9780130348036

Foreword by Pierre Lamond, General Partner, Sequoia Capital Venture capital has never been more important to the entrepreneur. But in the past few years, the venture capital process has changed dramatically: first with the dot.com explosion, again with the dot.com collapse, and yet again as the industry has learned its lessons and begun to move forward. From Concept to Wall Street is the first book on venture capital to reflect these radical transformations and their impact on ventures creation and development. Written by two leading participants in the venture capital and entrepreneurial process, it covers all you need to know to succeed-whatever your industry, whatever your role. For entrepreneurs, it covers every step from idea to exit: planning, teambuilding, protecting intellectual capital, identifying funding sources, raising money, writing funding agreements, and managing through to IPO or M & A. For venture capitalists, investment bankers, and angels, it offers comprehensive guidance for valuing potential companies and guiding them towards success. This book provides the depth, the clarity, and above all, the realism that are sorely lacking in many previous books on venture capital. It is, quite simply, essential. * More than fundraising: the entire VC process In-depth coverage of the unique challenges associated with planning and managing VC-funded startups * Practical insight from all sides of the table Insider's expertise for entrepreneurs, investors, advisors, and consultants * Applicable to every venture capital funded industry Electronics, hardware, software, information technology, telecom, biotech, medical instrumentation, and more * Reviews and compares all key funding sources Venture capital funds, investment banks, angels, and other funding sources * Includes in-depth coverage of valuation, legal, and contractual issues The most challenging and risky aspects of the VC process: pitfalls and solutionsThe new realities of venture capital: a start-to-finish success guide. bull; Addresses the entire venture development process-from planning and funding a startup through IPOs, M & As, or dissolution Includes detailed coverage of management issues crucial to the success of the venture For every participant: entrepreneurs, venture capitalists, investment banks, angels, consultants, and advisors Reflects the revolutionary changes in venture capital industry since the dot.com implosion Co-authored by two leading experts in Venture Development and Venture Capital Industry, and reviewed by dozens of leading investment bankers, venture capitalists, entrepreneurs and lawyers. Now, there's a comprehensive guide to the realities of venture capital as they exist right now and going forward. In From Concept to Wall Street, two leading experts in venture-backed entrepreneurship offer a start-to-finish guide to the entire process: starting new companies, identifying and negotiating funding, and managing to-and through-IPOs or M & As. Drawing on their immense personal experience on all sides of the table-and the hard lessons of recent years-Dr. Oren Fuerst and Dr. Uri Geiger offer a complete roadmap for both investors and entrepreneurs. They begin with detailed guidance on the startup process: evaluating ideas, assembling initial teams, establishing companies, defining strategies, recruiting key employees, registering intellectual property, and more. Next, they review the startup's cash requirements and potential sources of capital, and walk through the process of capital raising, with a close look at valuation, and at the typical contractual arrangements between funders and entrepreneurs. The book includes a full section on venture capital entities and institutions, ranging from VC funds

DR. OREN FUERST is the Managing Director of Strategic Models LLC, a strategic advisory in the international, technology and healthcare sectors, handling all aspects of venture development and venture capital investments.

Fuerst is also co-director of the Technology and Internet Valuation and Strategy Executive program at Columbia Business School, and lectures in the Executive and MBA programs. He was formerly on the faculty of Yale School of Management and served with the Capital Market Advisory Group of KPMG. He is also a feature financial columnist for leading financial publications, including the Financial Times.

He received his master's and doctoral degrees from Columbia Business School (on the topic of International Securities Offerings).

DR. URI GEIGER is co-founder and CEO of GalayOr Networks Inc., a developer of innovative micro opto-mechanical systems for applications at the core of next-generation optical networks. He teaches venture capital and entrepreneurship topics at Tel Aviv University Business School. An experienced lawyer with leading law firms, including Sullivan & Cromwell, he specialized in securities offerings, M&As and venture capital transactions.

Dr. Geiger has vast experience in running technology-based and capital-raising projects, including founding and successfully selling an Internet-based jewelry company.

He received his master's and doctoral degrees from Columbia University Center for Law & Economics (on the topic of International Securities Offerings). His influential work had been published in leading law and economics journals.

Foreword.
Preface.
Acknowledgments.
About the Authors.
1. Introduction.
Book Structure . Glossary.

I. ESTABLISHMENT AND DEVELOPMENT OF VENTURES.

2. Beginnings—Establishing a Venture.
The Price of Success and Failure. The Idea. The Management Team. External Advisors. Incorporation. Incorporation in Delaware.

3. Financial and Business Planning.
The Company's Business Cycle. Financial Statements. Financial Projections. Cost Structure Analysis and Forecasting. Cash Flow Forecasting. Market Analysis and Strategic Planning. Strategic Alliances. The Business Plan.

4. Employee Recruitment and Compensation.
Employee Recruiting. Employee Compensation in the Technology Segments. Granting Options to Employees. Taxation of Stock Options. Performance-based Compensation. Incentives to Tie Employees to the Company. Considerations in Employment Termination.

5. Intangible Capital and Intellectual Property.
Patents. Copyright Law. Trademark Law. Trade Secrets. Issues with Employees. NDA-Non-Disclosure Agreements. Considerations in the Granting of Licenses.

II. FINANCING THE VENTURE.

6. Milestones and Sources of Financing the Venture.
Financing in Stages. Milestones in Venture Development. Scope of Financing and the Company's Value. Stages in Raising Venture Capital. Sources of Capital.

7. Practical Aspects of Raising Venture Capital.
Basic Terms. Deciding How Much Capital to Raise. Valuing the Company for the Purpose of Raising Capital/Determining According to Which Value Capital Will be Raised. The Process of Raising Venture Capital.

8. Legal and Contractual Aspects of Raising Venture Capital.
Legal Restrictions on Raising Private Capital.
9. Valuation of Companies.
Methods Based on Multiples. Methods for Discounting Cash Flows and Residual Income. The Real Options Method. Value to Investors or Strategic Investors and Buyers. The Discount Rate Used by Venture Capital Funds. Issuing Stock to Investors. The Venture Capital Method. Appendix-Basic Terms in Measurement.

III. VENTURE CAPITAL INVESTORS.

10. Venture Capital Funds.
Private Equity Funds and Venture Capital Funds. Venture Capital Investment Characteristics. Venture Capital Funds and Their Investors. Venture Capital Funds and Their Portfolios. The Added Value of Venture Capital Funds. The Development of the Venture Capital Industry in the United States. The Venture Capital Industry at the Dawn of the Third Millennium. The Structure and Activities of Venture Capital Funds. Exit Strategies of Investments by Venture Capital Funds. The Return on Venture Capital Funds.

11. Other Venture Capital Investors.
Private Investors (Angels). Corporate and Other Investors. Financial Institutions Which Invest Directly in Funds. Other Sources of Capital.

IV. RAISING CAPITAL FROM THE PUBLIC.

12. Raising Capital from the Public-Introduction.
Deciding to Go Public. Preparing the Company for an IPO.

13. The Public Offering Process.
Stock Markets in the United States. Forming the IPO Team. The Process. The Underwriting Agreement. The Registration Statement. Liability under U.S. Securities Laws. Changes in the Registration Process. Following the IPO. Selling Shares That Are Exempt from Registration. Foreign Companies Raising Capital.

V. MERGERS AND ACQUISITIONS, BANKRUPTCIES, AND DISSOLUTION.

14. Mergers and Acquisitions (M&A)-Introduction.
The Scope of the Phenomenon. Types of Corporate Restructuring. Strategic Classification. Why Do Mergers and Acquisitions Occur? Do Mergers and Acquisitions Create Value? Sales and Mergers Versus IPOs. Case Study-The Sale of Chromatis to Lucent.

15. Conducting the M&A Transaction.
Mergers. Sale and Acquisition of Assets. M&A Strategy. The Consideration in Mergers and Acquisitions. The Process. Tender Offers.

16. Additional Legal Aspects.
Legal Rules Governing Mergers and Acquisitions. Merger or Acquisition Agreements. Antitrust Issues. Fairness Opinions.

17. Other Restructuring.
Other Types of Restructuring: Spin-offs, Split-offs, Carve-outs, and Letter Stocks. Equity Carve-outs (Spin-out IPOs). Letter Stocks/Targeted Stocks. The Rationale of Separate Listing of Units.

18. Bankruptcy and Dissolution of Companies.
Legal Rules Governing Bankruptcy and Dissolution in the United States. Additional Issues Concerning Bankruptcy of Startup Companies.

Glossary.
Further Readings.
Index.

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Preface Over the past decade, thousands of new ventures were established every year around the world, and tens of billions of dollars were invested by venture capitalists. Technological vision, an entrepreneurial spirit, and success stories of other entrepreneurs and investors have led many talented people to get involved in the technology-intensive, or high tech, industry as entrepreneurs, investors, or consultants. The far-reaching changes experienced by the global economy, and in particular, the introduction of the PC and the Internet, have dramatically accelerated the pace of development of new ventures, and their number. Furthermore, during the second half of the 1990s, the technological changes and vast resources invested in many high tech ventures, in both the private and public markets, have caused many to believe that the ratio of risk to return was never as low as during that period. The unprecedented prosperity of the U.S. stock markets in the 1990s led to enormous financial investments in venture capital and in promising startup companies around the world. Such a volume of funds, unmatched in human history, supported thousands of new and existing ventures every year. The severe economic crisis that befell the capital markets and started in the year 2000 symbolized, for many, the end of an era in capital markets and entrepreneurship. For us, this was an expected awakening after several years of euphoria in the market. We are confident the high tech industry will continue to supply the global economy with developments that will streamline business systems, decrease production costs, and improve the quality of life of citizens worldwide. Despite the substantial slowdown in the capital market, technological changes have not come to a halt, and companies are being established, developed, and have raised capital. Technological progress is visible everywhere in fields such as communications, electronics, hardware, software, information technologies, biotechnology, genomics, and medical devices. From Concept to Wall Street was written to fulfill the need for a central source of information for entrepreneurs, investors, consultants, employees, and anyone involved or interested in entrepreneurship and the venture capital industry. In this book we combine our practical and academic experience, with the experience of leading experts in their respective fields, to communicate a mass of material in a manner that is as coherent and straightforward as possible, without sacrificing depth. The book describes the lifecycle of the venture, from its establishment, though its various capital raising activities and its venture development process, including strategy formulation, business planning, and implementation, up to the IPO or acquisition by another company. The book addresses all the material aspects, theoretical and practical, of venture capital investment, venture creation and development, through the eventual investment realization. The focus is on venture capital-backed companies (independent or part of larger organizations) and issues pertaining to their value maximization. At the same time, the book details the types of investors in those companies--their nature, method of operation, and the manner by which they are organized. In the past few years, the venture capital process has changed dramatically, first with the dot.com explosion, again with the dot.com collapse, following by the collapse of the tech sector. These changes have underlined the importance of deep understanding of the venture process in order to guarantee the construction of economically solid entrepreneurial companies, leading to the successful fund raising for these firms, to their rapid and sustainable growth, and finally the success for their investors. From Concept to Wall Streetis the first book on venture capital and entrepreneurship to reflect these radical transf

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From Concept to Wall Street A Complete Guide to Entrepreneurship and Venture Capital

From Concept to Wall Street A Complete Guide to Entrepreneurship and Venture Capital

0130348031

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