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Chapter 1. Introduction to Venture Capital. What is a VC?. (1) A VC is a financial intermediary , meaning that they take the investors’ capital and invest it directly in portfolio companies .

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Chapter 1

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Chapter 1

Introduction to Venture Capital


What is a VC?

(1) A VC is a financial intermediary, meaning that they take the investors’ capital and invest it directly in portfolio companies.

(2) A VC will only invest in private companies. This means that once the investments are made, the companies cannot be immediately traded on a public exchange.

(3) A VC takes an active role in monitoring and helping the companies in his portfolio.

(4) A VC’s primary goal is to maximize his financial return by exiting investments through a sale or an initial public offering (IPO).

(5) VCs invest in order to fund the internal growth of companies.


Portfolio Companies

VC Funds

Managed by

General Partners

(“VCs” or “GPs”)

“Exits”: Sale of

Portfolio

companies

to public markets (IPOs)or to other companies

Limited Partners

(Investors or “LPs”)

THE FLOW-OF-FUNDS IN THE VENTURE CAPITAL CYCLE


Venture

Capital

Buyout

ALTERNATIVE INVESTMENTS

Private Equity

Mezzanine

Distress

Hedge Funds


What Do VCs and Buyout Firms Do?

Investing

Monitoring

Exiting


Private Equity

  • Illiquid investments

  • Who should invest in illiquid assets?


Chapter 2

The VC Players


Investment, Pre-Boom


Investment, Boom and Post-Boom


Stages of Growth

  • Early-Stage

    • Seed

    • Startup

    • Other Early-Stage

  • Mid-Stage (expansion)

  • Late-Stage

    • Generic Late Stage

    • Bridge/Mezzanine


Investment by Stage


Investment by Industry


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