Raising Venture Capital for the Serious Entrepreneur

Description

Get the Funding You Need From Venture Capitalists and Turn Your New Business Proposal into Reality Authoritative and comprehensive, Raising Venture Capital for the Serious Entrepreneur is an all-in-one sourcebook for entrepreneurs seeking venture capital from investors. This expert resource contains an unsurpassed analysis of the venture capital process, together with the guidance and strategies you need to make the best possible deal_and ensure the success of your business. Written by a leading international venture capitalist, this business-building resource explores the basics of the venture capital method, strategies for raising capital, methods of valuing the early-stage venture, and techniques for negotiating the deal. Filled with case studies, charts, and exercises, Raising Venture Capital for the Serious Entrepreneur explains: How to develop a financing map How to determine the amount of capital to raise and what to spend it on How to create a winning business plan How to agree on a term sheet with a venture capitalist How to split the rewards How to allocate control between founders/management and investors Contents Foreword Preface Acknowledgments Introduction Creditica software Inc. Case Study Part I: Understanding the Basics of the Venture Capital Method Chapter 1 Developing a Financing Map Creating a Set of Stepping-Stones for a New Business Matching the Financing Strategy to the Stepping-Stones Developing a Map of Possible Stepping-Stones Capturing as Much of the Prize as You Can Chapter 2 Getting to the First Stepping-Stone Why New Ventures Are Not Fully Funded from the Start Fleshing Out the First Stepping-Stone Options at the End of Each Stage of Investment The Chief Financial Officer as Strategist Why Corporations Fail in Creating New Businesses Chapter 3 The Unique Cash Flow and Risk Dynamics of Early-Stage Ventures Costs Known—Revenues Unknown J Curves and Peak Cash Needs Milestone Funding: Option or Investment? A 12- to 24-Month Ticking Clock Timing Is Everything—Buy Low, Sell High A Five- to Seven-Year Marathon in Three to Four Stages Gross Margins of 80 to 100% No Correlation between the Amount of Money Raised and the Company’s Success A Tension between the “Lemons Ripening Early” and the “Valley of Death” A Binary Payoff Profile Part II: Raising the Finance Chapter 4 Determining the Amount of Capital to Raise and What to Spend It on An Established Company—Estimating the Amount of Capital to Raise A New Company—Estimating the Amount of Capital to Raise Activities in a New Business That Absorb Capital Investors’ Views of the Five Capital-Absorbing Activities Businesses with Different Capital-Absorbing Profiles Chapter 5 Getting Behind How Venture Capital Firms Think Structure of Venture Capital Funds Types of Investors in Venture Capital Funds Size and Internal Structure of VC Firms How VC Firms Are Compensated Valuation of Investments within a VC Portfolio Cash Flows and J Curve at a Fund Level Expected Returns on a VC Fund Expected Returns on Individual Investments in a VC Fund It’s All about Big Winners Portfolio Construction Sorting Out Confiicts of Interest Chapter 6 Creating a Winning Business Plan Market Power—the Key Ingredient Missing in Most Business Plans Evidence to Include in the Business Plan 1. Potential for Accelerated Growth in a Big, Accessible Market 2. Achievable Position of Market Power 3. Capable, Ambitious, Trustworthy Management 4. Plausible, Value-Enhancing Stepping-Stones 5. Realistic Valuation 6. Promising Exit Possibilities Part III: Valuing the Early-Stage Venture Chapter 7 Valuing Early-Stage Companies Traditional Valuation Methods—Why They Don’t Work for Early-Stage Ventures Are Valuations of Technology Companies Crazy? Corporate Finance Theory—Technology Company Valuation Triangulation Process of Venture Capitalists How the Company Can Maximize Its Valuation Why Big Companies Buy Small Companies Value of Small Companies Compared to Large Companies Part IV: Negotiating the Deal: Term Sheets Chapter 8 Agreeing on a Term Sheet with a Venture Capitalist Percentage Ownership of the Company Granted to the Investor What Each Side Tries to Achieve in a Term Sheet Why It Isn’t Like Investing in a Public Company Chapter 9 Terms for Splitting the Rewards 1. Exit Preferences, Linked to the Type of Preferred Stock 2. Staging of Investment against Milestones 3. Options to Invest More Money at a Defined Price per Share 4. Preferred Dividends 5. Antidilution Problems with Ratchets Pay-to-Play Clauses Washout Financing Rounds—Down (and Out!) Rounds Chapter 10 Allocating Control Between Founders/Management and Investors Restricted Transactions/Protective Covenants Structure of the Board of Directors Redemption Forced Sale Registration Rights Tagalong Rights, Dragalong Rights Information Rights Right of Access to the Premises and Records and Right to Appoint a Consultant Preemption Rights Transfer Provisions Exclusivity Clause Chapter 11 Aligning the Interests of Founders/Management and Investors Founders’ Stock Option Pool Vesting Arrangements Noncompete Agreements Intellectual Property Assignment Warranties and Representations Part V: Exercises Chapter 12 Term Sheet Exercises Appendix A: Security Portal Inc. Appendix B: Standard Term Sheet Clauses Index A B C D E F G I J K L M N O P R S T V W