Wiley
Wiley.com
Print this page Share

The Business of Venture Capital: Insights from Leading Practitioners on the Art of Raising a Fund, Deal Structuring, Value Creation, and Exit Strategies

ISBN: 978-0-470-87444-8
432 pages
October 2011
The Business of Venture Capital: Insights from Leading Practitioners on the Art of Raising a Fund, Deal Structuring, Value Creation, and Exit Strategies (0470874449) cover image
The definitive guide demystifying the venture capital business

The Business of Venture Capital covers the entire spectrum of a venture capital business, from raising venture funds to structuring investments, value creation as board member and assessing exit pathways. Author Mahendra Ramsinghani covers the distinct aspects of the venture capital fund raising and investment process with insights and perspectives from leading experts. Interviewees include Limited Partners (LPs) such as Credit Suisse, Grove Street Advisors and General Partners (GPs) from Foundry Group, Spark Capital, Benchmark Capital, Norwest Venture Partners, Shasta Ventures and Bessemer Venture Partners. If you’re curious about venture capital businesses, you’ve found the only book that covers it all.

• The first book to address the full investment cycle of the venture capital business
• Demystifies the key aspects of the business - raising venture funds, fund-level due diligence and fund terms, structuring investments, value creation, and exits
• Foreword by Mark Heesen, President, National Venture Capital Association
• Benefit from the experiences of the best-in-class practitioners, who have made investments in leading companies like Zynga, Twitter & Foursquare
• Describes how venture capital is an art as well as a science

In-depth and thorough, The Business of Venture Capital is the one book that includes insights, tools and real world examples every practitioner can benefit from.
See More
Foreword xiii

Preface xvii

Acknowledgments xxix

PART ONE: Raising the Venture Fund 1

CHAPTER 1: The Universe of Limited Partners 5

An Overview of Alternative Assets 6

Sources of Capital 10

Comparison of Limited Partnerships 29

Summary 29

CHAPTER 2: Fund Due Diligence 33

Sourcing and First Screens 34

Fund Due Diligence: How LPs Evaluate Venture Firms 36

Evaluating the Fund Managers 39

Emerging Managers: A Promise of the Future 53

The Quest for the Elusive Top Quartile Managers 61

Fund Investment Strategy 67

Market Timing 77

Fund Size and Portfolio Construction vis-a-vis Fund Strategy 80

Fit within the LP's Current Portfolio 85

Why LPs Terminate Existing Relationships 87

Summary 87

CHAPTER 3: Terms of Investment: The Limited Partnership Agreement 89

Sample Terms in a Fund's PPM 90

Other LP-GP Terms 105

What Matters Most 110

Summary 110

CHAPTER 4: Fund Structure, Governance, and Operations 113

Key Constituents of the GP Team 114

Finding Suitable Partners 125

Fund Governance and Economics 126

Governance of Management Services GP LLC 127

Summary 134

CHAPTER 5: Getting to the First Close 135

Build Your Target List of Investors 137

Fund Marketing Materials 141

Presentation Slides 142

Making the Presentation Pitch: Drink Your Own Kool-Aid 144

Attracting the Lead Investor: Your "Nut" 144

Communicate, Create, and Maintain Momentum 146

Offering Sweeteners to Attract LPs: A Double-Edged Sword 147

The Role of Placement Agents in Fund-Raising 147

Caveat Emptor 151

Summary 152

PART TWO: The Investment Process 153

CHAPTER 6: The Art of Sourcing Investment Opportunities 155

The Best Source: The Network 157

The Fountainheads of Academia and Research 160

Corporate Research 161

Venture Events and Trade Conferences 163

Venture Farming 165

Angels and Pledge Funds 167

Business Plan Competitions 171

Cold Calling 172

You Win Some, You Miss Some 172

Summary 174

CHAPTER 7: The Art of Conducting Due Diligence 177

What Is Important: Jockey, Horse, or Markets? 178

Attributes of the Jockey 179

Serial Entrepreneurs versus First-Time Entrepreneurs 183

What about Charisma? 184

Management Team Due Diligence: How to Assess the Jockey 185

The Importance of Conducting Background Investigations 192

Assessing the Market 194

Evaluating the Idea or Product 199

Reviewing the Business Model 201

Considering the Financial Projections 202

Weighing the Importance of Business Plans 203

The Due Diligence Checklist 203

Summary 206

CHAPTER 8: The Basics of Corporations, Ownership, and Control 209

Authorized Shares and Issued Shares 211

Shareholder Rights 217

Role of the Board 217

Summary 218

CHAPTER 9: Valuation Methods and Other Voodoo Arts 219

The Drivers of Valuation 220

The Simplified Form of the VC Method of Valuation 221

Comparable Valuations of Similar Investments (Comps) 224

Discounted Cash Flow Method 226

Summary 228

CHAPTER 10: Structuring Investment Transactions 229

The Spirit of the Term Sheet 229

Negotiation Stress Points 230

Milestone-Based Financing: Risk Mitigation or Distraction 238

Structuring Terms to Generate Target Returns 239

Governance and Control: Protecting Your Securities 246

Exit-Related Provisions 247

Other Terms 248

Toward a Simpler Term Sheet for Smaller Investments 250

Syndicating Investments 251

The Closing Process: After the Term Sheet 252

Summary 253

CHAPTER 11: Behind Every Successful CEO Stand a Few Good Board VCs 255

The Need for Director Education 256

Roles and Responsibilities of a Board Member 257

Board Composition and Orientation 261

Board Practices 263

Get That Gavel: Overview of Robert’s Rules of Order 265

Value Creation: How to Support Your Portfolio Company’s CEO 268

The CEO’s Perspective on Venture Capitalist Value Add 269

Setting the Tone through Board Culture 275

Improving the Board Game 284

Summary 289

CHAPTER 12: Exit Strategies 291

Preconditions for an Exit 292

Acquisitions: The Primary Path to an Exit 297

The Sell Process 302

When an Acquirer Comes Knocking 307

The Buy-Side Acquisition Process 307

Deal Killers 310

Acquisition Case Study: Mint.com Generates 5x Cash-on-Cash Return in Two Years 310

Initial Public Offering 313

Private Exchanges: Necessity Drives Liquidity Solutions 324

Summary 327

CHAPTER 13: Summing Up 329

Aptitudes and Attitudes of Successful Practitioners 330

Drawbacks 338

What about Luck? 339

Key Takeaways for Practitioners 340

As You Go Forward 344

About the Companion Web Site 345

Notes 347

Suggested Reading 375

About the Author 379

Index 381

See More
MAHENDRA RAMSINGHANI manages Invest Detroit's First Step Fund, a seed and early stage fund with investments in over twenty-five start-ups. He led the development and launch of legislation for two fund-of-fund programs for the state of Michigan. The author has over fifteen years of experience with development of early stage companies and venture investments in the United States, Singapore, and India.
See More
November 02, 2011
THE BUSINESS OF VENTURE CAPITAL: Insights from Leading Practitioners on the Art of Raising a Fund, Deal Structuring, Value Creation, and Exit Strategies

Defining the business of venture capital is not always an easy feat. Even those who are in the industry, will discover something new from expert author Mahendra Ramsinghani’s new book THE BUSINESS OF VENTURE CAPITAL (John Wiley & Sons; $75.00; October 2011). This is the first book that addresses all the elements of the Venture Capital business including:

  • Covers the process of raising the venture fund, including identifying and assessing the Limited Partner universe; fund due-diligence criteria; and fund investment terms in Part One
  • Discusses the investment process, including sourcing investment opportunities; conducting due diligence and negotiating investment terms; adding value as a board member; and exploring exit pathways in Part Two
  • Offers insights, anecdotes, and wisdom from the experiences of best-in-class practitioners  
  • Includes interviews conducted by Leading Limited Partners/Fund-of-Funds with Credit Suisse, Top Tier Capital Partners, Grove Street Advisors, Rho Capital, Pension Fund Managers, and Family Office Managers
  • Features the insights of over twenty-five leading venture capital practitioners, frequently featured on Forbes' Midas List of top venture capitalists

ABOUT THE AUTHOR:

Mahendra Ramsinghani manages Invest Detroit’s First Step Fund, a seed and early stage fund with investments in over twenty-five start-ups. He led the development and launch of legislation for two Fund-of-Fund programs for the State of Michigan. The author has over fifteen years of experience with development of early stage companies and venture investments in the United States, Singapore, and India.  

THE BUSINESS OF VENTURE CAPITAL: Insights from Leading Practitioners on the Art of Raising a Fund, Deal Structuring, Value Creation, and Exit Strategies; Published by John Wiley & Sons, Inc.; Publication date: October 31, 2011; $75.00; Hardcover; 392 pages; ISBN: 978-0-470-87444-8

See More
Buy Both and Save 25%!
+

The Business of Venture Capital: Insights from Leading Practitioners on the Art of Raising a Fund, Deal Structuring, Value Creation, and Exit Strategies (US $75.00)

-and- Regulating Competition in Stock Markets: Antitrust Measures to Promote Fairness and Transparency through Investor Protection and Crisis Prevention (US $60.00)

Total List Price: US $135.00
Discounted Price: US $101.25 (Save: US $33.75)

Buy Both
Cannot be combined with any other offers. Learn more.
Back to Top