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The Business of Venture Capital: The Art of Raising a Fund, Structuring Investments, Portfolio Management, and Exits (Wiley Finance)

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The new edition of the definitive guide for venture capital practitioners―covers the entire process of venture firm formation & management, fund-raising, portfolio construction, value creation, and exit strategies

Since its initial publication, The Business of Venture Capital has been hailed as the definitive, most comprehensive book on the subject. Now in its third edition, this market-leading text explains the multiple facets of the business of venture capital, from raising venture funds, to structuring investments, to generating consistent returns, to evaluating exit strategies. Author and VC Mahendra Ramsinghani who has invested in startups and venture funds for over a decade, offers best practices from experts on the front lines of this business.

This fully-updated edition includes fresh perspectives on the Softbank effect, career paths for young professionals, case studies and cultural disasters, investment models, epic failures, and more. Readers are guided through each stage of the VC process, supported by a companion website containing tools such as the LP-GP Fund Due Diligence Checklist, the Investment Due Diligence Checklist, an Investment Summary format, and links to white papers and other industry guidelines. Designed for experienced practitioners, angels, devils, and novices alike, this valuable resource:

  • Identifies the key attributes of a VC professional and the arc of an investor’s career
  • Covers the art of raising a venture fund, identifying anchor investors, fund due diligence, negotiating fund investment terms with limited partners, and more
  • Examines the distinct aspects of portfolio construction and value creation
  • Balances technical analyses and real-world insights
  • Features interviews, personal stories, anecdotes, and wisdom from leading venture capitalists

The Business of Venture Capital, Third Edition is a must-read book for anyone seeking to raise a venture fund or pursue a career in venture capital, as well as practicing venture capitalists, angel investors or devils alike, limited partners, attorneys, start-up entrepreneurs, and MBA students. 

Author(s): Mahendra Ramsinghani
Edition: 3
Publisher: Wiley
Year: 2021

Language: English
Commentary: Perfect PDF
Pages: 544

Cover
Title Page
Copyright Page
Contents
Foreword
Preface
Acknowledgments
Part I The Making of a VC
Chapter 1 The Business of Cash and Carry
Introduction: An Operational Primer
Roles, Responsibilities, and Compensation
Chapter 2 Why Choose a Career in VC
Creative Construction
Intellectual Stimulation
Mentor Capitalists
Asymmetrical Rewards
Chapter 3 Attributes of Successful VCs
Strong Awareness of Tech Trends
Ability to Pick Winners
Optimism, Patience, and Stability
Ability to Learn and Grow
An Inherent Bias for Action
Chapter 4 Welcome to the Land of Ad-Venture
Roles and Responsibilities of a VC
Internships and Campus Recruitment
The Fellowship of Investors
Adjacent Entry Points
Getting Lucky — When Opportunity Meets a Prepared Mind
Chapter 5 Developing Your Investment Career
Building Your Strengths
Beware: Bias and Psychology
Chapter 6 A Business Where Enemies Accumulate 
Challenges of a VC Career
VC Career as a Calling
Chapter 7 Generational Transfer and Succession
Managing Succession - Now my work is done
The Art of Letting Go
Part II Raising Your Venture Fund
Chapter 8 LP Universe
Pension Funds
Endowments and Foundations
Sovereign Wealth Funds
Finance and Insurance Companies
Family Offices and High-Net-Worth Individuals
Corporate Operating Funds
Comparison of Limited Partnerships
Chapter 9 LPs of Choice: Fund of Funds
Advantages of a Fund of Funds
Fund of Funds Investment Strategies
Chapter 10 How LPs Conduct Fund Due Diligence
Primary and Secondary Investment Criteria
Fund Selection Criteria
Chapter 11 Defining Your Fund’s Investment Strategy
Market Opportunity
Competitive Advantages
Case Study: Solo GP Goes Institutional
Case Study: Oversubscribed First Fund — How a $30m Fund Ended Up With Over $100m in Commitments
Case Study: Starting all Over. . .
Case Study: Who has Time for This? I Don’t Need no LPs Anymore. . .
Chapter 12 Investment Team Diligence
Evaluating Fund Managers
Team Dynamics: Stability, Skill Set, and Alignment
Chapter 13 Fund Size and Portfolio Construction
Chapter 14 Performance Analysis
Individual Performance and Attribution
Public Market Equivalents
Fund-Level Performance
Measuring Realized Returns
Self-Selection Bias: Giants Among Midgets
Chapter 15 Terms of Fund Investment: The Limited Partnership Agreement
Key Terms
Fund Financial Terms
Fund Governance Terms
What Institutional LPs Seek
Offering Sweeteners to Attract LPs: A Double-Edged Sword
Most Negotiated LP–GP Terms
Why LPs Terminate Existing Relationships
Chapter 16 The Venture Firm’s Ethos, Culture, and Values
Ethos
Culture and Values
Governance of the Firm
Chapter 17 Raising Your First Fund
First Steps
Targeting LPs
Market Timing
Fit Within the LP’s Current Portfolio
Chapter 18 The Fundraising Roadshow
Overview: The Fundraising Process
Getting in the LP Door
Locking Your Anchor Investor
Sell, Sell, Sell
Should You Warehouse Portfolio Companies?
Your Biggest Fundraising Risks, and How to Manage them
Chapter 19 Why LPs Seek First-Time Funds
Creativity, Hunger, and Performance
Ranking Emerging Managers
A Futures Option
Chapter 20 Sourcing Investment Opportunities
Overview: The Sourcing Process
Proactive Sourcing
Network-Based Sourcing
Accelerators
Angel Networks
Commercializing University Research
Corporate Research
Trade Conferences
Investor Pitch Sessions
The Agony of Missed Opportunities
Part III Building Your Portfolio
Chapter 21 Due Diligence Cheat Sheet
Chapter 22 Diligence
The Checklist Manifesto
Tailoring Diligence by Stage
Checklists — Useful but Seldom Used
Chapter 23 Management Team Diligence: Assessing the Intangible
Overview
Values and Integrity
Can the Company Attract Giants?
Can the CEO Execute? Lambs Versus Cheetahs
Serial Entrepreneurs Versus First-Time Entrepreneurs
Bias at Work: Seeking Attractive Men
Background Checks: False MBAS and Criminal Histories
Various Approaches to Management Diligence
Chapter 24 Market, Product, and Business Model Analysis
Evaluating the Product
Assessing the Business Model
Chapter 25 Terms and Conditions Apply: The Art of Structuring Investment Transactions
The Spirit of the Term Sheet
Negotiation Stress Points
Chapter 26 Structure of the Term Sheet
Overview
Convertible Loans and Safe
Keeping Term Sheets Simple
Sample Summary Term Sheet
Chapter 27 Buy Low, Sell High: Equity Preferred Stock
Valuation Methods and Other Voodoo Arts
The Drivers of Valuation
Comparable Valuations of Similar Investments (Comps)
Discounted Cash Flow Method
Liquidation Preference
Antidilution Protections
Governance and Control: Protecting your Securities
Exit-Related Provisions
Other Important Terms
Syndicating Investments
Milestone-Based Financing: Risk Mitigation or Distraction
Chapter 28 The Closing Process: After the Term Sheet
Part IV The Art of Value Creation
Chapter 29 Serving on Boards
Overview
Legal Requirements of Board Service
Self-Education: Preparing for your Board Role
Roles and Responsibilities of a Board Member
Chapter 30 Board Culture and Orientation
Toward a Better Board Culture
On-Boarding Checklist
Chapter 31 Let Me Know How I Can Be Helpful: Value Creation
Good Governance as the First Step Toward Value Creation
The CEO’s Perspective on Venture Capitalist Value Add
Chapter 32 Challenges in the Boardroom
CEO Transitions
Best Practices in Managing CEO Transitions
Performance Challenges
Alignment on Exit
Board Evaluation
Part V Exits: Liquidity Events and Champagne
Chapter 33 Exit Strategies
Exit Options
Preconditions for an Exit
Chapter 34 Acquisitions
The Primary Path to an Exit
Putting the Company up for Sale
Deal Killers
Chapter 35 Initial Public Offering
The IPO Process: The Long and Winding Road
Steps to an IPO
IPO Underpricing and Dutch Auctions
Post IPO: Should VCs Stay Engaged?
Chapter 36 Secondary Sales
Index
EULA