The Business of Venture Capital, 3rd Edition

The Business of Venture Capital, 3rd Edition

by Mahendra Ramsinghani
Released February 2021
Publisher(s): Wiley
ISBN: 9781119639688

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Book description

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. 

Table of contents

  1. Cover
  2. Title Page
  3. Copyright
  4. Dedication
  5. Foreword
  6. Preface
    1. WHY SHOULD YOU READ THIS BOOK?
    2. AND WHO AM I TO WRITE THIS BOOK?
    3. WHAT SHOULD YOU KNOW ABOUT THIS BUSINESS OF VENTURE CAPITAL?
    4. NOTES
  7. Acknowledgments
  8. Part One: The Making of a VC
    1. 1 The Business of Cash and Carry
      1. INTRODUCTION: AN OPERATIONAL PRIMER
      2. ROLES, RESPONSIBILITIES, AND COMPENSATION
      3. NOTE
    2. 2 Why Choose a Career in VC
      1. CREATIVE CONSTRUCTION
      2. INTELLECTUAL STIMULATION
      3. MENTOR CAPITALISTS
      4. ASYMMETRICAL REWARDS
      5. NOTES
    3. 3 Attributes of Successful VCs
      1. STRONG AWARENESS OF TECH TRENDS
      2. ABILITY TO PICK WINNERS
      3. OPTIMISM, PATIENCE, AND STABILITY
      4. ABILITY TO LEARN AND GROW
      5. AN INHERENT BIAS FOR ACTION
    4. 4 Welcome to the Land of Ad-Venture
      1. ROLES AND RESPONSIBILITIES OF A VC
      2. INTERNSHIPS AND CAMPUS RECRUITMENT
      3. THE FELLOWSHIP OF INVESTORS
      4. ADJACENT ENTRY POINTS
      5. GETTING LUCKY — WHEN OPPORTUNITY MEETS A PREPARED MIND
      6. NOTES
    5. 5 Developing Your Investment Career
      1. BUILDING YOUR STRENGTHS
      2. BEWARE: BIAS AND PSYCHOLOGY
      3. NOTES
    6. 6 A Business Where Enemies Accumulate
      1. CHALLENGES OF A VC CAREER
      2. VC CAREER AS A CALLING
      3. NOTES
    7. 7 Generational Transfer and Succession
      1. MANAGING SUCCESSION - NOW MY WORK IS DONE
      2. THE ART OF LETTING GO
      3. NOTE
  9. Part Two: Raising Your Venture Fund
    1. 8 LP Universe
      1. PENSION FUNDS
      2. ENDOWMENTS AND FOUNDATIONS
      3. SOVEREIGN WEALTH FUNDS
      4. FINANCE AND INSURANCE COMPANIES
      5. FAMILY OFFICES AND HIGH-NET-WORTH INDIVIDUALS
      6. CORPORATE OPERATING FUNDS
      7. COMPARISON OF LIMITED PARTNERSHIPS
      8. NOTES
    2. 9 LPs of Choice: Fund of Funds
      1. ADVANTAGES OF A FUND OF FUNDS
      2. FUND OF FUNDS INVESTMENT STRATEGIES
    3. 10 How LPs Conduct Fund Due Diligence
      1. PRIMARY AND SECONDARY INVESTMENT CRITERIA
      2. FUND SELECTION CRITERIA
      3. NOTES
    4. 11 Defining Your Fund's Investment Strategy
      1. MARKET OPPORTUNITY
      2. COMPETITIVE ADVANTAGES
      3. CASE STUDY: SOLO GP GOES INSTITUTIONAL
      4. CASE STUDY: OVERSUBSCRIBED FIRST FUND — HOW A $30M FUND ENDED UP WITH OVER $100M IN COMMITMENTS
      5. CASE STUDY: STARTING ALL OVER…
      6. CASE STUDY: WHO HAS TIME FOR THIS? I DON'T NEED NO LPS ANYMORE…
      7. NOTES
    5. 12 Investment Team Diligence
      1. EVALUATING FUND MANAGERS
      2. TEAM DYNAMICS: STABILITY, SKILL SET, AND ALIGNMENT
      3. NOTES
    6. 13 Fund Size and Portfolio Construction
      1. NOTES
    7. 14 Performance Analysis
      1. INDIVIDUAL PERFORMANCE AND ATTRIBUTION
      2. PUBLIC MARKET EQUIVALENTS
      3. FUND-LEVEL PERFORMANCE
      4. MEASURING REALIZED RETURNS
      5. SELF-SELECTION BIAS: GIANTS AMONG MIDGETS
      6. NOTES
    8. 15 Terms of Fund Investment
      1. KEY TERMS
      2. FUND FINANCIAL TERMS
      3. FUND GOVERNANCE TERMS
      4. WHAT INSTITUTIONAL LPs SEEK
      5. OFFERING SWEETENERS TO ATTRACT LPs: A DOUBLE-EDGED SWORD
      6. MOST NEGOTIATED LP–GP TERMS
      7. WHY LPs TERMINATE EXISTING RELATIONSHIPS
      8. NOTES
    9. 16 The Venture Firm's Ethos, Culture, and Values
      1. ETHOS
      2. CULTURE AND VALUES
      3. GOVERNANCE OF THE FIRM
      4. NOTES
    10. 17 Raising Your First Fund
      1. FIRST STEPS
      2. TARGETING LPs
      3. MARKET TIMING
      4. FIT WITHIN THE LP's CURRENT PORTFOLIO
      5. NOTES
    11. 18 The Fundraising Roadshow
      1. OVERVIEW: THE FUNDRAISING PROCESS
      2. GETTING IN THE LP DOOR
      3. LOCKING YOUR ANCHOR INVESTOR
      4. SELL, SELL, SELL
      5. SHOULD YOU WAREHOUSE PORTFOLIO COMPANIES?
      6. YOUR BIGGEST FUNDRAISING RISKS, AND HOW TO MANAGE THEM
      7. NOTES
    12. 19 Why LPs Seek First-Time Funds
      1. CREATIVITY, HUNGER, AND PERFORMANCE
      2. RANKING EMERGING MANAGERS
      3. A FUTURES OPTION
      4. NOTES
    13. 20 Sourcing Investment Opportunities
      1. OVERVIEW: THE SOURCING PROCESS
      2. PROACTIVE SOURCING
      3. NETWORK-BASED SOURCING
      4. ACCELERATORS
      5. ANGEL NETWORKS
      6. COMMERCIALIZING UNIVERSITY RESEARCH
      7. CORPORATE RESEARCH
      8. TRADE CONFERENCES
      9. INVESTOR PITCH SESSIONS
      10. THE AGONY OF MISSED OPPORTUNITIES
      11. NOTES
  10. Part Three: Building Your Portfolio
    1. 21 Due Diligence Cheat Sheet
      1. NOTE
    2. 22 Diligence
      1. THE CHECKLIST MANIFESTO
      2. TAILORING DILIGENCE BY STAGE
      3. CHECKLISTS — USEFUL BUT SELDOM USED
      4. NOTES
    3. 23 Management Team Diligence: Assessing the Intangible
      1. OVERVIEW
      2. VALUES AND INTEGRITY
      3. CAN THE COMPANY ATTRACT GIANTS?
      4. CAN THE CEO EXECUTE? LAMBS VERSUS CHEETAHS
      5. SERIAL ENTREPRENEURS VERSUS FIRST-TIME ENTREPRENEURS
      6. BIAS AT WORK: SEEKING ATTRACTIVE MEN
      7. BACKGROUND CHECKS: FALSE MBAS AND CRIMINAL HISTORIES
      8. VARIOUS APPROACHES TO MANAGEMENT DILIGENCE
      9. NOTES
    4. 24 Market, Product, and Business Model Analysis
      1. EVALUATING THE PRODUCT
      2. ASSESSING THE BUSINESS MODEL
      3. NOTES
    5. 25 Terms and Conditions Apply
      1. THE SPIRIT OF THE TERM SHEET
      2. NEGOTIATION STRESS POINTS
    6. 26 Structure of the Term Sheet
      1. OVERVIEW
      2. CONVERTIBLE LOANS AND SAFE
      3. KEEPING TERM SHEETS SIMPLE
      4. SAMPLE SUMMARY TERM SHEET
      5. NOTES
    7. 27 Buy Low, Sell High
      1. VALUATION METHODS AND OTHER VOODOO ARTS
      2. THE DRIVERS OF VALUATION
      3. COMPARABLE VALUATIONS OF SIMILAR INVESTMENTS (COMPS)
      4. DISCOUNTED CASH FLOW METHOD
      5. LIQUIDATION PREFERENCE
      6. ANTIDILUTION PROTECTIONS
      7. GOVERNANCE AND CONTROL: PROTECTING YOUR SECURITIES
      8. EXIT-RELATED PROVISIONS
      9. OTHER IMPORTANT TERMS
      10. SYNDICATING INVESTMENTS
      11. MILESTONE-BASED FINANCING: RISK MITIGATION OR DISTRACTION
      12. NOTES
    8. 28 The Closing Process
  11. Part Four: The Art of Value Creation
    1. 29 Serving on Boards
      1. OVERVIEW
      2. LEGAL REQUIREMENTS OF BOARD SERVICE
      3. SELF-EDUCATION: PREPARING FOR YOUR BOARD ROLE
      4. ROLES AND RESPONSIBILITIES OF A BOARD MEMBER
      5. NOTES
    2. 30 Board Culture and Orientation
      1. TOWARD A BETTER BOARD CULTURE
      2. ON-BOARDING CHECKLIST
      3. NOTES
    3. 31 Let Me Know How I Can Be Helpful: Value Creation
      1. GOOD GOVERNANCE AS THE FIRST STEP TOWARD VALUE CREATION
      2. THE CEO'S PERSPECTIVE ON VENTURE CAPITALIST VALUE ADD
      3. NOTES
    4. 32 Challenges in the Boardroom
      1. CEO TRANSITIONS
      2. BEST PRACTICES IN MANAGING CEO TRANSITIONS
      3. PERFORMANCE CHALLENGES
      4. ALIGNMENT ON EXIT
      5. BOARD EVALUATION
      6. NOTES
  12. Part Five: Exits: Liquidity Events and Champagne
    1. 33 Exit Strategies
      1. EXIT OPTIONS
      2. PRECONDITIONS FOR AN EXIT
      3. NOTES
    2. 34 Acquisitions
      1. THE PRIMARY PATH TO AN EXIT
      2. PUTTING THE COMPANY UP FOR SALE
      3. DEAL KILLERS
      4. NOTES
    3. 35 Initial Public Offering
      1. THE IPO PROCESS: THE LONG AND WINDING ROAD
      2. STEPS TO AN IPO
      3. IPO UNDERPRICING AND DUTCH AUCTIONS
      4. POST IPO: SHOULD VCs STAY ENGAGED?
      5. NOTES
    4. 36 Secondary Sales
      1. NOTES
  13. Index
  14. End User License Agreement

Product information

  • Title: The Business of Venture Capital, 3rd Edition
  • Author(s): Mahendra Ramsinghani
  • Release date: February 2021
  • Publisher(s): Wiley
  • ISBN: 9781119639688