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Venture Capital

Venture Capital. Professor Sandeep Dahiya Georgetown University. ONSET Ventures. How would you compare ONSET to a more traditional source of capital such as a Bank? (Would TallyUp care if the money came from a bank instead of a VC?). What is a VC?.

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Venture Capital

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  1. Venture Capital Professor Sandeep Dahiya Georgetown University

  2. ONSET Ventures • How would you compare ONSET to a more traditional source of capital such as a Bank? (Would TallyUp care if the money came from a bank instead of a VC?)

  3. What is a VC? (1) A VC is a financial intermediary, meaning that they take the investors’ capital and invest it directly in portfolio companies. (2) A VC will only invest in private companies. This means that once the investments are made, the companies cannot be immediately traded on a public exchange. (3) A VC takes an active role in monitoring and helping the companies in his portfolio. (4) A VC’s primary goal is to maximize his financial return by exiting investments through a sale or an initial public offering (IPO). (5) VCs invest in order to fund the internal growth of companies. Angel Investor Mutual Fund Corporate Investment Buyout Fund

  4. ONSET Ventures • How would you compare ONSET to a more traditional source of capital such as a Bank? (Would TallyUp care if the money came from a bank instead of a VC?) • Guiding principles of ONSET – Do they make sense? • Which type of entrepreneur is or is not a good fit for ONSET? Why? • Why is ONSET limiting itself to 80-95 million range when there is a strong demand from investor?

  5. This Course • No easy answers – Boot Camp (Up to 100+pages of reading before class!!) • Main Perspective • Key aspects and practices of industry • How these key features are a response to the difficult environment • Constant comparison of the US and European experience

  6. Investing Capital Exit and returning capital Fund raising We will follow the “Venture Capital Cycle”

  7. Raising Capital • Highly complex and arcane legal issues • We shall focus on high level themes • Perspective of capital suppliers • Structure of rewards • Profound effect on behavior is important for everyone!

  8. ONSET Ventures • The first fund (1984) – Do you find anything unusual about this fund? • Highlights from the Offering (Ex1) – If you were investing in ONSET III what would you focus on? Why?

  9. Investing Capital • Responses by VCs • Active Screening • Stage Financing • Syndication • Use of Stock options/grants with strict vesting requirements • Contingent control mechanisms – Covenants and restrictions • Strategic composition of Board of Directors • Challenges • Uncertainty • Asymmetric Information • Nature of Firm’s assets • Conditions of relevant financial and product markets

  10. ONSET Ventures • Revisit the guiding principles of ONSET • How are the applied/not applied to Tally Up investment? • Analyze Tally Up using the challenges/responses framework we just saw

  11. Investing Capital • Responses by VCs • Active Screening • Stage Financing • Syndication • Use of Stock options/grants with strict vesting requirements • Contingent control mechanisms – Covenants and restrictions • Strategic composition of Board of Directors • Challenges • Uncertainty • Asymmetric Information • Nature of Firm’s assets • Conditions of relevant financial and product markets

  12. Exiting Investments • Failure • Disappear • Zombie Companies “Living Dead” • Success “Liquidity Event” • Critical … yet controversial • Can cause severe heartburns for an entrepreneur • IPO • Sale to another company

  13. Why Take this Course? • There are few VC related employement opportunities? • Broader perspectives • Would be entrepreneurs – know the other side • Would be investors – know the incentives and organizational issues • Would be professionals (Bankers) – know the dynamics

  14. Grading • Class Participation 20% • Home Work/Quiz 30% • Final Exam 50%

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