EFim11Ed3 - Chapter 11 PROFESSIONAL VENTURE CAPITAL FOCUS...

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Chapter 11 PROFESSIONAL VENTURE CAPITAL FOCUS In this chapter, we consider the highest profile segment of the venture investing markets: professional venture capital. We discuss the origins of venture capital and the periodic fluctuations accompanying major new technologies. We give special attention to the professional venture capital screening and investment processes. LEARNING OBJECTIVES 1. Discuss the history and current status of venture investing in the United States 2. Explain the professional venture investing cycle and its relevance to entrepreneurs seeking professional venture capital 3. List major elements in the design and structure of a venture capital fund 4. Describe the venture capital screening process and list characteristics central to determining a venture capitalist’s willingness to invest 5. Discuss the various roles a venture capitalist can take in providing financing and services to an emerging venture 6. Enumerate several terms or conditions to be negotiated when structuring venture capital financing CHAPTER OUTLINE 11.1 HISTORICAL CHARACTERIZATION OF PROFESSIONAL VENTURE CAPITAL 11.2 PROFESSIONAL VENTURE INVESTING CYCLE: OVERVIEW 11.3 DETERMINING (NEXT) FUND OBJECTIVES AND POLICIES 11.4 ORGANIZING THE NEW FUND 11.5 SOLICITING INVESTMENTS IN THE NEW FUND 11.6 OBTAINING COMMITMENTS FOR A SERIES OF CAPITAL CALLS 11.7 CONDUCTING DUE DILIGENCE AND ACTIVELY INVESTING 11.8 ARRANGING HARVEST OR LIQUIDATION 11.9 DISTRIBUTING CASH AND SECURITIES PROCEEDS SUMMARY DISCUSSION QUESTIONS AND ANSWERS 1. What is a professional venture capitalist? How does this occupation differ from that of an angel investor? 207
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Chapter 11: Professional Venture Capital A professional venture capitalist is one who invests not only his own money but also other capital from other investors while an angel investor is a wealthy individual who invests just his own money. 2. Briefly describe how professional venture capital got started after World War II. See section 11.1 for details. Professional venture capital, as we know it today did not exist before World War II. A group of people including Georges Doriot and Ralph Flanders believed that WWII technologies could be commercialized and joined to form the first professional venture capital fund called American Research and Development (ARD) in 1946. 3. What was the early role of the Small Business Administration (SBA) in fostering venture investing? The SBA initially helped small businesses get government contracts and then moved into guaranteeing small business loans. The SBICs chartered by the SBA became the primary structure for professional venture capital very quickly after their inception. 4. Describe the development of professional venture investing in the 1960s, 1970s , and early 1980s. After the overheated SBIC market, private venture capital partnerships became the
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This note was uploaded on 12/05/2009 for the course FIN Fin 595 taught by Professor Shabbir during the Spring '09 term at CSU Dominguez Hills.

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EFim11Ed3 - Chapter 11 PROFESSIONAL VENTURE CAPITAL FOCUS...

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