Venture Capital The Business of Innovation · Venture Capital The Business of Innovation...
Transcript of Venture Capital The Business of Innovation · Venture Capital The Business of Innovation...
Venture Capital The Business of Innovation
Kellogg-Recanati International Executive MBATel Aviv, March 2017
Session 4
Izhar Shay
VC 101
Venture Capital
Returns
Investment
Year 1 Year 7
VC 101
Venture Capital
Returns
Investment
Year 1 Year 7
Shareholders’ Value Creation
Syndicate Funding - CAP Table
Syndicate Funding - CAP Table
Syndicate Funding - CAP Table Example
Syndicate Funding - Distribution of Proceeds
Company sold for $$$ - who gets what?
Distribution of Proceeds - CAP Table Waterfall
Company sold for $$$ - who gets what?
Typical Waterfall:1. Loans and credit lines paid off2. Investors’ Preferred Shares, “LIFO” (Sometimes with interest)
1. (Example: B Shares A Shares Common)3. Common Shares and Preferred “As Converted”
Typical Preferred Terms:“Participating”, “Participating with a CAP”, “Non Participating”
CAP Table Comments
Different classes of shares:• Investors’ Preferred Shares• Common Shares• Employee Stock Options Plan (ESOP)
Investors:• Earlier investors pay less for higher ownership• Later investors pay more but their risk is reduced• Financial Preference can overpower CAP table holdings
Investors’ and Founders’ dilemmas:• Valuation - Shareholders Value• Dilution - “What’s in it for me by the end of the day?”• Control - “Who is going to call the shots here?”• Financial outcome of CAP table
VC 101
Venture Capital
Returns
Investment
Year 1 Year 7
Thank You!
January 2016
A small slice in a big pieis better
than a big slice of nothing…