10 Things You Should Know About VC

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Information about 10 Things You Should Know About VC

Published on January 26, 2010

Author: olivierwitmeur

Source: slideshare.net

Description

Presentation made during an Event organized by ABE-BAO,
BECI and BVA

10 THINGS YOU SHOULD KNOW ABOUT « VC » ABE – BECI – BVA Event January 21rst, 2010

Selected messages from the first Belgian Guide to VC Sophie Manigart Olivier Witmeur An initiative supported by: Olivier Witmeur, 21/01/2010

Sophie Manigart

Olivier Witmeur

An initiative supported by:

Venture Capital / VC Capital-Risque Capital-Développement Risicokapitaal Seed Capital Start-up capital Private Equity / PE Durfkapitaal Olivier Witmeur, 21/01/2010

1. VC is typical inside entrepreneurial finance Risk level High Low Company maturity FFF BUSINESS ANGELS VENTURE CAPITAL STOCK MARKETS BANKS Low High Olivier Witmeur, 21/01/2010

2. High risks = High returns Typical expected yearly return: Seed: 60-100% Start-up: 50-60% Early development: 40-50% Growth: 30-40% RISK RETURN Olivier Witmeur, 21/01/2010

Typical expected yearly return:

Seed: 60-100%

Start-up: 50-60%

Early development: 40-50%

Growth: 30-40%

3. VCs are professionals with their own business strategy Multiple types of VC firms: public, private, captive… They all have: Investment strategy Industry, region, maturity stage… Portfolio strategy (risk diversification) Organizational structure Investment Manager Investment Committee Olivier Witmeur, 21/01/2010

Multiple types of VC firms: public, private, captive…

They all have:

Investment strategy

Industry, region, maturity stage…

Portfolio strategy (risk diversification)

Organizational structure

Investment Manager

Investment Committee

4. Equity for growth … not lifestyle BE AMBITIOUS. Olivier Witmeur, 21/01/2010

5. A very selective filter 1 100 80 2 Contacts Initial meetings 10 Start of Due Diligence Investment Proposal (term sheet) Investment DON’T GIVE UP AFTER A FIRST REJECTION. Olivier Witmeur, 21/01/2010

6. A systematic Due Diligence process Initial Contact In-depth analysis Negotiate Go / No go Go / No go Shareholder agreement Term sheet Pitch Initial meeting Business Plan More info items Closing From 6 to 9 months BE PREPARED. Olivier Witmeur, 21/01/2010

7. Define Exit route in advance Trade sales IPO (Initial Public Offering) Buy-back / MBO DEFINE EXIT ROUTE IN ADVANCE. Olivier Witmeur, 21/01/2010

Trade sales

IPO (Initial Public Offering)

Buy-back / MBO

DEFINE EXIT ROUTE IN ADVANCE.

8. The value of a company is mainly based on its future Multiple valuation methods: Discounted Cashflow / Net Present Value Multiple (from peer group) Book value Exit based value BE REALISTIC. Olivier Witmeur, 21/01/2010

Multiple valuation methods:

Discounted Cashflow / Net Present Value

Multiple (from peer group)

Book value

Exit based value

BE REALISTIC.

9. A partnership with written rules Formalized in a term sheet and in a shareholder agreement Investment conditions and milestones Corporate governance, incl. board composition, veto rights… Reporting Work agreement for the entrepreneurs, incl. good leaver/bad leaver clauses Buying and selling shares SOP (Stock Option Plan) Non competition and non disclosure Dispute litigation ETHICS MATTERS. Olivier Witmeur, 21/01/2010

Formalized in a term sheet and in a shareholder agreement

Investment conditions and milestones

Corporate governance, incl. board composition, veto rights…

Reporting

Work agreement for the entrepreneurs, incl. good leaver/bad leaver clauses

Buying and selling shares

SOP (Stock Option Plan)

Non competition and non disclosure

Dispute litigation

10. Smart money Best practices Network Specialists Industrial partners Access to more finance Second opinion Helicopter view Exit preparation BETTER A SMALLER PART OF A MUCH BIGGER CAKE. Olivier Witmeur, 21/01/2010

Best practices

Network

Specialists

Industrial partners

Access to more finance

Second opinion

Helicopter view

Exit preparation

Q&A on www.venture-capital.be Olivier Witmeur, 21/01/2010

Q&A on www.venture-capital.be

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