1

Executive MBA

Class Presentation

By

Coşkun Akdeniz

Bilgi University

November 2001

VENTURE CAPITAL & PRIVATE

EQUITY

WHAT IS VENTURE CAPITAL

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INVESTMENT PROCESS: A TYPICAL VC INVESTMENT

START UP

CO

Entrepreneur Venture Fund

Big Idea,

Small Money

Corporate Governance,

Large Amount of

Money

3

Management

Fee 2,5 %

VC FUND Management

Company EXIT

Investors:

Capital +80%

Management

Co.

20%

Distribution,

Carried

Interest

Portfolio

#4

Portfolio

#2

Portfolio

#3

Portfolio

#1

Founders Investors

P.Co Bank FofF P.Co T VC co. PP

Source: KAPİTALNET

non-active

INVESTMENT PROCESS : FUND STRUCTURE

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INVESTMENT PROCESS : TIMELINE

Organization

& Formation

Months 1-6 Fund

Raising

Months 6-18

Portfolio

Investments

Years 1-4 Portfolio

Management

Years 1-7

Portfolio

Exit

Years 3-10

1 2 3 4 5

Source: KAPİTALNET

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INVESTMENT PROCESS: WATERFRONT COVERAGE

Tech. Fund I

100 Mln

Innovative Technology Funds

Maturity / Value

V

e

h

i

c

l

e

/

R

i

s

k

Early Stage Mid Stage Late Stage

IPO

( USD )

Source: KAPİTALNET

Tech. Growth

Fund II

300 Mln Big Tech. Co

Fund III

150 Mln

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FUND RAISING BY VENTURE CAPITALIST

DEAL GENERATION

INITIAL SCREENING

SECOND SCREENING,VALUATION AND DUE DILIGENCE

DEAL APPROVAL AND STRUCTURING

POST INVESTMENT MONITORING

INVESTMENT REALISATION

ENTREPRENEUR’S EXIT AND ASSESSMENT BY

VENTURE CAPITALIST

VC FUND RAISING, DEAL APPRAISAL, MONITORING AND SERIAL ENTREPRENEURS

POST EXIT MONITORING BY

VENTURE CAPITALIST

POST EXIT CAREER – RETIREMENT; CONSULTANCY;

INVESTMENT BY ANOTHER VENTURE CAPİTALİST;

MANAGERIAL CAREER

G

o

v

e

r

n

a

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e

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y

F

u

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d

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R

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p

o

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i

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g

t

o

F

u

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p

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Source: Wright and Robbie, Journal of Finance Accounting, JuneJuly 1998 KAPİTALNET

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- 4 out of 40,000 ideas get funded by VCs,

- Only about 4,000 ideas reach the pre-business plan

stage,

- 400 write some kind business plan,

- 40 get some funding by angels and other sources,

- Only 4 get funded by VCs.........

STATISTICALLY SPEAKING

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BUSINESS PLAN DEVELOPMENT

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MAGIC

Investor must visualize and be committed

to your dream. Convey this through the

following components:

- Company: business purpose, objectives, history, legal structure, and ownership.

- Products or Services: general description, technical

specifications, and proprietary position.

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MAGIC (Con’t)

- Competitive Advantages: management team strengths,

market opportunity, product/service uniqueness and

sustainability, and the business model.

- Operational Strategy: operational plans, strategic

partners, and government regulations.

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MARKET

Key market sections:

- Industry Overview: description, structure, and size of

targeted industry and markets

- Customer: description, segmentation, and size of

targeted and future customer groups.

- Competition: current and potential competitors,

including their positioning and advantages.

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MARKET (Con’t)

- Marketing Strategy: advertising, promotion,

public relations, and media programs.

- Sales Strategy: distribution channels and

strategic partnering.

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MONEY

Key money sections:

- Revenue Model: pricing and volume assumptions and

revenue streams.

- Financial Statements: 3 to 5 years of key historical and

projected statements of income, statements of cash

flow, and balance sheets.

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MONEY (Con’t)

- Previous Financing: amount and timing of capital

investments and the type of provider. Company

Valuation: “pre-money” company valuation and

comparable companies.

- Capital Requirements: amount of capital required for

existing and future rounds.

- Uses of Funds: distribution of required capital

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MONEY (Con’t)

- Exit Strategy: description and timeframe of probable

liquidity event, such as an IPO or acquisition.

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MANAGEMENT

Key management sections:

- Executive Officers/Senior Managers: professional and academic experience.

- Board of Directors/Advisory Board: experienced, diverse and active.

- Future Staffing: expansion and succession plans for key staff.

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BUSINESS PLAN SUMMARY

- Venture capital providers receive hundreds of investment plans a year.

- But, typically request and review the business plan’s “executive summary”.

- Executive summary indicates the investment opportunity’s compatibility with the venture capital provider.

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BUSINESS PLAN SUMMARY ( Con’t)

- If the executive summary sparks their interest, will

request the complete business plan

- Many are rejected because they lack pertinent

investment information.

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Expecting Class Contribution!

Use the course book and other case papers provided to

develop your own original presentations.

You may refer to the attached information.

No more than 8 to 10 slides.

Course Instructor