Origin of Venture Capital - 1(风险投资创新与金融的结合).pdf

Origin of Venture Capital - 1 • It did not exist as a profession before WWII • American Research Development, the first VC firm, 1946, General George Doroit of HBS. • 1953, SBA, 1958, SBIC • originally, SBIC could get up to $300,000 government money for each $150,000 PE. Half of the money in subordinated debentures, half in reduced int. loans. • Other benefits… taxes, losses... History of Venture Capital-2 • Successful story: SBIC invested in CEIR $900,000, 9months later, became 7 million • by 1961, 250 SBIC gone public • 1964, pick of 722 SBIC, 1967 only 250 left. • 1968, first time private VC SIBC • ARD invested in DEC, $70,000 in 1957, got 52.7 million in 1967. • 1974, DOW fell to 600, NASDAQ to 54.87 • 1969, capital gain tax up. VC down. • 1965-1980, avg vc return 25% History of Venture Capital - 3 • Sources: 1981, 23% pension, 23% families • 1977, 105 private VC, 66 Corp vc, 66 SBIC • typically, expected return 50% for startups, 30- 40% for second stage, 25-30% for expansion stage • IPO 1981, 448 co. 3.2 billion, 1983, 884 co. 12.9 billion • the supply and demand of VC: the delta factor • seed, early stage, later stage, conventional… • 1980s, small firms 322 innovations per million employees, big firms only 225. Sources of Funds • Angels: 250,000 individuals investing $20- 30 billion, $100,000 each investment • pension funds and ERISA ‘prudent man’ • Taxes: 1969, 49.5%, 1978, 28%, 1981, 20% • 1980, 25% of VC in seed and early stage projects, 1988, reduced to 12.5% Elements of VC investment • Amount and timing of the investment • forms of investment (convertible, preferred…) • terms of investment (conversion price, liquidation preference, dividend rate, etc.) • put and call rights • registration rights • options pools • vesting schedule, employment contracts • board