Introduction to Venture Capital

Introduction to Venture Capital

@koladiya

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Introduction to Venture Capital

@koladiya1 week ago

Introduction to Venture Capital
EE 203
Stanford University
March 6th, 2007
Will Price
Hummer W…

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Introduction
• Will Price, Principal
– Harvard College, AB
– Northwestern University, MBA
– In…

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What Is Venture Capital?
• Venture capitalists:
– Raise pools of capital from institutional and
…

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A Long History!

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Impact on Economy
• Infrastructure
– Intel, Cisco, 3Com,
Juniper, Apple, EMC,
Sun, Wind River…

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Snapshot
• 2006 US Deal Stats
– $25.8bn invested
– 2,454 deals
– $10.5m per deal
• By Sector
…

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Private Equity Returns Over 20-Year Horizon
(by investor type; as of 3/31/05)
The 20 year early s…

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Economics of VC Firm
• Management Fees (typically 2-2.5% of AUM)
– Charge a management fee to cov…

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Flavors of VCs
• VC’s segment in a number of ways
– Sector
• Healthcare versus IT versus clean …

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Structure of Firm
• General Partners
– 6-8 active deals at a
time
• Principals/Associate
– Dr…

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What do VC’s want
• This depends on stage – let’s focus on early stage
since that is what we do.…

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What Should Founders Expect: Reduce Prob. of Failure
• Codified best practices
– FP&A/budgeting, …

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Suggested Playbook
• Be committed….
• Hire a great Valley lawyer
• Figure out what stage and sec…

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• What we do
• Who we are
• How we plan to make money
• What we are asking for (how much money)
…

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Pat your head and rub your tummy…Hard to Do!
• Pat your head
–Spec out 1.0 and focus on a
cust…

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What to Expect
• 12-16 week process
– First meeting to close
– 1st mtg  diligence 
partner me…

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What to Consider
• Is the idea sufficiently baked?
– Optimal time is 6 months of iteration
• Pic…

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Approaching VC’s
• Investing is a people business, and
getting a meeting is all about “who
you…

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Tips
• Don’t take rejection personally, the odds
are against you.
• Every VC is “interested” – …

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Resources
• http://
feeds.feedburner.com/venturecapital
• www.feld.com
• www.askavc.com
• http…

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Hummer Winblad Venture Partners
• First Fund Exclusively for Software
Investing
– Founded Septe…

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Hummer Winblad Highlights
• 104 investments in 17 years
• 51 liquidity events in 17 years
– 17 I…

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History
• General Georges Doroit is considered to be the father of
venture capital industry.
•…

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Overview
• Institutional investor will allocate ~ 2% to 3% of their
institutional portfolio to a…

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2 .1 1.5 1.8
3 .9 3 .2 4 3 .8 4 .5 4 .7 5 .1 3 .4 2 .1
5 .3 4 .1
7 .8
10 .2
18 .1
3 0 .6
5 8…

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Growth of Active Firms
# of Active VC Firms
0
200
400
600
800
1000
199219931994199519961997…

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Amount Invested ($B)
Number of Deals
Investment Level Surpasses 2005
Deal Flow and Equity into …

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0%
20%
40%
60%
80%
100%
4Q03 2Q04 4Q04 2Q05 4Q05 2Q06 4Q06
Other
Business,
Consumer,
Reta…

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Bay Area Draws Most Investment Dollars
Regional Investment in the United States 4Q’06
Source: Dow…

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@koladiya

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Introduction to Venture Capital

@koladiya

This presentation provides an introduction to venture capital, outlining its history, key players, and economics. It explores how venture capitalists fund startups, the benefits they bring, and the expectations for founders. Best practices for pitching to VCs are detailed, along with practical strategies to increase chances of securing investment.

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