The Business of Venture Capital Insights from Leading Practitioners on the Art of Raising a Fund, Deal Structuring, Value Creation, and Exit Strategies

by Ramsinghani, Mahendra

• ISBN13: 9780470874448
• ISBN10: 0470874449
• Format: Hardcover
• Copyright: 2011-10-25
• Publisher: Wiley

Summary

The newly updated fast-reference problem solver The Complete CPA Desk Reference-the convenient, comprehensive reference professionals have relied on for over fifteen years-is now updated in a new Fifth Edition to give today's busy executives and accountants the helpful information they need in a quick-reference format. Whether in public practice or private industry, professionals will always have this reliable reference tool at their fingertips because it easily goes anywhere-to a client's office, on a business trip, or to an important lunch meeting. Written in an easy question-and-answer format, this is the perfect up-to-date reference for today's accountants. Discusses the latest on FASB Accounting Standards Codification (ASC) and Accounting Standards Update (ASU) Includes a new section to cover International Financial Reporting Standards (IFRS) Covers web-based budgeting, cloud computing, and environmental costing Written by the bestselling authors of The Vest Pocket CPA, Fourth Edition Question-and-answer format covers an abundance of topics, including financial measures, ratios, and procedures Packed with practical techniques and rules of thumb for analyzing, evaluating, and solving day-to-day accounting issues, The Complete CPA Desk Reference, Fifth Edition helps you quickly pinpoint what to look for, what to watch out for, what to do, and how to do it. It is a powerful companion for the complex, ever-changing world of accounting.

Author Biography

MAHENDRA RAMSINGHANI manages Invest Detroit's First Step Fund, a seed and early stage fund with investments in over twenty-five start-ups. He led the development and launch of legislation for two fund-of-fund programs for the state of Michigan. The author has over fifteen years of experience with development of early stage companies and venture investments in the United States, Singapore, and India.

Table of Contents

Foreword	p. xiii
Preface	p. xvii
Acknowledgments	p. xxix
Raising the Venture Fund	p. 1
The Universe of Limited Partners	p. 5
An Overview of Alternative Assets	p. 6
Sources of Capital	p. 10
Comparison of Limited Partnerships	p. 29
Summary	p. 29
Fund Due Diligence	p. 38
Sourcing and First Screens	p. 34
Fund Due Diligence: How LPs Evaluate Venture Firms	p. 36
Evaluating the Fund Managers	p. 39
Emerging Managers: A Promise of the Future	p. 53
The Quest for the Elusive Top Quartile Managers	p. 61
Fund Investment Strategy	p. 67
Market Timing	p. 77
Fund Size and Portfolio Construction vis-à-vis Fund Strategy	p. 80
Fit within the LP's Current Portfolio	p. 85
Why LPs Terminate Existing Relationships	p. 87
Summary	p. 87
Terms of Investment: The Limited Partnership Agreement	p. 89
Sample Terms in a Fund's PPM	p. 90
Other LP-GP Terms	p. 105
What Matters Most	p. 110
Summary	p. 110
Fund Structure, Governance, and Operations	p. 113
Key Constituents of the GP Team	p. 114
Finding Suitable Partners	p. 125
Fund Governance and Economics	p. 126
Governance of Management Services GP LLC	p. 127
Summary	p. 134
Getting to the First Close	p. 135
Build Your Target List of Investors	p. 137
Fund Marketing Materials	p. 141
Presentation Slides	p. 142
Making the Presentation Pitch: Drink Your Own Kool-Aid	p. 144
Attracting the Lead Investor: Your "Nut"	p. 144
Communicate, Create, and Maintain Momentum	p. 146
Offering Sweeteners to Attract LPs: A Double-Edged Sword	p. 147
The Role of Placement Agents in Fund-Raising	p. 147
Caveat Emptor	p. 151
Summary	p. 152
The Investment Process	p. 153
The Art of Sourcing Investment Opportunities	p. 155
The Best Source: The Network	p. 157
The Fountainheads of Academia and Research	p. 160
Corporate Research	p. 161
Venture Events and Trade Conferences	p. 163
Venture Farming	p. 165
Angels and Pledge Funds	p. 167
Business Plan Competitions	p. 171
Cold Calling	p. 172
You Win Some, You Miss Some	p. 172
Summary	p. 174
The Art of Conducting Due Diligence	p. 177
What Is Important: Jockey, Horse, or Markets?	p. 178
Attributes of the Jockey	p. 179
Serial Entrepreneurs versus First-Time Entrepreneurs	p. 183
What about Charisma?	p. 184
Management Team Due Diligence: How to Assess the Jockey	p. 185
The Importance of Conducting Background Investigations	p. 192
Assessing the Market	p. 194
Evaluating the Idea or Product	p. 199
Reviewing the Business Model	p. 201
Considering the Financial Projections	p. 202
Weighing the Importance of Business Plans	p. 203
The Due Diligence Checklist	p. 203
Summary	p. 206
The Basics of Corporations, Ownership, and Control	p. 209
Authorized Shares and Issued Shares	p. 211
Shareholder Rights	p. 217
Role of the Board	p. 217
Summary	p. 218
Valuation Methods and Other Voodoo Arts	p. 219
The Drivers of Valuation	p. 220
The Simplified Form of the VC Method of Valuation	p. 221
Comparable Valuations of Similar Investments (Comps)	p. 224
Discounted Cash Flow Method	p. 226
Summary	p. 228
Structuring Investment Transactions	p. 229
The Spirit of the Term Sheet	p. 229
Negotiation Stress Points	p. 230
Milestone-Based Financing: Risk Mitigation or Distraction	p. 238
Structuring Terms to Generate Target Returns	p. 239
Governance and Control: Protecting Your Securities	p. 246
Exit-Related Provisions	p. 247
Other Terms	p. 248
Toward a Simpler Term Sheet for Smaller Investments	p. 250
Syndicating Investments	p. 251
The Closing Process: After the Term Sheet	p. 252
Summary	p. 253
Behind Every Successful CEO Stand a Few Good Board VCs	p. 255
The Need for Director Education	p. 256
Roles and Responsibilities of a Board Member	p. 257
Board Composition and Orientation	p. 261
Board Practices	p. 263
Get That Gavel: Overview of Robert's Rules of Order	p. 265
Value Creation: How to Support Your Portfolio Company's CEO	p. 268
The CEO's Perspective on Venture Capitalist Value Add	p. 269
Setting the Tone through Board Culture	p. 275
Improving the Board Game	p. 284
Summary	p. 289
Exit Strategies	p. 291
Preconditions for an Exit	p. 292
Acquisitions: The Primary Path to an Exit	p. 297
The Sell Process	p. 302
When an Acquirer Comes Knocking	p. 307
The Buy-Side Acquisition Process	p. 307
Deal Killers	p. 310
Acquisition Case Study: Mint.com Generates 5x Cash-on-Cash Return in Two Years	p. 310
Initial Public Offering	p. 313
Private Exchanges: Necessity Drives Liquidity Solutions	p. 324
Summary	p. 327
Summing Up	p. 329
Aptitudes and Attitudes of Successful Practitioners	p. 330
Drawbacks	p. 338
What about Luck?	p. 339
Key Takeaways for Practitioners	p. 340
As You Go Forward	p. 344
About the Companion Web Site	p. 345
Notes	p. 347
Suggested Reading	p. 375
About the Author	p. 379
Index	p. 381
Table of Contents provided by Ingram. All Rights Reserved.