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Stephanie McCoy

Stephanie McCoy. March 9, 2010. Agenda. Venture Capital Process Venture Capital Investing Trends Industry Compensation Dos and Don’ts. Venture Capital Process. Venture Capital Process. Selecting Structuring & Syndication. Creating Value. Fund Raising. Exiting. Sourcing. Fund

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Stephanie McCoy

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  1. Stephanie McCoy March 9, 2010

  2. Agenda • Venture Capital Process • Venture Capital Investing Trends • Industry Compensation • Dos and Don’ts

  3. Venture Capital Process

  4. Venture Capital Process Selecting Structuring & Syndication Creating Value Fund Raising Exiting Sourcing

  5. Fund Raising Commitment Sources Source: Venture Economics

  6. Key Sources For Transactions Sourcing • Relationships with Entrepreneurs • Limited Partner Investors • Other Venture Capital Firms • Accountants • Bankers • Attorneys • Investment Bankers

  7. Selecting Structuring Syndication Investment Criteria • Market Potential and Size • Quality of Management • Product/Services • Sustainable Competitive Advantage • Financial Drivers

  8. Creating Value Creating Value • Build Independent Boards • Guide Strategy • Facilitate Strategic Relations • Recruit Key Managers • Raise Additional Debt and Equity

  9. Exiting Realization of Gains • Sale/Merger of Portfolio Company • Sale of Portfolio Company Securities (Public Offering) • Private Placement of Portfolio Securities

  10. Exiting Venture Portfolio Company Returns Source: Venture Economics

  11. Exiting Timing of Winners and Losers 63% 56% 37% 32% Percentage of Companies 12% Years Source: Venture Economics

  12. Length of Time to Liquidate a Venture Capital Fund Source: NVCA – Adam Street Presentation Data sample size = 64 Data as of 9/30/05

  13. II. Venture Capital Investing Trends

  14. Equity Difficult For Companies to Obtain Fewer deals are getting funded compounded by smaller investment sizes PWC Moneytree

  15. Credit Virtually Unavailable 28% Annualized Decline In the first half of 2009, companies consumed more capital than they raised for the first time in 60 years Federal Reserve: loans to commercial and Industrial

  16. IPO Market Unavailable for Small Companies • IPO market has become virtually shut to smaller issuers (less than $50 million offering) Grant Thorton and Thompson Reuters

  17. Going, Going, Gone 2009 Estimated American Bankruptcy Institute

  18. III. Industry Compensation

  19. Venture Capital Fee Structure • Management Fees - Typical Venture Fund receives 2% of the Fund annually for salaries and operating expenses • Carried Interest - 20% of realized value

  20. Entrepreneur Compensation Salary and Stock Compensation by Title

  21. IV. Dos and Don’ts

  22. How Not to Get a VC’s Attention • Address Plan to “Dear Sir” • Management team is all ex venture capitalists • After reading the summary, have no idea what the company does • Project profitability in 6 months • Plan sent from jail • Projections exceed Microsoft’s • “There is no competition” • Plan comes from an out of work consultant • Guaranteed Exit in 3 months • Provide VC ownership of 10% or less

  23. How to Get a VCs Attention • A Compelling Story • An Unfair Advantage • Pinching Pennies • Entrepreneurs have Skin in the Game • The Team has Done it Before • Command of the Key Business Metrics • Big Vision • Winning Attitude • A CEO Who Can Sell • Undeniable Customer Pain that will be Relieved • An Elevator Pitch that is Easily Repeatable

  24. Stephanie McCoy March 9, 2010

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