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- Product code: 25806
- ISBN: 0470027576,
ISBN13: 9780470027578,
258 pages, hardback
Published by John Wiley & Sons in 2006
, illustrated edition Rate this book... Rating: 0.0/5 (0 votes cast) |
Description of Raising Venture Capital |
From early beginnings in the aftermath of World War II, the venture capital industry has evolved from an ad hoc collection of pioneering investors into a sophisticated, fast paced and highly specialised industry. During this period, venture capitalists have provided the fuel for entrepreneurs to create companies that have changed the face of the planet. The question of how the venture capital industry works, however, remains a mystery for many novice entrepreneurs, and the dynamics of venture capital deals are challenging for those without first–hand experience. This book examines the fundamentals that drive the VC industry, explains how these fundamentals translate into investments, and culminates in a blow–by–blow account of how venture capital deals are negotiated and structured by examining a real venture capital ‘term sheet’ in detail.
- Raising Venture Capital provides practical insights into positioning a business to raise venture capital finance, and how to navigate the investment process, based on a mix of real life deal experience and sound academic theory and research.
- The book reveals how the delicate relationship between entrepreneurs and venture capitalists is managed before, during and after the deal, creating the ideal platform on which to build a successful business.
- By understanding the principles that drive venture capital deals this book explains how entrepreneurs and venture capitalists can structure a win–win deal creating value for both.
- A detailed, clause–by–clause examination of a venture capital term sheet provides practical solutions to the typical ‘sticking points’ in a venture capital deal, provides insight into what can and cannot be negotiated, and minimises the risk of potentially successful deals being derailed.
- The book is intended for entrepreneurs and venture capitalists actively engaged in doing deals, investment bankers, lawyers and consultants who work with high growth venture–backed businesses and MBA students and policy makers alike who wish to understand how the venture capital business operates.
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Contents of Raising Venture Capital |
Preface.
PART I: THE BUSINESS OF VENTURE CAPITAL.
1. Entrepreneurs and Venture Capitalists.
1.1 Introduction.
1.2 Entrepreneurs and business creation.
1.3 Why entrepreneurs need external capital.
1.4 Venture capitalists.
1.5 How to read this book.
2. Other People’s Money.
2.1 Introduction.
2.2 The fund raising cycle.
2.3 Relationship with LPs.
2.4 Identity of the LPs.
2.5Conclusions.
3. The Limited Partnership.
3.1 Introduction.
3.2 The primacy of a limited partnership.
3.3 Facets of a limited partnership.
3.4 Partnership terms.
3.5 Conclusions: The venture capital business in a nutshell.
4. The Competitive Environment.
4.1 Introduction.
4.2 Capital competition.
4.2.1 Vintage years
4.3 Deal competition.
4.4 Conclusions.
5. The VC’s Investment Model.
5.1 Introduction.
5.2 Fundamentals of VC risk.
5.3 Extreme caution over the act of investment.
5.4 Exit obsession.
5.5 High rewards for high risks.
5.6 Downside risk management.
1. Tranching of investments.
2. Price protection.
3. Follow-on capability.
4. Information and veto rights.
5. Special exit rights.
6. Dynamic capital allocation.
7. The human element.
8. Conclusions.
PART II: ACCESSING VENTURE CAPITAL.
6. Introduction to Part II.
7. Is Venture Capital the Right Option?.
7.1 Introduction.
7.2 What do I want my business to become?.
7.3 Can my business match those ambitions?.
7.4 How much capital does my business require?.
7.5 Do I want to control my business for a long time?.
7.6 What kind of life do I want to lead?.
7.7 Am I comfortable with an exit?.
8. Choosing a VC Firm.
8.1 Introduction.
8.2 Substantial long-term resources.
8.3 Long and relevant experience.
8.4 A leader, not a follower.
8.5 Scaling the business.
8.6 Successful reputation.
8.7 Personal chemistry.
9. The Entry Point.
9.1 Introduction.
9.2 Which qualified access route?.
9.3 Generating a qualified access point.
9.4 Communicating the initial message.
9.5 What is the VC firm looking for?.
9.6 Conclusion.
10. The Investment Process.
10.1 Introduction.
10.2 Phase one – initial engagement with the VC firm.
10.3 Phase two – preliminary due diligence to term sheet.
10.4 Phase three – from term sheet to completed investment.
10.5 Afterwards.
11. Preparing for the Investment Process.
11.1 Introduction.
11.2 Timing.
11.3 Valuation.
11.4 Choosing an inventor.
11.5 Grooming the business.
11.6 Transaction structure.
11.7 Transaction logistics.
11.8 Conclusion.
PART III: THE VC TERM SHEET.
12 Introduction to Term Sheets.
12.1 Purpose.
12.2 What is a term sheet?.
12.3 Why have term sheets at all?.
12.4 What happens to a term sheet?.
12.5 Methodology of Part III Pro forma term sheet.
13. Business Valuation.
14. Investment Structure.
15. Syndication.
15.1 Introduction to syndication.
15.2 Reward for syndicate leadership.
15.3 The entrepreneur’s response.
16 Investment Milestones.
16.1 Introduction to investment milestones.
16.2 Attractions for the VC firm.
16.3 Attractions for the entrepreneur.
16.4 Areas to watch out for.
17 Corporate Governance.
17.1 Introduction to corporate governance.
17.2 VC board representation.
17.3 Board process.
17.4 Shareholder information.
17.5 Shareholder veto powers.
18. The Equity Participation.
18.1 Introduction to equity participation.
18.2 Voting rights.
18.3 Dividend rights.
18.4 The preference cascade.
18.5 Redemption features.
18.6 Conversion rights.
19 Share Incentives.
19.1 Introduction to share incentives.
19.2 Sizing of incentive programmes.
19.3 Who bears the dilution?.
19.4 Ratchets.
20. Share Vesting.
20.1 Introduction to share vesting.
20.2 Attractions of vesting to the VC firm.
20.3 The entrepreneur’s response.
20.4 Vesting – areas to watch out for.
20.4.5 Repurchase mechanics
21. Pre-emption Rights on Securities Issues.
21.1 Introduction to share issue pre-emption rights.
21.2 Attractions of share issue pre-emption rights to a VC firm.
21.3 The entrepreneur’s response.
21.4 Areas to watch out for.
22. Anti-dilution Rights.
22.1 Introduction to anti-dilution rights.
22.2 Attraction of anti-dilution to a VC firm.
22.3 The entrepreneur’s response.
22.4 Pay to Play.
22.5 Areas to watch out for.
23. Provisions Relating to Share Transfers.
23.1 Introduction to share transfers.
23.2 Transfer restrictions.
23.3 Transfer pre-emption rights.
23.4 Drag-along rights.
23.5 Tag-along rights.
24. Deal Management Terms.
24.1 Introduction.
24.2 Conditions precedent.
24.3 Exclusivity.
24.4 Cost reimbursement.
Index.
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About Rupert Pearce and Simon Barnes |
RUPERT PEARCE joined Inmarsat in 2005 as Group General Counsel. Inmarsat is the world’s leading mobile satellite communications provider and recently underwent a $1,500 million leveraged buy–out by Apax and Permira and subsequent $3,000 million IPO on the London Stock Exchange. Inmarsat is now well–established in the FTSE 250. Prior to joining Inmarsat, Rupert was a General Partner at Atlas Venture, the leading transatlantic venture firm, responsible for corporate finance, mergers & acquisitions and special situations. He also served as Atlas Venture’s European COO. Prior to Atlas Venture, Rupert was a partner at the international law firm Linklaters, specializing in corporate finance, mergers & acquisitions, technology and private equity. Rupert has therefore experienced private equity and venture capital transactions from the perspectives of investor, adviser and member of management. As a founder of Out–Take Limited, an on–line publisher, he has also dabbled in entrepreneurship.
Rupert holds a First Class MA in Modern History from Oxford University and won the 1995 Fullbright Fellowship in US Securities Laws, studying at Georgetown Law Centre, Washington DC.
SIMON BARNES is Director of the Entrepreneurship Centre, and Deputy Director of the Full Time MBA programme at the Tanaka Business School, Imperial College London. He teaches electives in new venture creation and venture capital finance on the MBA, MSc Finance and MSc Health Management as well as courses for the faculty of Imperial College’s science and technology departments. His research at Imperial focuses on technology entrepreneurship and venture capital, with an emphasis on the development of university spin outs and technology ventures. Simon has six years of hands on experience in the venture capital industry, first with the transatlantic firm Atlas Venture and most recently with GIMV Venture Capital where he invested in early stage biotechnology companies. He has been a board director of several VC backed ventures, and lived through two M&A transactions at board level.
Simon received a first class honours degree and a PhD from The University of Cambridge. He holds an MBA with Distinction from the Tanaka Business School, Imperial College London, and was the winner of the European MBA Business Plan of the Year Competition in 1998.
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