Fundamentals of Venture Capital

by Joseph W. Bartlett

Overview

Written in highly readable layman's language, Fundamentals of Venture Capital is a concise introduction to the key issues facing both investors and entrepreneurs as they embark on the journey of turning a good idea into a profitable reality.

Product Details

ISBN-13:	9781568331263
Publisher:	Rowman & Littlefield Publishers, Inc.
Publication date:	11/17/1999
Pages:	176
Product dimensions:	6.22(w) x 9.28(h) x 0.61(d)

Table of Contents

Chapter 1	What Is All the Talk About?	1
	What Is Venture Capital?	3
	How Venture Capitalists Talk	6
	Should You Start Your Own Company?	7
	"You Can Make it... Will Someone Buy It?	9
Chapter 2	Where Should I Look for Seed Capital?	11
	Introduction	11
	Angels	12
	Seed Capital from VCs	12
	State Aid	14
	Federal Grants and Loans	15
	Commercial Banks	16
	Should I Have a Placement Agent?	17
	Venture-Capital Clubs	19
	Concept IPOs	19
	The Shell Game	20
	Multiple-Round Strategy	21
	Case Study in Finding Money: A Reality Check	23
Chapter 3	How on Earth Do I Put a Value on My Company?	26
	Portfolio Management	29
	Nonnumerical Factors	30
Chapter 4	What Legal Form Works Best for You?	31
	S Corporations	31
	Limited Liability Companies	33
	Corporation versus Limited Liability Company	36
Chapter 5	What Will My Corporation Look Like?	40
	Corporate Charter	40
	Payment for Stock	42
	Purposes	42
	Miscellaneous Charter Provisions	43
	Restrictions on Transfer	43
	Preferred Stock Provisions	46
	Preemptive Rights	46
	Indemnification	47
	Bylaws	50
	Other Organizational Documents	50
	State of Corporate Domicile: Delaware or Somewhere Else?	51
Chapter 6	Tax Discussion for the Nonlawyer: Minimizing Taxes in the Early Stages	53
	Cheap Stock to Employees and Promoters: The "Eat-'em-All-Up" Preferred Stock Approach	56
	Stock for Services: The "Passage-of-Time" Approach	58
	Section 83 and Stock Subject to Vesting	59
Chapter 7	Drafting the Business Plan and the Placement Memo	62
	Risk Factors	65
	Certain Transactions	68
	Business Plan	69
	The Marketing Section: The Single-Most Important Section for Early-Stage Investments	70
	Business Strategy and the Single-Product Problem	72
	Management	72
	Beefing up the Board of Directors	72
	Other Issues	73
	Projections--The "Bull's-Eye" Theory of Forecasting: "Shoot High,"	74
	The Promissory Nature of the Forecast: "Shoot Low,"	76
Chapter 8	You've Set up the Company and Negotiated the Price: What Are the Investors' Terms?	79
	Herein the Term Sheet	79
	What Will the VCs Want for a Security: Common Stock? Preferred Stock? Debt? Warrants?	80
	Common Stock	82
	Warrants	82
	Preferred Stock	83
	Conversion and Redemption	86
	Preferred Stock Redeemable at the Option of the Holder	87
	Participating Preferred	89
	Antidilution Protection for Investors	90
	Who Controls: Me or Them?	94
	Registration Rights	96
Chapter 9	I Have a Letter of Intent: What's in the Contract?	98
	Stockholders Agreement	106
	Rights of First Refusal	107
Chapter 10	Selling Stock, Privately ... and Legally	108
	If Reg. D Is Not Available?	114
Chapter 11	Compensating Your Key Executives	117
	The "Carrot" Approach: Equity Incentives	117
	Stock Options	119
	Incentive Stock Options	119
	Nonqualified Stock Options	121
	ISOs versus NSOs	122
	"Grossing Up,"	124
	Miscellaneous Items	124
	The Carrot-and-Stick Approach: The Employment Agreement	124
	Restrictions on Post-Employment Behavior: Noncompetition, Nondisclosure, and "Work-for-Hire" Clauses	128
Chapter 12	How to Go to the Promised Land (i.e., Go Public)	133
	Whether or Not to "Go Public,"	134
	Preparation for the Public Offering	136
	Liability	140
	"Directed Shares" and "Hot Issues,"	142
	Lock Ups and Other Obstacles to Liquidity	143
Chapter 13	Financing with Strategic Investors: Joint Ventures	148
	Typical Business Contexts	149
	Negotiation Points	151
	The Duty of Candor	155
	Corporate Opportunity and Self-Dealing	155
	Conclusion	156
	Index	159
	About the author	167