The Business of Venture Capital: The Art of Raising a Fund, Structuring Investments, Portfolio Management, and ExitsHardcover (2024)

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  • Product Details
  • About the Author
  • Table of Contents

Description

The new edition of the definitive guide for venture capital practitioners--covers the entire process of venture firm formation & management, fund-raising, portfolio construction, value creation, and exit strategies

Since its initial publication, The Business of Venture Capital has been hailed as the definitive, most comprehensive book on the subject. Now in its third edition, this market-leading text explains the multiple facets of the business of venture capital, from raising venture funds, to structuring investments, to generating consistent returns, to evaluating exit strategies. Author and VC Mahendra Ramsinghani who has invested in startups and venture funds for over a decade, offers best practices from experts on the front lines of this business.

This fully-updated edition includes fresh perspectives on the Softbank effect, career paths for young professionals, case studies and cultural disasters, investment models, epic failures, and more. Readers are guided through each stage of the VC process, supported by a companion website containing tools such as the LP-GP Fund Due Diligence Checklist, the Investment Due Diligence Checklist, an Investment Summary format, and links to white papers and other industry guidelines. Designed for experienced practitioners, angels, devils, and novices alike, this valuable resource:

  • Identifies the key attributes of a VC professional and the arc of an investor's career
  • Covers the art of raising a venture fund, identifying anchor investors, fund due diligence, negotiating fund investment terms with limited partners, and more
  • Examines the distinct aspects of portfolio construction and value creation
  • Balances technical analyses and real-world insights
  • Features interviews, personal stories, anecdotes, and wisdom from leading venture capitalists

The Business of Venture Capital, Third Edition is a must-read book for anyone seeking to raise a venture fund or pursue a career in venture capital, as well as practicing venture capitalists, angel investors or devils alike, limited partners, attorneys, start-up entrepreneurs, and MBA students.


Product Details

ISBN-13: 9781119639688

Media Type: Hardcover

Publisher: Wiley

Publication Date: 02-03-2021

Pages: 544

Product Dimensions: 6.10(w) x 9.00(h) x 1.90(d)

Series: Wiley Finance

About the Author

MAHENDRA RAMSINGHANI, B. Engg., MBA, has over fifteen years of investment experience and is the founder of Secure Octane, a San Francisco–based cybersecurity fund. He is the former Managing Director of First Step Fund and has advised investment organizations in the U.S., Asia Pacific, and Middle East regions. He is a frequent speaker at engagements around the world, and contributes regularly to professional publications, including Techcrunch, Forbes, and Venturebeat.

Table of Contents

Table of Contents

Foreword xiii

Preface xv

Acknowledgments xxvii

Part One The Making of a VC

1 The Business of Cash and Carry 3

2 Why Choose a Career in VC 11

3 Attributes of Successful VCs 15

4 Welcome to the Land of Ad-Venture 21

5 Developing Your Investment Career 41

6 A Business Where Enemies Accumulate 57

7 Generational Transfer and Succession 63

Part Two Raising Your Venture Fund

8 LP Universe 73

9 LPs of Choice: Fund of Funds 89

10 How LPs Conduct Fund Due Diligence 95

11 Defining Your Fund’s Investment Strategy 99

12 Investment Team Diligence 119

13 Fund Size and Portfolio Construction 129

14 Performance Analysis 137

15 Terms of Fund Investment 155

16 The Venture Firm’s Ethos, Culture, and Values 173

17 Raising Your First Fund 193

18 The Fundraising Roadshow 205

19 Why LPs Seek First-Time Funds 221

20 Sourcing Investment Opportunities 229

Part Three Building Your Portfolio

21 Due Diligence Cheat Sheet 255

22 Diligence 259

23 Management Team Diligence: Assessing the Intangible 269

24 Market, Product, and Business Model Analysis 293

25 Terms and Conditions Apply 303

26 Structure of the Term Sheet 309

27 Buy Low, Sell High 317

28 The Closing Process 353

Part Four The Art of Value Creation

29 Serving on Boards 357

30 Board Culture and Orientation 367

31 Let Me Know How I Can Be Helpful: Value Creation 377

32 Challenges in the Boardroom 391

Part Five Exits: Liquidity Events and Champagne

33 Exit Strategies 407

34 Acquisitions 417

35 Initial Public Offering 435

36 Secondary Sales 449

Notes 451

Index 485

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The Business of Venture Capital: The Art of Raising a Fund, Structuring Investments, Portfolio Management, and ExitsHardcover (2024)

FAQs

What is the structure of funds venture capital investment? ›

It all starts with the General Partners (GPs) and Limited Partners (LPs). GPs and LPs are at the core of every venture capital firm and act as the two primary types of investors. The primary legal structure of most venture capital funds is a limited partnership (made up of at least one GP and LP).

How are venture capital funds structured and how do they make money? ›

A venture fund is a pool of money invested by high net worth individuals, investment banks, insurance companies, endowments, retirement funds, and other financial firms. Once a venture capital firm raises a pool of money, it charges its investors a fee to manage the fund.

What is the exit mechanism of venture capital? ›

Exit strategies

Venture capital (VC) investors may decide to sell their investment and exit a company. Alternatively, the company's management can buy the investor out (known as a 'repurchase'). Other exit strategies for investors include: sale of equity to another investor - secondary purchase.

What is venture capital in business management? ›

Venture capital (VC) is a form of private equity that funds startups and early-stage emerging companies with little to no operating history but significant potential for growth. Fledgling companies sell ownership stakes to venture capital funds in return for financing, technical support and managerial expertise.

What are the three types of venture capital funds? ›

Venture capital investments are considered either seed capital, early-stage capital, or expansion-stage financing, depending on the maturity of the business at the time of the investment. However, regardless of the investment stage, all venture capital funds operate and are regulated in much the same way.

What are most venture capital funds structured as? ›

Additionally, most private equity and venture capital funds in Canada are structured as limited partnerships, which are governed by limited partnership agreements.

How do you get funded by venture capital? ›

How to get venture capital funding
  1. Find an investor. Look for individual investors — sometimes called “angel investors” — or venture capital firms. ...
  2. Share your business plan. ...
  3. Go through due diligence review. ...
  4. Work out the terms. ...
  5. Investment.

How do you make money from venture capital? ›

VCs are investors who form limited partnerships to pool investment funds. They use that money to fund startup companies in return for equity stakes in those companies. VCs usually make their investments after a startup has been generating revenue rather than in its initial stage.

What is an example of a venture capital investment? ›

Examples of Venture Capital

Series A, B, C, etc.: These are multiple rounds of funding that a company goes through, generally getting more substantial as the business grows. For instance, Facebook's Series A was $12.7 million from Accel Partners, while its Series B ballooned to $27.5 million from various investors.

What is the most common exit strategy for venture capitalists? ›

Acquisition. Aside from IPOs, being acquired by another company is the most popular exit opportunity. It simply entails the purchase of a startup by another company. The founders and venture capitalists are typically ready to move on and relinquish control over what they have built.

What is venture capital strategy? ›

Venture capital investment strategies involve aligning investment goals with market trends and implementing effective structures and policies to support the investment process. Venture capital (VC) is a form of private equity that is invested in early-stage companies with high growth potential.

How is venture capital repaid? ›

Is there a specific timeline for repayment? Venture capital is not paid back the way you'd pay back a mortgage or a car loan. The investors in a startup are paid back when the company is sold, or, more rarely, goes public with an IPO.

What are the two rules of success in venture capital management? ›

Venture capital management involves investing in early-stage companies with high growth potential. To succeed in this field, there are two key rules that venture capitalists follow: diversification and due diligence.

What percentage do venture capitalists take? ›

The investors get 70% to 80% of the gains; the venture capitalists get the remaining 20% to 30%. The amount of money any partner receives beyond salary is a function of the total growth of the portfolio's value and the amount of money managed per partner. (See the exhibit “Pay for Performance.”)

How to raise venture capital? ›

How to raise venture capital
  1. Evaluate your financing needs. First, take a look at your financial situation. ...
  2. Determine the right timing. ...
  3. Refine your minimum viable product. ...
  4. Build your pitch deck (and demo) ...
  5. Prepare for due diligence. ...
  6. Spread the word. ...
  7. Choose the right investors. ...
  8. Do your investor due diligence.

What is venture capital capital structure? ›

Venture Capital Structure

High-net-worth individuals (HNWI), insurance companies, pension funds, foundations, and corporate pension funds may pool money in a fund controlled by a VC firm. The venture capital firm acts as the general partner (GP), while the other companies or individuals are LPs.

What is the structure of an investment fund? ›

The most common investment structures are OEICs (Open Ended Investment Companies), Unit Trusts, CIFs (Common Investment Funds) and Investment Trusts. As well as thinking about which investment structures are best for your organisation, you'll need to select a specific type of fund, such as: Single-asset funds.

What is the structure of capital investment? ›

Capital structure is the specific mix of debt and equity that a company uses to finance its operations and growth. Debt consists of borrowed money that must be repaid, often with interest, while equity represents ownership stakes in the company.

What is the capital structure of a fund? ›

Capital structure refers to the amount of debt and/or equity employed by a firm to fund its operations and finance its assets. A firm's capital structure is typically expressed as a debt-to-equity or debt-to-capital ratio.

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