Unit-3

VC Tittles

General Partner
 The people who put their own money in, raise the rest of the capital,
manage the fund, make investment decision, get the management
fees and the vast majority of the carried interest. They hold the
fiduciary and legal liability for the fund.
Limited Partner

 Investors who provided the rest of the capital for the fund, but who
have no management or day to day role or involvement. Think
pension funds, insurance companies, family offices and high net
worth individuals.
Managing Director

 Often used in corporate venture structures where traditional

partnerships aren't present, but similar responsibility to a General
Partner
Venture Partner

 Someone who may be full or part time but is usually only responsible
for sourcing investments and managing those they do. May get
some salary, but more often just gets a portion of the carried interest
related specifically to their deals. Can also be a junior partner, but
either way someone not usually involved in the management of the
fund. May or may not work with the fund for it's entire life, so if the
title you see only says partner, clarify if it's general or venture
Principal

 Experienced through junior roles or operating experience, looking to

move up to partner. They run their own deals and may get a small
percentage of the carried interest. May also be called a Vice
President, particularly in a corporate environment, though that
could also be someone very senior depending on the corporate
Senior Associate / Associate

 Usually post-MBA, eager to get some venture experience and

responsible for helping with sourcing, screening and diligence as
well as portfolio companies. Apprentice with and provide support
for the partners and principals. Similar to the same titled role in the
broader finance and banking world.
Analyst

 The most junior investments team role. Pre-MBA, often there for a
couple of years before moving on to graduate school or another
job. They usually do a lot of the research and diligence work, so
often know competitive landscapes and markets and are great to
talk to for insight
Non-Investment Roles

 Most of the above titles can also be combined with non-investment

roles like platform, operating or communications, but those
individuals likely interact with the investments team and may
participate in discussions
VC Raise Funds

 VC firms raise money from:-

 Insurance companies,
 Educational endowments,
 Pension funds and
 Wealthy individuals

Venture Capital Funds are Limited Partnerships

 VC Raise Funds
 professional VC firms raise money from insurance companies, educational endowments,
pension funds and wealthy individuals. These organizations have an investment portfolio which
they allocate to various asset classes i.e. stocks (equities), bonds and real estate. One of the
assets classes is called “Alternative Investments”- venture capital is such an investment.
Perhaps 5% to 10% of the portfolio might be allocated to Alternative Investments. The portfolio
owners seek to obtain high returns from these more risky Alternative Investments.
 Most Venture Capital Funds are Limited Partnerships: pension funds, educational endowments,
foundations, insurance companies and wealthy individuals, while there are General Partners.
These are the “Venture Capitalists” you will deal with as an entrepreneur. They may have been
entrepreneurs in a prior life or they might be financial types. The General Partners use an
Offering Memorandum to raise a fund of a given size from the Limited Partners by convincing
them that the GPs have a unique strategy or expertise in a particular sector or sectors of the
market. Fund raising can take a year or more. If the GPs are successful they will convince
enough Limited Partners to invest enough money to achieve the size fund offered. When this
happens
 there is a first “close” of the fund. However, the Limited Partners do not actually invest money
in the Fund at the closing. They legally commit to provide a certain amount of capital when
they are called upon. This is called a Limited Partner's Capital Commitment. When the General
Partners find what they think is a good investment opportunity they make a “Capital Call” on
the Limited Partners
 Corporate venture capital
 They invest directly in external Strat up Companies. “Practice where a large firm takes an
equity stake in a small but innovative or specialist firm, to which it may also provide
management and marketing expertise; the objective is to gain a specific competitive
advantages. For instance, investing firms may want to obtain a window on new
technologies, to enter new markets, to identify acquisition targets and/or to access new
resources.
 Dell Ventures, Dell Computer's in-house VC division, which made multiple Internet
investments with the expectation of earning favourable returns. Although Dell hoped the
seed money will help its own business grow, the primary motivation for the investments was
the opportunity to earn high financial returns
Stages of financing

 Early-stage financing
 Seed capital funds
 Expansion financing
 Initial public offering (IPO)
 Mergers and acquisitions
PE
BASIS FOR COMPARISON PRIVATE EQUITY VENTURE CAPITAL
Meaning Private Equity are the investments, that Venture Capital refers to financing of

vs
are made in those firms which are not small business by the investors, seeking
publicly listed on any stock exchange. high growth potential.

VC Stage of Investment

Investments made in
Later stage

Few companies
Initial stage

Large number of companies

Companies Funds are provided to matured Investments are made in startup

companies having good track record. companies.

Focus on Corporate Governance Management Capability

Industries All industries Industries that require heavy initial

investments like energy conservation,
high technology, etc

Risk Involved Less risky High risk

Fund Requirement For growth and expansion of business For scaling up operations

Ownership of investor Generally, 100% Does not exceed 49%

Angel investor
 An angel investor (also known as a business angel, informal investor, angel funder, private
investor, or seed investor) is an affluent individual who provides capital for a business start-
up, usually in exchange for convertible debt or ownership equity. A small but increasing
number of angel investors invest online through equity crowdfunding or organize
themselves into angel groups or angel networks to share research and pool
their investment capital, as well as to provide advice to their portfolio companies
 Often successful, exited entrepreneurs or retired business persons – active investors
Invest both time and money in companies
 Angels invest their own money
 Investing in local companies
Stages of Financing
Crowd Funding

 Crowdfunding is an online money-raising strategy that began as a

way for the public to donate small amounts of money, often
through social networking websites, to help artists,
musicians, filmmakers and other creative people finance
their projects
 The concept has recently been promoted as a way of assisting small
businesses and start-ups looking for investment capital to help get
their business ventures off the ground
Crowdfunding Models

 Donation and reward based

 Lending Based
 Equity Based Crowdfunding
Term Sheet

 The term sheet is the document that outlines the terms by which an
investor (angel or venture capital investor) will make a financial
investment in your company. Term sheets tend to consist of three
sections: funding, corporate governance and liquidation.
Unit-4
Creating an organization
 The organizational process consists of five steps:-

1. Review plans and objectives

2. Determine the work activities necessary to accomplish objectives
3. Classify and group the necessary work activities into manageable units.
4. Assign activities and delegate authority
5. Design a hierarchy of relationships
Team member selection
Team member selection

• Heterogeneous rather than homogenous teams tend to be more effective.

• Higher Education
• Prior Entrepreneurial Experience
• Relevant Industry Experience
• Broad Social and Professional Network
• Recruiting Key Employees
• Full or Part-time Employee
• Intern
• Freelancer (or contractor)
• Virtual Assistant
Personalities needed in an organization

 Someone who is creative

 Someone who is detail-oriented
 Someone who is process-oriented
 A builder.
 Someone who is impatient and highly deadline-oriented
Startup team management
Co-Founder Duties and Responsibilities
 Identify Market Opportunities
 Manage Product Development
 Direct Marketing and Promotion
 Develop Financial Estimates
 Create Business Plans and Documents
 Build and Lead Teams
Start up Compensation
• Salary
• Benefits
• Equity: Stock or Profit Sharing
– Pay for performance
– Cover expenses before taxes
– Reduce risk in case of turnover
– Invest in training and professional development
– Non Cash Benefits
– Reward with a job title