Upload
kasey-navita-phifer
View
1.034
Download
1
Tags:
Embed Size (px)
DESCRIPTION
Venture Capital - What it is, how it's used and strategies implemented
Citation preview
VENTURE CAPITAL
VENTURE CAPITAL
HTW – University of Applied SciencesInternational Business LawProf. Dr. S. DietrichNavi K. J. Phifer, Janin Viere, Lucia Soskova, Lisa Petzold
Table of Contents
1. Introduction• Definitions
2. Venture Capital• Historical Background• What, Why, Who ?• How to find Investors• The role of VC investors• VC financing cycle• Direct/indirect VC
10.04.23 2Venture Capital
3. Exit Strategies• IPO‘s• Trade Sales• Secondary Sale• Buy Backs• Liquidation
4. Advantages/Disadvantages
5. Discussion Points6. Conclusion
Definitions
• Venture Capital
• Corporate Venture Capital
• Private Equity
• Business Angels
• Direct/indirect VC
10.04.23 Venture Capital 3
Definitions
10.04.23 Venture Capital 4
Historical Background
• 1946 – 1977: started out in USA• 1960s: Germany• 1970 – 1971: Financial support offered• 2000 – 2001: “.Com-Bubble Burst“ total investment 2000: $ 16.8bn total investment 2002: $ 2 bn• 2008: 6.400 German firms involved in
VC• 2009: €8bn in German VC funding10.04.23 Venture Capital 5
VC - What, Why, Who ?
• Helps to foster growth
• “Innovation capital“
• Technology
• Financial backing for new, innovative
ideas
• Firms which require much capital
10.04.23 Venture Capital 6
How to find VC investors?
• Internet searches
• Personal contacts / recommendations
• Banks
• Large existing corporations
• Previous financers
10.04.23 Venture Capital 7
The Role of VC-Investors
• Finance
• Advice
• Consultation
• Management
• Partial business ownership
• Eventually exit
10.04.23 Venture Capital 8
Types of VC - Financing
• Expansion Financing
• Bridge Financing
• Turnaround Financing
• Replacement Capital
10.04.23 Venture Capital 9
VC Financing - Cycle
1. Screening
2. Seed Financing
3. Early Stages
4. Growth Finance
5. Exit Strategies (Janin)
10.04.23 Venture Capital 10
Phase 1: Screening
• Business plan creation
• Select and contact investors
• Screening
• Pre-contract negotiations
• Due diligence test
• Contract closure
10.04.23 Venture Capital 11
Questions to ask before considering VC financing
Do we have high growth prospects and
a team ambitous enough, to grow
rapidly?
Do we have a competitive edge or a
unique selling product?
Intellectual Property Rights?10.04.23 Venture Capital 12
Questions to ask before considering VC financing
Are we willing to sell company shares
to a private equity investor?
Do we have a realistic exit opportunity
for all shareholders to realise desired
investment?
10.04.23 Venture Capital 13
Phase 2: Seed Financing
• D & R (Development & Research)
• Very high risk
• Difficult to judge commercial success
• Buy-in at low price
• Contract negotiations
10.04.23 Venture Capital 14
Phase 3: Early Stages
• Tests
(esp. in pharmaceutical and bio-tech.
fields)
• Marketing activities
• Building up production capacity
Less risky than seed finance, but the
commercial success is still hard to judge10.04.23 Venture Capital 15
Phase 4: Growth Finance
• Company hits market
• Needs to stay afloat and grow to
compete
• Further advice
• Last finance payments
• Hit Break-Even-Point
10.04.23 Venture Capital 16
Phase 5: Exit Strategies
• IPOs
• Trade Sales
• Secondary Sales
• Buy Backs
• Liquidations
10.04.23 Venture Capital 17
Phase 5: Exit Strategies
• IPOs
10.04.23 18Venture Capital
Phase 5: Exit Strategies
• Trade Sales
10.04.23 19Venture Capital
Phase 5: Exit Strategies
• Secondary Sales
10.04.23 20Venture Capital
Phase 5: Exit Strategies
• Buy Backs
10.04.23 21Venture Capital
Phase 5: Exit Strategies
• Liquidations
10.04.23 22Venture Capital
Phase 5 Exit Strategies - Statistics
• 2008, in exit volume terms:• trade sales dominated at 35%• sales to other private equity firms came to 30%• divestments by IPO/sale of quoted equity were 9%• trade sales dropped from 89 to 74• sales to private equity firms increased from 10 to
29• Total losses were down from € 139 million and 151
companies to € 118 million and 136 companies• As a result of declining share prices both declined
the number of exits by IPO (from 7 to 3) and through the sale of shares (from 34 to 10).
10.04.23 Venture Capital 23
Advantages/Disadvantages
• The VC Investor
• Investment
• Experience, advice, mentoring
• Objectivity
• Networking
• Recruitment
• Credibility
• Shared risk10.04.23 Venture Capital 24
• Mandatory exit
• Loss of independence
• Right to lay off the workforce
• Onerous conditions
Advantages/Disadvantages
• Capital
• Solely for our business
• Start-up financing
• Liable equity within the company
• Improved rating
10.04.23 Venture Capital 25
Advantages/Disadvantages
• Due Diligence
Advantages Disadvantages
• Company realises:
Where it stands in the market
What/where to improve
Possible future developments
10.04.23 Venture Capital 26
•Time
•Money
•Power
Advantages/Disadvantages
• The Company
Advantages
• Growth
• Value
• Security
• Equity ratio
10.04.23 Venture Capital 27
Advantages/Disadvantages
• DilutionDisadvantages
• Dilution-decrease of sth
• Anti-dilution protection
Milestone financing
Pay-to-play
Liquidation preferences
10.04.23 Venture Capital 28
Advantages/Disadvantages
• Contractual protection for the VC investor
• Information rights
• Control rights
• Representation and warranties
• Anti-dilution protection
10.04.23 Venture Capital 29
Advantages/Disadvantages
• Restrictions on the Transfer of
Shares by Shareholders
• The articles and shareholders‘ agreement
• Exceptions
Investors‘ shares
Founders‘ shares
10.04.23 30Venture Capital
Advantages/Disadvantages
• Investor‘s Protection-Exit
• Drag-alone rights
• Tag-along rights
10.04.23 31Venture Capital
Advantages/Disadvantages
• Taxation
10.04.23 32Venture Capital
Discussion Points
• Obstacles
• Alternatives
• Our best options
10.04.23 Venture Capital 33
Conclusion
• Augumus Pecumian GmbH
10.04.23 Venture Capital 34