A Look Into The Venture Capital Industry

A LOOK INTO THE VENTURE CAPITAL INDUSTRY Venture capitalism is a way for young companies or startups to receive funding from investors that provide the capital necessary to grow or expand a fledgling business. Venture capitalism is traditionally seen as a high risk, high reward type of investment and investors are typically seated on the board of the company with a say in decisions and partial equity. TWO DIFFERENT TYPES OF VENTURE CAPITALISTS ANGEL INVESTORS Individuals with high net worth looking for high returns on their investments; often former VENTURE CAPITAL FIRMS A group or partnership of investors entrepreneurs Participate in boards, management, structuring, and decision making Take high risks at the hope Focus on young startups or high-growth companies of high reward Plan for longer investment maturation Invest capital Investment Investors are not looking to be involved in the business they've invested in forever. Typically the investment life-cycle has an entry Life-Cycle and exit strategy planned out in advance. BUSINESS PLAN SUBMITTED: venture capitalists review the business plan and speak with the entrepreneurs DUE DILIGENCE: the prospective investor looks into the business in great detail to get a full picture of the company's strengths, weaknesses, and operations INVESTMENT: capital is provided to the business, usually as a part of a deal trading equity and/or debt ($) EXECUTION: The investor(s) become actively involved, providing funds, advice, and oversee milestone completion 4 Life-cycles typically last about 10 years, but can be longer or shorter depending on each EXIT: Sometimes known as a liquidity event; at maturation, the venture funds exit the business, through IPOS (Initial Public Offerings), acquisitions, and mergers Common Stages of Venture Capital Investing? As part of the fourth stage of the investment life-cycle, there are typical stages for the release of funds into the business. LATER STAGE: capital provided for companies that are in SEED STAGE: capital business but provided, usually directed toward early development, 1 possibly not turning a profit products, research, and/or A. THIRD STAGE: developing a business plan capital provided for expansions, improvements, and marketing FORMATIVE STAGE: B. EXPANSION 2 This stage includes the STAGE: seed and early stages encompasses second and third stages EARLY STAGE: capital provided to support growth in C. MEZZANINE OR BRIDGE STAGE: capital provided to go public capabilities, encompasses start-ups that need support for product development and marketing, as well as first stages that need support for manufacturing and are testing, or beginning testing Total Investments As of the first two quarters in 2014 venture Capitalists have invested approximately 47% $6 Billion Software 14% $9.8 Billion $13 Billion $1.8 Billion Biotech In 1st Quarter In 2nd Quarter 8% $1 Billion Media 6% $747 M IT JAN FEB MAR APR MAY JUN Where Is The Money? The top 10 regions of investments by venture capitalists: SILICON VALLEY $7.1 billion NEW ENGLAND $1.3 billion NEW YORK METRO $1.2 billion LA / ORANGE COUNTY $538 million MIDWEST $497 million NORTHEAST $411 million SOUTHEAST $364 million TEXAS $354 million DC/METROPLEX $247 million SAN DIEGO $222 million The Firms Behind Who is behind the funding? In 2013, the top 10 most active the Money venture capital firms were. Andreessen Horowitz New Enterprise Associates $667 million 82 deals $596 million 45 deals Google Venture Kleiner Perkins Caufield & Byers $563 million 34 deals $533 million 34 degls 33 deals ($) Lightspeed Venture Partners Accel Partners $491million 31 deals $488 million First Round Capital General Catalyst Partners $440 million 57 deals $427 million 40 deals Battery Ventures 10 Khosla Venture $325 million 28 deals $319 million 36 deals IT'S ALL IN THE NUMBERS Although venture capitalism is high risk, high reward, it is a huge business and is responsible for funding many of the businesses that would otherwise fail. Small businesses are crucial to the US economy, and venture capitalism supports that ecosystem. investopedia.com/terms/v/venturecapital.asp sba.gov/content/venture-capital securedocs.com/blog/2013/11/vc-fund-lifecycle/ investopedia.com/exam-guide/cfa-level-1/alternative-investments/venture-capital-investing-stages.asp pwcmoneytree.com/CurrentQuarter/Bylndustry pwc.com/en_US/us/health-industries/publications/assets/pwc-moneytree-venture-funding-q3-2013.pdf cbinsights.com/blog/active-venture-capital-firms-h1-2014-silicon-valley-york-massachusetts/ entrepreneur.com/vc100 SURE PAYROLL OBizMedia A Paychex® Company created by