Venture Capital and the Finance of Innovation, 2nd Edition

by Metrick, Andrew; Yasuda, Ayako

• ISBN13: 9780470454701
• ISBN10: 0470454709
• Edition: 2nd
• Format: Hardcover
• Copyright: 2010-09-14
• Publisher: Wiley

Summary

This useful guide walks venture capitalists through the principles of finance and the financial models that underlie venture capital decisions. It presents a new unified treatment of investment decision making and mark-to-market valuation. The discussions of risk-return and cost-of-capital calculations have been updated with the latest information. The most current industry data is included to demonstrate large changes in venture capital investments since 1999. The coverage of the real-options methodology has also been streamlined and includes new connections to venture capital valuation. In addition, venture capitalists will find revised information on the reality-check valuation model to allow for greater flexibility in growth assumptions.

Author Biography

Andrew Metrick is a Professor of Finance and the Theodore Nierenberg Professor of Corporate Governance at the Yale School of Management, where he teaches a course in Venture Capital and the Finance of Innovation. He was previously a faculty member in the finance department at the Wharton School of the University of Pennsylvania, and in the economics department of Harvard University. In 2010 he served as the Chief Economist for President Obama's Council of Economic Advisers. Dr. Metrick received a BA in Economics and Mathematics from Yale and a Ph.D. in Economics from Harvard. He has received numerous teaching awards and distinctions, including recognition by BusinessWeek as one of the best teachers at Wharton.

Ayako Yasuda is an Assistant Professor of Management at the Graduate School of Management, University of California, Davis. She was previously a faculty member in the finance department at the Wharton School of the University of Pennsylvania; prior to her Ph.D. she worked at the Investment Banking Division of Goldman, Sachs & Co. Dr. Yasuda received a BA and Ph.D. in Economics from Stanford University. She has won numerous research grants and has been published in the Journal of Finance, Journal of Financial Economics, and the Review of Financial Studies.

Table of Contents

VC Basics

The VC Industry

VC Players

VC Returns

The Cost of Capital for VC

The Best VCs

VC Around the World

Total Valuation

The Analysis of VC Investments

Term Sheets

Preferred Stock

The VC Method

DCF Analysis of Growth Companies

Comparables Analysis

Partial Valuation

Option Pricing

The Valuation of Preferred Stock

Later-Round Investments

Participating Convertible Preferred Stock

Implied Valuation

Complex Structures

The Finance of Innovation

R&D Finance

Monte Carlo Simulation

Real Options

Binomial Trees

Game Theory

R&D Valuation

Sample Term Sheet

The VCFI Spreadsheets

Guide to Crystal Ball

Glossary

Index

Table of Contents provided by Publisher. All Rights Reserved.