Venture Capital The Definitive Guide for Entrepreneurs, Investors, and Practitioners,9780471398134

Venture Capital The Definitive Guide for Entrepreneurs, Investors, and Practitioners

by ; ; ; ;
Edition: 1st
ISBN13: 9780471398134
ISBN10: 0471398136
Format: Hardcover
Pub. Date: 2001-10-01
Publisher(s): Wiley
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Summary

How to attract the venture capital needed to grow any business Venture Capital teaches entrepreneurs and small business owners everything they need to know about finding the venture capital they need to grow their businesses. Based, in large part, upon in-depth interviews with major players in the venture capital arena--including money managers as well as entrepreneurs who have dealt with them successfully--it provides powerful pointers on how to make a business attractive to venture capitalists, how to protect yourself in negotiating an agreement, how to manage a relationship with venture capitalists once a deal is signed, and much more. Perhaps most importantly, the reader learns what makes venture capitalists tick and sees things through a venture capitalist's eyes. Joel Cardis, Esq. (Blue Bell, PA), consults both Fortune 500 companies and small businesses on an array of venture and start-up issues. Hildy Richelson, PhD (Scarsdale, NY), is President of the Scarsdale Investment Group, Ltd.

Author Biography

JOEL CARDIS, Esq., is an attorney and consultant with more than two decades of experience working with Fortune 500 executives and small businesses. He is the founder and President of an investment club comprising entrepreneurs and businesspeople.He can be reached at jcardisesq@snip.net

Table of Contents

Introduction xi
Part I Doing Your Homework: Preparing for the Venture Capitalists
The Venture Capital Revolution
3(4)
Venture Capital FAQ: Is the Game Right for You?
7(11)
What Funding Will I Be Expected to Have in Hand before Approaching Venture Capitalists?
7(4)
Will Venture Capitalists Take Advantage of Me?
11(1)
How Do Venture Capitalists Determine Valuation?
12(1)
What Is Dilution?
12(1)
Will Venture Capitalists Help Me Grow My Business?
13(1)
Do Venture Capitalists Have Unrealistic Performance Expectations?
14(1)
Why Do Venture Capitalists Stress an Exit Strategy?
14(1)
Why Will Venture Capitalists Give Me a Lower Valuation than Do Passive Investors?
15(1)
Will I Lose My Job?
15(1)
Next Steps
16(2)
The Market Risk
18(13)
Your Market Opportunity
19(2)
Your Market Analysis
21(2)
Your Competition
23(4)
Your Customers
27(2)
Your Sales and Marketing Strategy
29(2)
The People Risk---Part I: Management Teams and Boards
31(17)
The Founder and the Management Team
32(3)
A Case Study of an Entrepreneur's Passion
35(3)
David Henry
Coachability: A Crucial Ingredient for CEO Success
38(1)
How Do You Evaluate, Hire, and Retain Good People?
39(2)
Building a Board of Directors
41(3)
Professional Services Providers: Accountants and Lawyers
44(4)
The People Risk---Part II: Strategic Alliances
48(12)
Key to Success: Alliance Formation
49(1)
Forming Alliances through Public Service or Charity
50(1)
The Keiretsu
51(2)
How to Manage Difficulties in Your Alliances
53(1)
XL Vision: An Incubator Built on Alliances
54(2)
Minority and Women's Alliances
56(4)
The Master of the Keiretsu: An Interview with Pete Musser
60(23)
Novell and Other Stories
60(3)
Key Investment Factors
63(2)
Joe Siegel and QVC
65(1)
Strategic Alliances---Part I
66(3)
Milestones and Exit Strategies
69(2)
Strategic Alliances---Part II: Metcalfe's Law
71(3)
An IPO Goldmine: Internet Capital Group
74(1)
Organizing a Good Board
75(1)
Intellectual Property and Confidentiality Agreements
76(1)
The ``Black Art'' of Valuation
77(3)
The Business Plan
80(3)
The Technology Risk
83(13)
Product Development
84(2)
Market Acceptance Issues
86(6)
How Proprietary Is Your Technology?
92(4)
The Money Risk
96(19)
The Burn Rate
98(4)
The Path to Profitability (P to P)
102(3)
Scalability and Its Costs
105(1)
The Exit Strategy and Market Conditions
106(1)
Characteristics of the Venture Capitalists' Fund
107(1)
The Capital Structure and Legal Form of Your Entity
108(7)
Part II Getting Funded
How to Value Your Company
115(17)
The Language of Valuation
116(3)
Methods of Valuation
119(4)
How Does Valuation Look to the Venture Capitalist and the Entrepreneur?
123(1)
Valuation and the Quality of the Venture Capitalist
124(1)
When Should You Discuss Valuation?
125(2)
An Entrepreneur's Lawyer Looks at Valuation
127(5)
Writing Effective Business Plans
132(16)
The Executive Summary
132(2)
The Market Opportunity
134(1)
Products and Services
134(1)
The Business Model
134(1)
The People
134(1)
Financials
135(1)
Prior Sources of Funding and Uses of Proceeds
136(1)
Exit Strategy
136(1)
Dilution Schedule
136(1)
The Detailed Business Plan
137(1)
First Step: Gather Your Data
137(1)
General Business Plan Guidelines
138(2)
Framework of the Business Plan
140(1)
Cover Page
140(1)
The Market Opportunity
141(1)
Products and Services
142(1)
The People
143(1)
Financials
143(2)
Sources of Funding and Uses of Proceeds
145(1)
Calendar of Milestones
145(1)
Exit Strategy
146(1)
Dilution Schedule
146(1)
Appendixes
146(1)
Final Comments
147(1)
Which Venture Capitalist Is Right for You?
148(15)
The Venture Capital Industry
148(1)
The Best Firms and the Brightest Stars
149(2)
The Specialization of the Venture Capital Industry
151(4)
Resources
155(1)
Getting in the Door
156(1)
Sponsorship
156(4)
Nondisclosure Agreements (NDAs)
160(1)
The Application Process
161(2)
Show Time: Presenting to the Venture Capitalists
163(25)
Preparing for the Meeting
163(6)
Case Study: Half.com
169(14)
Dress Rehearsals
183(2)
Show Time: The Presentation
185(3)
Negotiating the Term Sheet: The Art of the Deal
188(19)
Choosing a Good Lawyer
189(1)
Strengthening Your Bargaining Position
190(6)
Understanding and Negotiating the Key Elements of the Term Sheet
196(11)
Surviving the Due Diligence Process
207(15)
Introduction
207(1)
The Major Steps of the Due Diligence Process
208(1)
Examining the Historical Data
208(2)
Evaluating the Market Risk
210(1)
Evaluating the People Risk
211(4)
Evaluating the Technology Risk
215(1)
Evaluating the Money Risk
216(2)
Making the Investment Decision
218(1)
Reading from the Book of BK---Chapters 11, 7, and 13
219(3)
Epilogue Life after the Deal 222(12)
The Golden Rule: Candor
223(1)
The Role of the Venture Capitalists
224(3)
How Venture Capitalists Deal with Nonperforming Founders
227(5)
Emerge Interactive, Inc.: A Case Study
232(1)
Final Comments
233(1)
Appendix A Directory of Interviewees 234(2)
Appendix B Sample Confidentiality Agreement 236(2)
Appendix C Sample Term Sheet 238(9)
Appendix D TL Ventures Due Diligence Checklist 247(15)
Appendix E Preferred Stock Purchase Agreement 262(37)
Appendix F Select Online Entrepreneurial Resources 299(1)
Appendix G VC Resources for Women and Minorities 300(2)
Notes 302(9)
Index 311

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