 +2 3 4 5 6 7 8 90 0
Lifecycle of a fund
Source more deals, vet lots of deals, invest in another 1 or 2. Manage the companies from the prior year.
Year 2
![Page 19: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/19.jpg)
VENTURE CAPITAL
101 +2 3 4 5 6 7 8 90 0
Lifecycle of a fund
Vet lots of deals, invest in another 1 or 2, maybe 3. Manage portfolio companies
Year 3
![Page 20: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/20.jpg)
VENTURE CAPITAL
101 +2 3 4 5 6 7 8 90 0
Lifecycle of a fund
Vet lots of deals, invest in another 1 or 2, maybe 3. Manage portfolio companies.
Year 4
![Page 21: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/21.jpg)
VENTURE CAPITAL
101 +2 3 4 5 6 7 8 90 0
Lifecycle of a fund
Vet lots of deals, invest in the last deals. Manage portfolio companies.
Year 5
![Page 22: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/22.jpg)
VENTURE CAPITAL
101 +2 3 4 5 6 7 8 90 0
Lifecycle of a fund
Manage portfolio companies.
Year 6
![Page 23: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/23.jpg)
VENTURE CAPITAL
101 +2 3 4 5 6 7 8 90 0
Lifecycle of a fund
Manage portfolio companies.
Year 7
![Page 24: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/24.jpg)
VENTURE CAPITAL
101 +2 3 4 5 6 7 8 90 0
Lifecycle of a fund
Start selling off portfolio companies.
Year 8
![Page 25: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/25.jpg)
VENTURE CAPITAL
101 +2 3 4 5 6 7 8 90 0
Lifecycle of a fund
Sell off portfolio companies.
Year 9
![Page 26: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/26.jpg)
VENTURE CAPITAL
101 +2 3 4 5 6 7 8 90 0
Lifecycle of a fund
Sell off portfolio companies.
Year 10
![Page 27: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/27.jpg)
VENTURE CAPITAL
101 +2 3 4 5 6 7 8 90 0
Lifecycle of a fund
Sell off the last portfolio companies that you argued to keep for extra time.
Year 10+
![Page 28: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/28.jpg)
VENTURE CAPITAL
101 +2 3 4 5 6 7 8 90 0
Lifecycle of a fund
Fund creation
Portfolio Management
Sourcing, Vetting, Investing Liquidation
![Page 29: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/29.jpg)
FUND CREATION
• Setting the rules of investment
• Defining the legal structure
• Selling the LPs
101 +2 3 4 5 6 7 8 90 0
![Page 30: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/30.jpg)
SOURCING, VETTING, AND INVESTING
• Getting entrepreneurs interested in your VC firm
• High deal flow means better deals
• Investing the right deals
101 +2 3 4 5 6 7 8 90 0
![Page 31: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/31.jpg)
LIQUIDATION AND RETURN
• Managing the companies in the portfolio
• Selling the companies the portfolio
• Wrapping up the fund and distributing the capital
101 +2 3 4 5 6 7 8 90 0
![Page 32: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/32.jpg)
THE GOAL IS EXIT
•Merger •Acquisition •Acquihire •IPO •Liquidation
![Page 33: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/33.jpg)
FUND GOALReturn more money than
initially invested.
![Page 34: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/34.jpg)
THE UNICORNS
• Investment to exits are 10:1
• 0.7% of VC-backed companies have had >$1B exits
• 4 unicorns born per year
• consumer ecommerce, consumer audience, saas, and enterprise software
![Page 35: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/35.jpg)
Data published last year by Aileen Lee , founder of
Cowboy Ventures
![Page 36: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/36.jpg)
VENTURE CAPITAL COMPANY MODEL
Step 1: Test it
Step 2: Scale it
Step 3: Sell it
![Page 37: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/37.jpg)
THINGS CHANGE OVER TIME
Mini Co
Year 1
![Page 38: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/38.jpg)
THINGS CHANGE OVER TIME
Mini Co
Year 2
![Page 39: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/39.jpg)
THINGS CHANGE OVER TIME
Mini Co
Year 3
![Page 40: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/40.jpg)
THINGS CHANGE OVER TIME
Mini Co
Year 4
![Page 41: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/41.jpg)
THINGS CHANGE OVER TIME
Big Co
![Page 42: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/42.jpg)
THINGS CHANGE OVER TIME
Big Co
Mini Co
Mini Co
Mini Co
Mini Co
Mini Co
![Page 43: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/43.jpg)
ACQUISITION BY BIG CO
Big Co
Mini Co
Mini Co
Mini Co
Mini Co
Mini Co
![Page 44: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/44.jpg)
THINGS CHANGE OVER TIME
Big Co
Mini Co
Mini Co
Mini Co
Mini Co
Mini Co
![Page 45: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/45.jpg)
MERGER OF LITTLE CO
Big Co
Mini Co
Mini Co
Mini Co
Mini Co
Mini Co
![Page 46: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/46.jpg)
![Page 47: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/47.jpg)
THE CULTURE OF STARTUP
CasualCreative
Technical
Nimble
Fast moving
ChangeablePersonal
Informal
Passion-based
Life/Work BlendIntimate
Intimate
Ill-defined
Insecure
Exciting
Fun
HardHubrisTemporary
Quick and dirty
![Page 48: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/48.jpg)
VETTING DEALSLearn to measure value in early stage companies
![Page 49: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/49.jpg)
INTANGIBLE ASSETS
• Caliber of advisors on boards
• IP: patents and trademarks
• Traction
• PR, news exposure
• Users email addresses
![Page 50: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/50.jpg)
PICKING WINNERS
• See hundreds of deals
• Learn to gut-feel founders
• Hone your intuition
• Build your network of resources
![Page 51: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/51.jpg)
BECOME A VC
1. Work for a VC as an associate
2. Build a reputation for picking winners
3. Gain trust of LPs
4. Raise your own fund
5. Don’t screw it up
![Page 52: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/52.jpg)
OTHER VC-LIKE OPTIONS
• Private Equity (PE)
• M&A
• Angel investing
• Startup Banking/Lending
![Page 53: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/53.jpg)
MORE INFORMATION
• Feld Thoughts - feld.com (Brad Feld, Foundry, TechStars)
• AVC.com (Fred Wilson, Union Square)
• thisisgoingtobebig.com (Charlie O’Donnell, Brooklyn Bridge Ventures)
• bothsidesofthetable.com (Mark Suster, Salesforce, Upfront Ventures)
![Page 54: Venture Capital 101 for Finance Students](https://reader034.fdocuments.us/reader034/viewer/2022052621/558595c6d8b42abc7b8b4b3a/html5/thumbnails/54.jpg)
NICOLE GRAVAGNA, PHDBlog: NicoleGravagna.com
Follow tweets @NicoleGravagna