vc 101 inside the black box l.
Download
Skip this Video
Loading SlideShow in 5 Seconds..
VC 101: Inside the Black Box PowerPoint Presentation
Download Presentation
VC 101: Inside the Black Box

Loading in 2 Seconds...

play fullscreen
1 / 13

VC 101: Inside the Black Box - PowerPoint PPT Presentation


  • 132 Views
  • Uploaded on

VC 101: Inside the Black Box. (AKA: Christine’s Quick & Dirty Guide to Venture Capital). What We’ll Cover. Public vs. Private Equity VC partnership structure Follow the money The VC investment process Impact of VC trends on you Feel free to ask questions throughout the discussion!.

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'VC 101: Inside the Black Box' - ismail


Download Now An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
what we ll cover
What We’ll Cover

Public vs. Private Equity

VC partnership structure

Follow the money

The VC investment process

Impact of VC trends on you

Feel free to ask questions throughout the discussion!

public vs private equity context
Public vs. Private Equity Context

Public Equity

  • Hedge Funds
  • Pension Funds
  • Mutual Funds
  • Public Stock Trading

…etc.

Private Equity

  • Buyouts
  • Mezzanine Investments
  • Venture Capital

…etc

vc partnership structure
VC Partnership Structure
  • Limited Partners vs. General Partners
    • Who are they and what do they do?
  • Reporting
    • What responsibilities do GPs have, and what rights do LPs have?
  • Investment Profile
    • What are a VC’s specific guidelines for investing and portfolio management?
vc partnership elements
VC Partnership Elements

GP

GP

GP

GP

GP

GP

GP

GP

“THE FUND”

LP

LP

LP

LP

LP

LP

following the money
Following the Money
  • Capital Calls
    • Where does the money come from?
  • Management Fees
    • How do the bills get paid? What does this imply for General Partner incentives?
  • Profit Distributions
    • What happens as investments mature?
  • Successive Funds
    • How does a partnership become sustainable and grow?
capital contributions
Capital Contributions

GP

GP

GP

GP

GP

GP

GP

GP

99% of total

1% of total

“THE FUND”

LP

LP

LP

LP

LP

LP

LP

a typical vc fund example
A Typical VC Fund Example
  • 2.5% annual management fee
    • Pays for office space, salaries, other G&A
    • Incentive implications for small v. large funds
  • All capital is repaid to LP before any profit is shared
    • 80% of profit goes to LPs
    • 20% of profit goes to GPs
  • An individual VC’s share of the total GP profit share is called “carried interest”
profit sharing
Profit Sharing

GP

GP

GP

GP

GP

GP

GP

GP

80% of total

20% of total

“THE FUND”

LP

LP

LP

LP

LP

LP

LP

vc growth more larger funds
VC Growth = More, Larger Funds

Each Fund Life = 10 Years

3-4 Yrs = Seed NewCos

6-7 Yrs = Harvest & Do Followons

Fund I ($100M)

Year 1

Fund II ($125M)

Year 6-7

Year 3-4

Fund III ($150M)

Must raise new funds to keep investing in NewCos; once new fund is raised, NewCo funding will come from it

After 6-7 years in business, VC will have 3+ concurrent, active funds at any one time; only one, however, will be funding NewCos

the vc investment cycle
The VC Investment Cycle
  • Deal sourcing and qualification: how good opportunities are found
  • Evaluation: deciding if there’s a good fit with investment parameters; company history, business characteristics, finances, business plan analysis, comparables analysis, pro forma return model
  • Term sheets: a nonbinding letter of intent
  • Due diligence: ensuring that everything we believe to be true, is true; research, references, financials, transaction summary/approval, investment memo
  • Closing: final signature and LP announcement
  • Value offered: capital, relationships, management support
impact of vc trends on you
Impact of VC Trends on You

Growing Funding Market

  • Minimum $ amount per investment grows
  • Higher VC valuations
  • Lower returns % on a higher base
  • ‘Gold rush’ mentality (lower funding bar = more mediocre ideas/ teams)

Shrinking Funding Market

  • Minimum $ amount per investment shrinks
  • Lower VC valuations
  • Higher returns % on a lower base
  • Champions mentality (higher funding bar = the strongest ideas/teams)

Whether the market is going up or going down,VC money still has to be invested