a look into the venture capital industry

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Post on 22-Jun-2015


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enture Capital is one of those things that’s often discussed, but maybe not completely understood. You’ll often hear about a company being “venture backed” or famous venture capital firms that make hugely profitable investments in things like Facebook. It’s rare, though, to see a breakdown of how the venture capital industry actually works. For instance, what’s the difference between a venture capital firm and an angel investor? How does a company end up getting venture capital funding? How much money is exchanged? Where does it take place? Is it all in Silicon Valley? You’ll be surprised how much venture capital money is in places like Texas and the Midwest. Source: http://blog.surepayroll.com/look-inside-venture-capital-industry/


  • 1. VEENTTUREECAPPIITTALLIIndussttRYInvestors are not looking to beinvolved in the business theyveinvested in forever. Typically theinvestment life-cycle has an entryand exit strategy planned out inadvance. {{As part of the fourth stageof the investment life-cycle,there are typical stages forthe release of funds intothe business.47%$6 BillionSoftwareTWO DIFFERENT TYPESOF VENTURE CAPITALISTSInvestmentLife-CycleCommon Stages ofVenture CapitalInvesting?SEED STAGE: capitalprovided, usually directedtoward early development,products, research, and/ordeveloping a business planTotal InvestmentsAs of the first two quarters in 2014 ventureCapitalists have invested approximately$1.8 Billion$1 Billion$747 MJAN FEB MAR APR MAY JUNWhere Is The Money?In 2nd QuarterA LOOK INTO THEVenture capitalism is a way for youngcompanies or startups to receive fundingfrom investors that provide the capitalnecessary to grow or expand a fledglingbusiness. Venture capitalism is traditionallyseen as a high risk, high reward type ofinvestment and investors are typically seatedon the board of the company with a say indecisions and partial equity.The top 10 regions of investments by venture capitalists:SAN DIEGOThe Firms Behindthe Money1 Andreessen Horowitz2 New Enterprise AssociatesAlthough venture capitalism is high risk, high reward, itis a huge business and is responsible for funding manyof the businesses that would otherwise fail. Smallbusinesses are crucial to the US economy, and venturecapitalism supports that ecosystem.$7.1 billion$1.3 billion$1.2 billion$538 million$497 million$411 million$364 million$354 million8%Media6%IT$247 million$222 millionSILICON VALLEYNEW ENGLANDNEW YORK METROLA / ORANGE COUNTYMIDWESTNORTHEASTSOUTHEASTTEXAS$9.8 BillionIn 1st Quarter14%$13 Billion BiotechBUSINESS PLANSUBMITTED: venturecapitalists review the businessplan and speak with theentrepreneurs1EXIT: Sometimes known as a liquidity event;at maturation, the venture funds exit thebusiness, through IPOs (Initial PublicOfferings), acquisitions, and mergers5INVESTMENT: capital isprovided to the business,usually as a part of a dealtrading equity and/or debt3EXECUTION: The investor(s)become actively involved,providing funds, advice, andoversee milestone completion4DUE DILIGENCE: the prospective investorlooks into the business in great detail to geta full picture of the companys strengths,weaknesses, and operations2Life-cycles typically lastabout 10 years, but can belonger or shorterdepending on each{Focus on young startups orhigh-growth companiesTake high risks at the hopeof high rewardParticipate in boards,management, structuring,and decision makingPlan for longer investmentmaturationInvest capital34EARLY STAGE: capital provided to support growth incapabilities, encompasses start-ups that need support forproduct development and marketing, as well as first stagesthat need support for manufacturing and are testing, orbeginning testingLATER STAGE:capital providedfor companiesthat are inbusiness butpossibly notturning a profitA. THIRD STAGE:capital providedfor expansions,improvements,and marketingB. EXPANSIONSTAGE:encompassessecond and thirdstagesC. MEZZANINEOR BRIDGESTAGE: capitalprovided to gopublicITS ALL IN THENUMBERSinvestopedia.com/terms/v/venturecapital.aspsba.gov/content/venture-capitalsecuredocs.com/blog/2013/11/vc-fund-lifecycle/investopedia.com/exam-guide/cfa-level-1/alternative-investments/venture-capital-investing-stages.asppwcmoneytree.com/CurrentQuarter/ByIndustrypwc.com/en_US/us/health-industries/publications/assets/pwc-moneytree-venture-funding-q3-2013.pdfcbinsights.com/blog/active-venture-capital-firms-h1-2014-silicon-valley-york-massachusetts/entrepreneur.com/vc100created by12FORMATIVE STAGE:This stage includes theseed and early stages$596 million 45 deals$563 million 34 deals $533 million 34 deals$491million 31 deals$440 million 57 deals $427 million 40 deals$325 million 28 deals $319 million 36 deals33 deals$488 million$667 million 82 deals3 Google Venture5 Lightspeed Venture Partners8 General Catalyst Partners9 Battery Ventures 10 Khosla Venture4 Kleiner Perkins Caufield & Byers6 Accel Partners7 First Round CapitalWho is behind the funding? In2013, the top 10 most activeventure capital firms were. {VENTURE CAPITAL FIRMSA group or partnership ofinvestorsANGEL INVESTORSIndividuals with high net worthlooking for high returns on theirinvestments; often formerentrepreneursDC/METROPLEX