Venture Capital（十）.pptVIP

Venture Capital Prepared by: Nadezda Chitrenko Definitions Venture capital is a type of private equity capital typically provided by professional, outside investors to new, growth businesses. A venture capitalist (VC) is a person who makes such investments. A venture capital fund is an investment vehicle (often a limited partnership) that primarily invests the financial capital of third-party investors in enterprises that are too risky for the standard capital markets or bank loans. Main features involves high risk Above-average returns there is a lack of liquidity or marketability investment returns are primarily from capital gains History of Venture Capital Georges Doriot -the father of the modern venture capital industry 1960-1970: synonymous with technology finance 1974: temporary downturn 1978: industry raised approximately $750,000 Roles within the VC firm General partners (Venture capitalists)= Executives Limited partners= Investors ’’ Capital calls’’ Fixed life of 10 years The investing cycle 3-5 years This model was pioneered by successful funds in Silicon Valley through the 1980s Compensation “Two and 20 arrangement for General partners Requirements of Venture Capitalists Strict requirements for potential investors Bootstrapping Finding the right investors the final deal should be a partnership of professionals with complementary resources and shared goals value-added investors investor should be prepared and able to provide the additional funds required to finance growth The cost of venture capital Vary substantially over the developmental stages of a new venture 1. Early-stage financing 2. Expansion financing 1. Early-stage financing Seed financing (to prove a concept, initial steps – marketing research, business plan) Startup financing (completing product development, initial marketing) First-stage financing (to expend initial capital, initiate full-scale sales) 2. Expansion financing Second-stage financing (initial expans