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Venture Capital - What it is, how it's used and strategies implemented


  • 1. VENTURE CAPITAL HTW University of Applied Sciences International Business Law Prof. Dr. S. Dietrich Navi K. J. Phifer, Janin Viere, Lucia Soskova, Lisa Petzold

2. Table of Contents 1. Introduction Definitions 2. Venture Capital Historical Background What, Why, Who ? How to find Investors The role of VC investors VC financing cycle Direct/indirect VC 23.03.12 2Venture Capital 1. Exit Strategies IPOs Trade Sales Secondary Sale Buy Backs Liquidation Advantages/Disadvantages Discussion Points Conclusion 3. Definitions enture Capital orporate Venture Capital rivate Equity 23.03.12 Venture Capital 3 4. Definitions 23.03.12 Venture Capital 4 5. Historical Background 1946 1977: started out in USA 1960s: Germany 1970 1971: Financial support offered 2000 2001: .Com-Bubble Burst total investment 2000: $ 16.8bn 23.03.12 Venture Capital 5 6. VC - What, Why, Who ? Helps to foster growth Innovation capital echnology 23.03.12 Venture Capital 6 7. How to find VC investors? nternet searches ersonal contacts / recommendations anks 23.03.12 Venture Capital 7 8. The Role of VC-Investors inance dvice onsultation 23.03.12 Venture Capital 8 9. Types of VC - Financing Expansion Financing Bridge Financing Turnaround Financing Replacement Capital 23.03.12 Venture Capital 9 10. VC Financing - Cycle 1. Screening 2. Seed Financing 3. Early Stages 4. Growth Finance 5. Exit Strategies (Janin) 23.03.12 Venture Capital 10 11. Phase 1: Screening usiness plan creation elect and contact investors creening 23.03.12 Venture Capital 11 12. Questions to ask before considering VC financing Do we have high growth prospects and a team ambitous enough, to grow rapidly? Do we have a competitive edge or a unique selling product? 23.03.12 Venture Capital 12 13. Questions to ask before considering VC financing Are we willing to sell company shares to a private equity investor? Do we have a realistic exit opportunity for all shareholders to realise desired 23.03.12 Venture Capital 13 14. Phase 2: Seed Financing & R (Development & Research) ery high risk ifficult to judge commercial success 23.03.12 Venture Capital 14 15. Phase 3: Early Stages ests (esp. in pharmaceutical and bio-tech. fields) arketing activities 23.03.12 Venture Capital 15 16. Phase 4: Growth Finance ompany hits market eeds to stay afloat and grow to compete urther advice 23.03.12 Venture Capital 16 17. Phase 5: Exit Strategies IPOs Trade Sales Secondary Sales Buy Backs Liquidations 23.03.12 Venture Capital 17 18. Phase 5: Exit Strategies IPOs 23.03.12 18Venture Capital 19. Phase 5: Exit Strategies Trade Sales 23.03.12 19Venture Capital 20. Phase 5: Exit Strategies Secondary Sales 23.03.12 20Venture Capital 21. Phase 5: Exit Strategies Buy Backs 23.03.12 21Venture Capital 22. Phase 5: Exit Strategies Liquidations 23.03.12 22Venture Capital 23. Phase 5 Exit Strategies - Statistics 2008, in exit volume terms: trade sales dominated at 35% sales to other private equity firms came to 30% divestments by IPO/sale of quoted equity were 9% trade sales dropped from 89 to 74 sales to private equity firms increased from 10 to 29 Total losses were down from 139 million and 151 companies to 118 million and 136 companies As a result of declining share prices both declined the number of exits by IPO (from 7 to 3) and through the sale of shares (from 34 to 10). 23.03.12 Venture Capital 23 24. Advantages/Disadvantages The VC Investor Investment Experience, advice, mentoring Objectivity Networking Recruitment Credibility Shared risk 23.03.12 Venture Capital 24 Mandatory exit Loss of independence Right to lay off the workforce 25. Advantages/Disadvantages Capital Solely for our business Start-up financing Liable equity within the company Improved rating 23.03.12 Venture Capital 25 26. Advantages/Disadvantages Due Diligence Advantages Disadvantages Company realises: Where it stands in the market What/where to improve Possible future developments 23.03.12 Venture Capital 26 ime oney 27. Advantages/Disadvantages The Company Advantages Growth Value Security Equity ratio 23.03.12 Venture Capital 27 28. Advantages/Disadvantages Dilution Disadvantages Dilution-decrease of sth Anti-dilution protection Milestone financing Pay-to-play Liquidation preferences 23.03.12 Venture Capital 28 29. Advantages/Disadvantages Contractual protection for the VC investor Information rights Control rights Representation and warranties Anti-dilution protection 23.03.12 Venture Capital 29 30. Advantages/Disadvantages Restrictions on the Transfer of Shares by Shareholders The articles and shareholders agreement Exceptions Investors shares Founders shares 23.03.12 30Venture Capital 31. Advantages/Disadvantages Investors Protection-Exit Drag-alone rights Tag-along rights 23.03.12 31Venture Capital 32. Advantages/Disadvantages Taxation 23.03.12 32Venture Capital 33. Discussion Points Obstacles Alternatives Our best options 23.03.12 Venture Capital 33 34. Conclusion Augumus Pecumian GmbH 23.03.12 Venture Capital 34


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