Cover image for Venture capital : the definitive guide for entrepreneurs, investors, and practitioners
Title:
Venture capital : the definitive guide for entrepreneurs, investors, and practitioners
Author:
Cardis, Joel, 1953-
Publication Information:
New York : Wiley, [2001]

©2001
Physical Description:
xv, 320 pages : forms ; 24 cm
Language:
English
Subject Term:
Added Author:
ISBN:
9780471398134
Format :
Book

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Summary

Summary

How to attract the venture capital needed to grow anybusiness
Venture Capital teaches entrepreneurs and small business ownerseverything they need to know about finding the venture capital theyneed to grow their businesses. Based, in large part, upon in-depthinterviews with major players in the venture capitalarena--including money managers as well as entrepreneurs who havedealt with them successfully--it provides powerful pointers on howto make a business attractive to venture capitalists, how toprotect yourself in negotiating an agreement, how to manage arelationship with venture capitalists once a deal is signed, andmuch more. Perhaps most importantly, the reader learns what makesventure capitalists tick and sees things through a venturecapitalist's eyes.
Joel Cardis, Esq. (Blue Bell, PA), consults both Fortune 500companies and small businesses on an array of venture and start-upissues. Hildy Richelson, PhD (Scarsdale, NY), is President of theScarsdale Investment Group, Ltd.


Author Notes

JOEL CARDIS, Esq., is an attorney and consultant with more than twodecades of experience working with Fortune 500 executives and smallbusinesses. He is the founder and President of an investment clubcomprising entrepreneurs and businesspeople.He can be reached atjcardisesq@snip.net

SAM KIRSCHNER, PhD, is an internationally recognized managementconsultant and psychologist who has served as a director on theboards of both publicly held and private companies. Contact him atskirsch@hotmail.com

STAN RICHELSON serves as a comprehensive financial planner,business advisor, and coach, integrating the fields of investments,law, tax, and accounting to provide solutions to complex problems.He can be reached at stanrichelson@aol.com

JASON KIRSCHNER (jason.kirschner@yale.edu) is a senior at YaleUniversity.

HILDY RICHELSON, PhD, is President of the Scarsdale InvestmentGroup, Ltd. as well as a nationally recognized bond advisor andfinancial author. Contact her at richelson@aol.com


Table of Contents

Introductionp. xi
Part I Doing Your Homework: Preparing for the Venture Capitalists
Chapter 1 The Venture Capital Revolutionp. 3
Chapter 2 Venture Capital FAQ: Is the Game Right for You?p. 7
What Funding Will I Be Expected to Have in Hand before Approaching Venture Capitalists?p. 7
Will Venture Capitalists Take Advantage of Me?p. 11
How Do Venture Capitalists Determine Valuation?p. 12
What Is Dilution?p. 12
Will Venture Capitalists Help Me Grow My Business?p. 13
Do Venture Capitalists Have Unrealistic Performance Expectations?p. 14
Why Do Venture Capitalists Stress an Exit Strategy?p. 14
Why Will Venture Capitalists Give Me a Lower Valuation than Do Passive Investors?p. 15
Will I Lose My Job?p. 15
Next Stepsp. 16
Chapter 3 The Market Riskp. 18
Your Market Opportunityp. 19
Your Market Analysisp. 21
Your Competitionp. 23
Your Customersp. 27
Your Sales and Marketing Strategyp. 29
Chapter 4 The People Risk--Part I: Management Teams and Boardsp. 31
The Founder and the Management Teamp. 32
David Henry: A Case Study of an Entrepreneur's Passionp. 35
Coachability: A Crucial Ingredient for CEO Successp. 38
How Do You Evaluate, Hire, and Retain Good People?p. 39
Building a Board of Directorsp. 41
Professional Services Providers: Accountants and Lawyersp. 44
Chapter 5 The People Risk--Part II: Strategic Alliancesp. 48
Key to Success: Alliance Formationp. 49
Forming Alliances through Public Service or Charityp. 50
The Keiretsup. 51
How to Manage Difficulties in Your Alliancesp. 53
XL Vision: An Incubator Built on Alliancesp. 54
Minority and Women's Alliancesp. 56
Chapter 6 The Master of the Keiretsu: An Interview with Pete Musserp. 60
Novell and Other Storiesp. 60
Key Investment Factorsp. 63
Joe Siegel and QVCp. 65
Strategic Alliances--Part Ip. 66
Milestones and Exit Strategiesp. 69
Strategic Alliances--Part II: Metcalfe's Lawp. 71
An IPO Goldmine: Internet Capital Groupp. 74
Organizing a Good Boardp. 75
Intellectual Property and Confidentiality Agreementsp. 76
The "Black Art" of Valuationp. 77
The Business Planp. 80
Chapter 7 The Technology Riskp. 83
Product Developmentp. 84
Market Acceptance Issuesp. 86
How Proprietary Is Your Technology?p. 92
Chapter 8 The Money Riskp. 96
The Burn Ratep. 98
The Path to Profitability (P to P)p. 102
Scalability and Its Costsp. 105
The Exit Strategy and Market Conditionsp. 106
Characteristics of the Venture Capitalists' Fundp. 107
The Capital Structure and Legal Form of Your Entityp. 108
Part II Getting Funded
Chapter 9 How to Value Your Companyp. 115
The Language of Valuationp. 116
Methods of Valuationp. 119
How Does Valuation Look to the Venture Capitalist and the Entrepreneur?p. 123
Valuation and the Quality of the Venture Capitalistp. 124
When Should You Discuss Valuation?p. 125
An Entrepreneur's Lawyer Looks at Valuationp. 127
Chapter 10 Writing Effective Business Plansp. 132
The Executive Summaryp. 132
The Market Opportunityp. 134
Products and Servicesp. 134
The Business Modelp. 134
The Peoplep. 134
Financialsp. 135
Prior Sources of Funding and Uses of Proceedsp. 136
Exit Strategyp. 136
Dilution Schedulep. 136
The Detailed Business Planp. 137
First Step: Gather Your Datap. 137
General Business Plan Guidelinesp. 138
Framework of the Business Planp. 140
Cover Pagep. 140
The Market Opportunityp. 141
Products and Servicesp. 142
The Peoplep. 143
Financialsp. 143
Sources of Funding and Uses of Proceedsp. 145
Calendar of Milestonesp. 145
Exit Strategyp. 146
Dilution Schedulep. 146
Appendixesp. 146
Final Commentsp. 147
Chapter 11 Which Venture Capitalist Is Right for You?p. 148
The Venture Capital Industryp. 148
The Best Firms and the Brightest Starsp. 149
The Specialization of the Venture Capital Industryp. 151
Resourcesp. 155
Getting in the Doorp. 156
Sponsorshipp. 156
Nondisclosure Agreements (NDAs)p. 160
The Application Processp. 161
Chapter 12 Show Time: Presenting to the Venture Capitalistsp. 163
Preparing for the Meetingp. 163
Case Study: Half.comp. 169
Dress Rehearsalsp. 183
Show Time: The Presentationp. 185
Chapter 13 Negotiating the Term Sheet: The Art of the Dealp. 188
Choosing a Good Lawyerp. 189
Strengthening Your Bargaining Positionp. 190
Understanding and Negotiating the Key Elements of the Term Sheetp. 196
Chapter 14 Surviving the Due Diligence Processp. 207
Introductionp. 207
The Major Steps of the Due Diligence Processp. 208
Examining the Historical Datap. 208
Evaluating the Market Riskp. 210
Evaluating the People Riskp. 211
Evaluating the Technology Riskp. 215
Evaluating the Money Riskp. 216
Making the Investment Decisionp. 218
Reading from the Book of BK--Chapters 11, 7, and 13p. 219
Epilogue: Life After the Dealp. 222
The Golden Rule: Candorp. 223
The Role of the Venture Capitalistsp. 224
How Venture Capitalists Deal with Nonperforming Foundersp. 227
Emerge Interactive, Inc.: A Case Studyp. 232
Final Commentsp. 233
Appendix A Directory of Intervieweesp. 234
Appendix B Sample Confidentiality Agreementp. 236
Appendix C Sample Term Sheetp. 238
Appendix D TL Ventures Due Diligence Checklistp. 247
Appendix E Preferred Stock Purchase Agreementp. 262
Appendix F Select Online Entrepreneurial Resourcesp. 299
Appendix G VC Resources for Women and Minoritiesp. 300
Notesp. 302
Indexp. 311