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Week 1
Course Introduction
Academia
Venture
Capitalists
Entrepreneurs
Formal
equity
Investor with
financial and
strategic goals
Venture Capitalist
Strategic Investor
Business Angel
Family & Friends
Financial
investment
company
Innovation & Entrepreneurship Group
Corporate
investment
company
Publicly funded
investment
company
Incubator
MBO
IPO
Capital
Increase
Strategic
Buyer
Bank Loan
Strategic
Investor
VC Investor
Family &
Friends
Business
Angel
EXPANSION PHASE
MATURITY PHASE
3
$100.000.000.000
$80.000.000.000
$60.000.000.000
$40.000.000.000
$20.000.000.000
$0
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Source: NVCA.org
Innovation & Entrepreneurship Group
Investors
Investment
Management
company
Mgmt.
fee
Profits
Venture
Capital
Fund
Capital
reflux
Financial investors /
industrial company
Capital flow
SELECTION AND
CARETAKING
Portfolio company
EXIT
Source: Geigenberger (2000)
Investors
Venture Capital
Company
Portfolio Company
Investors
Aka the limited partners
of the fund
Provide the capital
for the VC
Typically high net worth
individuals, banks, pension
funds, insurances,
corporations
Expect a high return to
compensate for the asset
class risk
Venture Capital
Company
Portfolio Company
Investors
Aka the limited partners
of the fund
Provide the capital
for the VC
Typically high net worth
individuals, banks, pension
funds, insurances,
corporations
Expect a high return to
compensate for the asset
class risk
Portfolio Company
Venture Capital
Company
Usually two legal entities:
the management company
and the general partner
of the VC Fund
Raise funds
Identify and screen
opportunities
Transact and close deals
Monitor and add value to
investments
Harvest
Uses VC money to
Create, recognize and
execute an opportunity
Develop products or
enter markets
Push and scale into
market-leading
position
Ultimately try to harvest the
created value through an
exit
Fund Management
Annual Management Fee:
2-3% of Fund Volume
Investors
Buyer
Portfolio Company
Equity Streams
Monetary Streams
Source: Bygrave & Timmons (1992), Icons designed by Freepik
Innovation & Entrepreneurship Group
Fund Management
Annual Management Fee:
2-3% of Fund Volume
Investors
Buyer
Portfolio Company
Equity Streams
Monetary Streams
Source: Bygrave & Timmons (1992), Icons designed by Freepik
Innovation & Entrepreneurship Group
Fund Management
Annual Management Fee:
2-3% of Fund Volume
Investors
Price of the
PF Company
Buyer
Equity Streams
Monetary Streams
Portfolio Company
IPO or private
purchase of VC
funds portfolio
company
Source: Bygrave & Timmons (1992), Icons designed by Freepik
And most of the proceeds from the sale of the company are
ultimately paid back to the VC funds investors
Venture Capital Company
Invest in VC fund
Investors
Fund Management
Principal + 75-85%
of Capital Gains
Carried Interest:
15-25% of Capital Gains
Price of the
PF Company
Buyer
Equity Streams
Monetary Streams
Portfolio Company
IPO or private
purchase of VC
funds portfolio
company
Source: Bygrave & Timmons (1992), Icons designed by Freepik
Its
a
p
o
Venture Capital Company
rt
folio
gam
e
r
o
f
ip
h
s
r
ne
e
t
r
m
i
a
t
P
Invest
ed in VC fund
t
i
m
i
al
Investors
Fund Management
Principal + 75-85%
of Capital Gains
Carried Interest:
15-25% of Capital Gains
Price of the
PF Company
Buyer
Equity Streams
Monetary Streams
Portfolio Company
IPO or private
purchase of VC
funds portfolio
company
10
MONEY
STRATEGIC
ADVICE
NETWORK
MONEY
STRATEGIC
ADVICE
NETWORK
!
C
V
a
h
ac
o
r
p
p
a
nd
ta
c
e
l
k)
e
e
s
e
w
y
l
t
l
x
u
e
of n
aref
c
C
i
:
p
o
e
t
n
I would be oending too
many
i
e
ottom
L (Which will be th
people, Khosla
Bretorted.
Maybe some percentage thats
substantially larger than 95 percent
of VCs add zero value.
I would bet that 70-80 percent add
negative value to a startup in their
advising.
Source:TechCrunch
Innovation & Entrepreneurship Group