Venture Support Systems Project: Angel Investors - Angel Capital PDF
Preview Venture Support Systems Project: Angel Investors - Angel Capital
Venture Support Systems Project: Angel Investors Release 1.1 MIT Entrepreneurship Center February 2000 t I.SB Hdn aTI Mt amae t ay bdegana ms itcejor P)SSV (smetsy Stroppu Serutne VehT . Adlano Rmor fnoitano dsuorene gay bdednu fsaw div adD n)a45 9T1I Mz(truK ztruK dn aseto ngnihcae t,sesa cedulcn itcejor PSS Veh tmor fstrope rreht O.)299 1SBH( .shpargonom adnic u yLdberape rsp atwrop esrihT d n)alatip anCilra Me(dniL kolA d(asarP ,oilgittiP wehtta Mdn aesro M. Phtenne Kf onoitceri deh tredn u)htarGc M&ddo T,nibaR kcabrettU TIM eht fo dravr aeH h ft,ostreb olReahc idM nnaosneve tdSraw odH nlaooh cnSaolS .looh csSsenisuB (cid:211)(cid:211) 22000000 MIT Entrepreneurship Center Table of Contents r eebgmauPN yra memvuiStucexE 2 stnemegdelwonkcA 4 wes ing vonfriioetdvpnO Ou—t Fgx.n e1i rttlonsefoegCvnnAI 5 .e2lifo rfPo elha rtcloietpgsyneTAvnI 10 s sg.en3c i oetlrhsePTegvnnAI 25 . 4eehsTiRo sdlpeeuzgo inrfnAGagrO 51 .g5nimoc enBa lreogtnsAevnI 71 sevitce p.s6reP 81 secidneppA .A evit amrrt es:TutleleIhS lreogtnsAevnI )derref e erlPb it re v ngo nCit ap ici tr aP( 1 - A B. l :b eetumgvelrnieCeAthTaSrtsullI ee)lldbbeiartmrreeeefvdeneroRPC( B-1 C. gn itdhincf atoe a rv:MmPitr-teeraeTorhFtSsullI noi ttanzeimntasgervOnI elbitrevnoC()derreferP C-1 s t.nD e t enfl oobdCae Tlia teD D-1 ,decudorp eey rbanmoitacilb uspi hfttor ao.pNretn epCihsruenerpert nT EIe Mhy0 tb0 t0©h2girypoC —sna ey m n yrambor oy f nndaiettimsna rr,toteehsdae r npdaise s,umets ylsaveir t nedairero t,sdetalsnart f onoissimre pnettir wroir peh ttuohtiw—esiwreht or o,gnidroce r,gniypocotoh p,lacinahce m,cinortcele .retne Cpihsruenerpertn ETIM kolA adni c dudnLaasarP rehti eetartsull io tnah trehta rnoissucsi dro fsisa beh ts aeto nsih tderaper pedniL noitau teivsitartsini mgfndnoaaild neavhitceff eernvoiitceffe egaP 1 (cid:211) ret npeiChsruenerper tT0nI0EM02 Executive Summary sr o lte esrtgean nv a gAnntdniarniroawupoomrsig e cgn i fcronopaf une-ihtftrats d. essyse id urnh uycu oThtg ots gsoh fnelilttes h ahowevadtfinonhnrothrpaoicgwneit .s dynnua oMl rafg i ok ersctsulaseee behngsvt enrn nraoihlipttteessigrerwntviannfei s.eg dn s iileer sscarruerentuueruBaitcnoenpnee fniaesreee fcvphbreetpmreitrtntene g ndsdielence tr ngeaaagn, enrvoenrteiaaitounsrtrt eeeoten mhpmsrorttxiseeehvtni ” ke ocvetaihbgt“ d e . h y ldshetyu eiclirfeplitnes klbhtuVsmaeuwimeemhplmchoctcus h cd s r enagaeece hnenlnedei s otebnltne adt iab sorltinraee ealoelhvsgdpitninxaiaeva .r olt ,estsgeItnvsa niyi la e am,rets uliretbp ubnaare eucontvlfesa rrvepimefirttne egda nr,aedvn eay lttsss ir rron erdoetuefbentdmr omhaanmueetluothmoucntgeevr tropp ussi hgtniw osrsgalc d efcon e.liserrgeonptaxseevni se nel,iherltgotn tuadlsoeeecgv nnnsseaie e icdnerunihe daftpsyoexidrdehutTtnsi se s ,se suhg sctnees is cid ti,ode l srsr zseeeppf iegcvuodndninonaiavirragvdgooraforp sec n .degse inrd edi ons huretelol Taimstatehpoenuggscv idni aentiahhbievtnirdonwi , gs,n rsilo rretduigsnepnearnsave eanh grit ,np os sieesltrrreonitanoepnihdsescuaustbs . m setrtr esoefbypr omspueeuthmsntev :sy egdesfr numi oafito heodsSythnetikf • Angels vs. Early Stage Venture Capitalists:s nson i otdiant raaeevhpiTotom t n nee ars yheoslt fh rlf fty oaoe eildtcglrdresiaeaaceptgenvysnent aiifroepxe gn is hrt cu inaemfa onoe c.rerntsprf estppebrsaemiiriFlt taneteriuptancev , srdr oe,olicster nts gpgeseo nniivty ai rlnleteeairregptaueaxietmtepnsaecv . sg . neny g secilens ehnkrgiiyn weeaadhdiereetnTulhessutttffsufoid • The “Network of Trust”: s tsc i ak atyrfneoo okwlctaenno ssr’ elp engAna g,nsi mtt gran,n eieei gttmc t,n oenecsingleuulnieegddaenineelodriccds slda nng uo nfoigiortnd di in,n dgratu ednunfruaiceeldem tadstefvashaetvni g.ny ige tehtutticaxerextes • “Not All Angels are Alike”: e fpedoyhnttatsr e sdorntuuenerper trs noytefaIp r igen h i yl stddy s a ldle letnleleineeeihaielphwagnhuthgotntbtnraa , snl ae si gd: ldon es.ertArzpyganuiunnu ioroaaGe forpWeggmveoatchac rsu le.lensa ge lidnr,lecnApsea gnaelbnenareioWAntgriinnctFEAsaerdepO s we lueotseosh aegie drpnrh tneyaaten aptvue wolre oaedyhovfietfvhiotdrp gni.gsreermuetnev • Systemization is on the Rise:gni m soercroeatbs el vedngeincaneir epxE nsoi isdt ynaclauialt naa cavm.ieentto a si nmyytrielSaitgresnehyiptssoaercni e r s,eea s bhedn sfmtrnreloucauv annto,e eierkcpdrpsulmideirehr .deredisnoc • The Need to Clarify the Angel Investing Process and Terms & Conditions: gn id t ensetoehc i v tusnt dnedr iaeniWnoeiduot hriocslytawfeeavvgwnnia egaP 2 (cid:211) ret npeiChsruenerper tT0nI0EM02 g nc s i isn ,defmo,rrhir isaatcedtslgetni(e uepadcncrsnoiiortcprap )sf’oC&T gnit sg leneevihgndtninaa t.er st tee mreeo thoreeWvapttedheatnsdhuc s .sn se i dnnceasnooomlmamiro prmtpsdxeoinetcdanoc • The Rise of Angel Groups:l e e gnstniinare ceeehbrtirc sdyenfdait n eedWi . .slstnpepn ou gueeioetn omrtrrnAnrpaa guai goewttnlrenraecneovvpemdi s rs uloddeetnnng aient fr asepy edeae rtirwhsosv ttpfaoenufrseoperhgT esdint a r,,ees p mlexdildeetiin kv iarso ebirysgm epalaor hwercootgeftnvael . se k nrsreiueo Wlop wst fy fltp uetkoeeudonrgnoniornraf woageaefdmarf gniw ogdrnn gialg.easgnpnauamorg • Becoming an Angel:e msolcaeubdi vy ihdd ten,wlriyo aolhee llwwpaxneiF d.escr non, e tI y e illsre tcmrueeuvehioefgvorwgvrpsnnuudfxsaisoaeesccus slegn ano si hc tidp.e os zrttdiihnregaahumtomhuts r e eoddelt aehboent a trg sny i eredssf reui eo,att he dnpsxthoaitihssc ul cnnIoc .: sgwgerno nn eileii ep tteWdlfholpsbntotleaeauegh vtovncan seaidrdoeodgnu Chapter 1 ssr eu ebesdli wn enbr oesnaa c ghrnilesonpolihetieitatddrtuvntpoaunofe gn itna thi t.es glasheni ed ntvole goo nhWensinsigs altiriotaphohhiotttf islweevgnnia dseett i agntedtnUnrnSi.e a a pamtlpedpttaamrnaa shtouardhetictttvpnsinaetwicvoob Chapter 2 ro tddl sne eyeacege vnhnvsn etareie iucwedrsuhee tdtsp couxoeretltlnoic gn ih ttg t swnln ne eoi eesih. vrvngcrt sangiineo eitiraarterhsadl cWotydpraflxufaeona r es.tesp bra2 ioho ri aC sgcvyelnsat n aiehid i et desnfllhshbraoteteceugvivonnriaid s l etefpngoye ntre tae udnfflnefoaamivedv l doenvhantt isdr eeotdtcnu urlt esednwoomc s , rdy .oelhl st clte yrsenaigel oereenwnwrttvagii aassnparFdeaeimtenrvospatncxnieoc erutnev.stsilatipac Chapter 3 smlsoa eregcfdnoirtp ss leeeevbhgnitniracsed gn i o.clttraiueexodWes ss u, c ag s,ineid rihd ee entsmcete mrnuie,roedrrsefgccn tris-odeltinpistadoipdnoc ,tn etmn eedvmnltaos ves nvetiniiigxeet afrots. slreogtnsaevni Chapter 4,ses st ,ss endlseeln eee pnpeirzge uiygseinhfoltnufnatortabfaguigodro , sll aeedugwnd nu i.aodv s feiles w decbs egngiuAdhininvln cviarcaetrkewaeasmtmni dye ng o anfk tmmoore.e lonsho 1ewip tt elbelud aWemtoergaurzonrogia fn2agro k rnoa w c .eesdsmb ie pa lh ssduroeT euulof tgeroir enzaiugdhaiprbntrmaaeovtccarahc dna worg legna.spuorg Chapter 5gni rrdsielrpfuo sfot aowsldeee vgcdsnnneiiae si nare obecepihxvteda .sl e egennW i a,lsw ttrod nuo heleotde c eisnronegceaa temnivwioafnorcoiheerpbpxe yl nsoemimgo ect t nga.e nr smritel telsbeoee s mligtmWpeooirnolvscwcasenlwshiaeend desu d eycbn .elsierrgoentpasxeevni Chapter 6 g n.si yit ddhceeutulpt diossnhleow evcsvi eethddc tueeilpmwcsonrsoecp egaP 3 (cid:211) ret npeiChsruenerper tT0nI0EM02 Acknowledgements d e ttycc beusgesjd mnh i onsTeitttroiIterr PchMsb oaeTyfppr SopueuthSnteV .l o sodt s hece s c denyareSdn j ibwehrudops tTafnriuenavaphBherstCarHuenerpertnE st unmoaor rrengfnoeRg di vd) an4TD a5Iz’Mt(ruK z t Srt .Burr)HKoi2(spe9aph’huTs .el b eiysdsdiasuhmottps adnicuL e ddnniaL kolA dea t s tsonarriroreohwiP dpt tenefchuroet rnieedsKroM w edhntataM nodsnn aerd verpdetaintnwhaSeosCHr ukecn aetb rarep eheTttrIttMUnE . lsnos h oesod h ntJrlcmiraeSosevarubrhfBoacRHiM ,nesseJ r agln oithtac sSTiIVMdna werdnA ,nir edke ldeuilMvb oa,ruhplcar vasneiisseyrlan ae vdintaa.rttrsoipnpiumsda ,sr e,yswtasli lta ste oi rf Mp,uo,alt scl nelaghewensv g iikntow w naitodeadlnhhelattrocf , s s drordeuhne nkewihoasnattaemorep re,rstr neteknneambt s,esvtnniatnuocca gn i,ts aunp oiirmco yifent horykt nadcgapuan tbid sddnneiaoevfo :retphrtoper no sdrEednA xelA ffolebrA’d drawdE evoleB nalA dreffuB rgriuaBrC retne pbroaBC eoJ osuraC nesnets inrohtCyalC llihc rhuchiCR nhoJ nonnacnoC eiluJ nitnatsnoC yawn onCoR w osDemaJ sdnomdE anehtA selrahC namredeF semaJ xuaenruF evetS Gaal nhoJ yelnaH ynoT seileH ngoisanrhCoJ ikasa wyauKG Hasan limaK deT nosreneK treboR nosretteK linA alsohK yerduA naeLcaM klreaaMhciM nseetmraaJM nag ryorMneH nitsuJ elaerroM e snreoKM egroeG elbeN nosl omhicJiN lawnaK ihkeR evetS icciR h cnaaoDR str elbeoaRhciM yuG Rochman boB repeoR lliB namlhaS s dlnoarSaC leirbaG legremhcS snaH sneireveS Jim molbrehS evaD tnomoloS rec nyerprSaB ttayW senratS nosnev edtrSawoH Jim ztrawS TallSpencer yelnatS .C.KmaT ydooW Tasch treboR illaV r ehnpglaaWR egaP 4 (cid:211) ret npeiChsruenerper tT0nI0EM02 Chapter 1. Context for Angel Investing-Overview of Funding Options s esbrw iuodre hncneasel erbr dpa eosel sttnrigepo tannaie1nviihtheadlCptntouufo gn itna thi t.es glasheni ed ntvole goo nhWensinsigs altiriotaphohhiotttf islweevgnnia dseett i agntedtnUnrnSi.e a a pamtlpedpttaamrnaa shtouardhetictttvpnsinaetwicvoob .rss geiegnt hvniplTrita e ezshsgnsiecanorvaie n tteirachodatfnruaohfc 1.1 How Do Entrepreneurs Fund Start-ups? s y rsaeusd veeo. anctsohe.cetrcavpnieI tryaa t tnenger dEniefiirtowdalnvauf e nsitzsaig la0M2 sseysa swp eueon-ctitnsrauanbtisf 1 ruen e,ry pleelhratttnnee m.adnuF , h l trarwo toofyifri etpgehiadtuc iqesert iu sluoeslq d eietif nwrscieiuehsmdtub ,ypleaa hrn ott rs dssesttrteoouxcnoeecbnaer p .endree thpynWp neanarapt cmseotbcoob s,eenu fins,oleelvla eat’ ,rsish r lprtdeta ae wnhutycdgyoutbitnnbrfapiuigrauoscqfue e s.le elblr y c aabo1tsrfs tlaf.iwu ontiiT1uooeoipa qhshidavdresttecane-prahnoctoon y l .lss are fuui ei senproUnaue tep -hdrmsttnpoiruecafrt tsan e dtheeseki nrloabtmatse sr ul lel eanikdteweii respo ,pstat . s yeucdrhrnelroneteordtutwhsainfsotahpearOesafgrr .la t e i rd dpe yiioeavraesseciomhtlnrftuado g gnlni a isdnteypi eni ivlpaagaepirartaratarat eciet dsenhnssloTititfoteoidbl ssdt enfn reooedmhnetur higlu na q e imeerretisroe r rnuhoasoiatnepmcieenrbapmoc s .ess i desd ln iru ea ae nottttto,stfatSacaitluaopshevpnlovmetjiaiahiovnrcmtrcnipspi c i sfer ivost at rnohsldueneeneivgan cnness iarw dp eseefiy srov enatrrvobneoretunsi eglnbi a csle lniila aa abtetn.vaa riisaidnupfelotasenc nRe govsnpnisa yeeffrmoirev s e di le neearearrtisp ua iuumott.pqaotnrsaecceotcrevpn been rmortiseehvtni Table 1.1: Funding Options for Start-Up Companies Bootstrapping Equity Financing secr uyolSraE secr uyolSraE la t’ispraeCdnuoF secr uyolS rganEippartst ololBA Savings :mor fosl alatipaC CardsCredit ylim ad FnsadneirF egag tdrnooMceS Angels gni seareuLtneV spu olreGgnA eune vseeRlaS sm rliaFti pearCut neegV aytlSraE secr uroeStaL secr uroeStaL ti d seferonCiL secr ugonSippartst ololBA sn aAoBLS smri Flatipa CerutneV gnid ndeeLk ctaeBssA sd neurFut neetVaroproC .,cgtneiro teclabFavi esctenRuoccA sm ryitFi ueqtEavirP spihsren tcriagPet aerttaSroproC sm rtinFemec aeltPavirP spU-tra t oSdTn etLa hsTknaB sm rginFicna neinFinazzeM ). c,tAeP R,ARDI BsSt(n atrnGemnrevoG sk ntanBemtsevnI sgnin ryanEapmoC ste kcrialMbuP sisyla nsarentr ayPgolonhc esTisen ed Gneanizag a.Mc n:IecruoS 1 , ”gnihty neAcnan i oFwto H,“99 9h1cr a,Mykserd nlAl i,Jresa rF Inc. Magazine 2 .3,p egaP 5 (cid:211) ret npeiChsruenerper tT0nI0EM02 1.2 Bootstrapping, Angel, and Venture Capital Investment Data 1.2.1 Highlights from Limited Bootstrapping Data .eg rn eeigyrht nlaTsldine en po vsgaap tnen atdaiiawrhehdet ghtufsnisttolsoob w .t0%e o 9dca00 rf tete8e nh 58.go0hsb9tnItec0ti1rohn5 lotIep derirahmBA hggnuioprphatrts.tyolonbo 2 et a vgi n r.0ie pc 0whsnt5o TiIs rt ea gs ftei0oshl0at5f tne s s s,aesureh re o eicxpi. ievneien s5vhoat mraeretp-fpharmhomTepogoycich d e yrsdedere h evew.td0sodesn0ucniea1 suvseeiorsH cdfee litndivninarisateuesbr , s.ecgt a ed og, nttltsd, oiardnspcdt orugueeilm afn-s rpancitacanavrcoiaasdstresemp ynt oit- unw.dsqe o0e rem sl0sfe egsl0iodnrneo,anaiiLf0r uhup1%otqp$0fea2rr tfsotoob n li. dahyyett nei ii5sgrahln pwrnipTeotsaa iemrbgcefdhoe nyontcdriouontorfae tn e0 fm0ho t0c oSss1n ltDpe$u eaEa vasnihsnliotrf ’i ieo.tsnpho sitreowecRoPnragnif .gn i epsh pettsals urp oeotmfmrmsaouatxtfoenoebv yt ifhsowc rert eN aaeveehi rstn l r ueUr ed ertRadznetonentahnfeeaeteVrWCF dd ee yts ygcaagd ouBnu n7eld–itfi 8r oncso49 inno n81whohcea2eschnNpetimTfaH ) tsd na’ e 5deh Fs d n7aetdBmn.nde9hwnT ri6une1taNwi8oabel(eF9fbgN1nE 3 ye hT pganrie trh o srtdt, t engtodf una oee yo ihebvr%tf )dtdip8io7nie3un0uscq1ftee(uro s r eo lrtlaeseu ewegd shvni,.ntnavssoiie e idi ri ftnnronroaiaeFairphpeemtmhpoootocc g nr .i ogscs4 fnm nd2y7 irean1 t7fdicnu ni1 oifriosouftvufrdmqosoonmeorsuompfc ls ad etn y riun.e dtmupfi sl yseiota3db2stmsurnc7na.weriqfe1uT1oniaevohifrrsN de t ssnte is vsiend lhin satuerft orooi d rutplnltsaaaenecu gevdwnv nioayivhniadmni d e ek .yg l ceyb nai e ahd yithyh,r tuslcaWdtdts tirndulisshia toitanestfihsftom .c si w eteee yo rahvihd tgum Tiv cudnnteesyetniinth nltsadestfer-nvyotahusxegfeih hs g td t n swah rsoime eo ectoetcrbkeorel iotnoiehdghfh nsafrettowoancstfisfed r temsdrelet.otaeh-euegrlrngaaovhls Table 1.2: Angels and Venture Capitalists Complement Each Other in Funding Technology Ventures Financing Number of Distribution of Number of Venture Distribution of Venture Round ($k) Individual Angels Angels Investing Capitalists Investing Capitalists Investing Investing (%) (%) <250 102 58 8 5 – 43 24 14 8 250 500 – 15 8 31 18 500 1,000 >1,000 17 10 120 69 Total 177 100 173 100 )78 9l1e(z t dernWaae e:reFcruoS 2spu-tra t ft S:ore eAhcTnan ipFartstoo B,“29 9r1ebmeceD/rebmev o,Nra m,Aedi hB ”, Harvard Business Review, p. 109 3 ” ?sruenerpert nhEceT-hg isHllorkn aoBh W0“9 9 .1 .E,Wlezt edW n,a .,Jraee rF Journal of Business Venturing 7. )7 p,25( – .98 egaP 6 (cid:211) ret npeiChsruenerper tT0nI0EM02 1.2.2 Highlights from Limited Angel Investing Data ddee tta n itdeema nml idsa )gb.Lrs8aag ei9rlnnp 9fiioml1atoe(vsGgaenvani s esce n zde d ie rhnsrteecaeachfrimut ead.mdnreugunos tnsoelsicretgsneavni 4 owT e td,a ewmer ,noihegsilttbnelesm ii tbeufstddunolsunodeeta egvsettnnhnsaitueovmnai se tlfaa omtgeiinhtpitsar ecey f lre freed. iad piss deievley ywhoeiboTrgdwpnutats de tst r iy oh.mbltc smesareogeea icnvegnany naioiptgmroecme n ets0 esl0ywee0ltvg,eenn0tbia5 a 2rmeai t exta)ldeoam6enrrhi9zaFptt9tps1eae(W n o0s0y i0 m2lhl0.nr–hcl,rii0gai0af1ueb3e$oyr 5 dgensinat obse dner l e ovuleaei) dtntatuhd8lnsinm antu8laaerfrnt9eGvooas1Bf(ni r .e s e inrela fw ol imiattpslFotr esm’arndfkeanufeorvsud danDi5IMiv3i4dni 6 ye hT d eytstl nra lt 0e omlaaee0m0tiauhrd0t0stmntua,s0esrntm0e,veoan2v9nfe7n8invi4i la tyi tpli aaugcuqnnein ya, l0tp0n m 7ehif,m to 6tei r 6su wraa$elnelvaaplnveoimd stnemt sfeovn i7 .n2o3.i $sll rlamoiuotbdrsifevvindini 1.2.3 Highlights from Venture Capital Investing Data del t as nnet caei rie itseupl d maehtab3eeodrtnCa.s rnpeT1anuoVbotc(nEeV h d teled wv a t esnois)teysdsdirs wlir beningoeoapuevaaulhhnathnrfptsrcntixueeovJ , e.ny3nc ye l9endrsoi 9 vi etisds1sEsrstsr aaaeasuese ehbhedhdtfhmvntnsotuniunior tnuoma detsevni rep.dnuor s7 t9 g t e9n n snt k1e k ifaencr-veclrohca ia5ihoaeeydlm9rTtifronb9dstfuau1iobpni gnit s se.stt tv )icas en snRhahatntlkihe rRTfthoes argtfuIneon taiaot(bloeimhrehprtac l da neteo tir i3d t puol.raisattl4omrcni2cme eb$eondvrcte rt.aiy pmteiit Luanqvieirp l,,sna w ndo c, on1 oni nni87l i 91iulaiil99pdm09.lflc99uno.13liy11ar31ibcf$$b srhoc tu lsse.ael)nvb3 ona. s iiT1 dldt(re euovfs t tceode tyielnvnibtRuaemsfhemnboic gn il.na)iu%ad 1mi e1 evnt( ssR io asad,di)rdn)ns%onu%in1pu f0/e1rfd6yp(on(lcaimaf s n, o)s i%dl t6na,a(u i)df fe c%n sodsn 6u geuda,(oCnclnn)rfVircui%edunff3hnoi(tusof ,)% 2nd(gn.ia)e%r1o(f 7 4.380-89 2:- f9,eyRd uet sSlaoCo hscsSeni sdurBav r”agHnicna nlieF genn toA8Ao 9“N.9 A1,.sPrep moG 5”serutn egVnigre mr Eosftekr alMatip aw CegNnita e6r 9C 9 “..1,EWlezt ed Wn.aE .,Jlh o, S.,Jraee rF .2601-M-59-QH AtBcSart nroce dnnouitartsini msdsAeni slulB aefmcoSi f ef rhOdotefraperP feoci6f feo hrt odferape rtprop e”Arlatip a fCyolpp ulSamrof neIh T8“8 9l1l e.BE .dS n,a . .J,Rnots aG .noitartsini msdsAeni slul Ba,mhScrae sceiRmonocE 7 Venture Capital Journal. 5.,4p99 9h1cr a,M egaP 7 (cid:211) ret npeiChsruenerper tT0nI0EM02 ,p,s,suswsr -tererl tsio yuehrivtewOgtalrsranitaeeulawsttvtinnnpiieavc d, dasse etrld rmrnean t eepab eafrahtstmevoot senerepoeydumurphsiotutwcnsceav .g nsnsl wdi aaront nAht aruse iilglgfertorpe ni vuateageimanthncnhliintnateseaevmf sruene rs petn te e loturgweseia o tnegsfthf-eniirar todh ewvalofetrorlcpohuresogtanci des e ve. phivgelytrinhe nwdti thha outncMlrcsieege etgxlv-neunhafigsi shdencacus de zgi ntdi ae tsdmzsl d s’e eiietneeytstnga arvanlsanhoondeeygatsmiomgsrltmnoaoac de v lnlseiongvonni a its r aeeee zbgth.ii nptenr f3naaracroarhogsehCfrevteodeb s tpldeauee vhogzsatrni ehganezahi gtrrree ott.c psa4aerhsaCs hegccnoirtpsevni .noit adz eidtmeue sbtoaisteryrtscnnoic Table 1.3: Recent Growth in Venture Capital Year Capital Committed Capital Invested by # Rounds $M/Round Annual Net to VC Funds ($B) 8 VC Firms ($B)9 IRR (%)10 1998 24.3 16.0 3470 4.62 17 1997 13.1 10.0 3279 4.00 29 1996 9.9 7.5 2675 3.70 42 1995 6.0 4.4 1900 3.16 49 1994 5.6 3.8 1800 3.11 13 1993 5.7 2.5 1700 3.35 18 1992 5.6 2.5 2000 2.80 11 1991 3.0 1.3 1600 1.88 21 1990 4.0 1.8 1900 2.11 2 1989 5.9 2.4 2200 2.68 5 1988 5.9 2.9 2000 2.95 2 :ecruoS Venture Capital Journald n)asecivr enSoitamrof nsIcimono ceErutn emVo raft anddoesa b( sisylan asrentra Pygolonhce TsiseneG 1.3 Overview of Financing Over the Early Life of a Company d, e sgttl dnsnaeni neuchucytivoitontnnmpraie iaynurs tiqeeefefilff bii4adt.Tn1edi ,h dc t ynassdluterenlo no vaa roetnenc.h msi hiiswhtelt pdcsvaeynuenchtusviiTonpriyt sr odd tn emsa evoenri r voaetfdnicoei tenssara enm blgoredanoretafas ornandibocena d e, tg tsnsne n eidihhuydvkntcolnnaeamluiep eaaope.rrsdsein secyGiltaan mayentasys s rgnonot i ce nyah,eirftp p mt un yer sp-ofthefuutio tt o d-rtdeerntaandheirtuathaslttaosv nsse rd tyonnfltuio rso :aer.eev)tneoIcNnamr otf e rhkktecc rnpuosaestamc(ser yl l naeoutsa upa(icitrap pro-rata yh yeg tahu, omtos enhd )ebtnr s huenitotisraalb sr.el iayfltropiappmuaiscrp 8 Venture Capital Journaldn a73. p,899 1ylu J, Venture Capital Journal.14 .,p99 9h1cr a,M 9 Venture Capital Journal; 8.,3p89 9t1sug u,A Venture Capital Journal 4.94p9 9h1cr a,M and Venture Capital Yearbook.1 3. p699 1 10 Venture Capital Journald n 4 a4. p,899 1ylu J, Venture Capital Journal 4.,4p99 9y1l u,J egaP 8 (cid:211) ret npeiChsruenerper tT0nI0EM02 Table 1.4: Equity Financing Rounds over the Early Life of a Company Financing Definition Typical Amounts Who Typically Plays Round deeS ryoffilauq/tpe ce nvaoocrP 000,52$ – 000,005 sl elganuAdividnI l aptui-ptarcats spu olreGgnA stsilatipa Cerutne Vegats-ylraE pu-tratS tcud oertpelpmoC 000,005$ – 000,000,3 sl elganuAdiv itdcneIleS laitin idn atnempoleved spu olreGgnA gnitekram stsilatipa Cerutne Vegats-ylraE tsriF elacs- leltuafitinI 000,005,1$ – 000,000,5 stsilatipaC erutneV se l dagnsnairutcafunam dnoceS lait irlnoaifti pgancikroW 000,000,3$ – 000,000,01 stsilatipaC erutneV noi ssnsaepnxiesub sm rtinFemec aeltPavirP Third eveihc ao tlatipa cnoisnapxE 000,000,5$ – 000,000,03 stsilatipaC erutneV neve-kaerb sm rtinFemec aeltPavirP egdirB ynapmo cwoll ao tgnicnaniF 3,000,000 – 000,000,02 sm rginFicna neinFinazzeM nc6iilb uoopgt – sht n2o1m sm rtinFemec aeltPavirP sre ktnnaeBmtsevnI m onre fksantoitini f;esdweivre t:neIcruoS Pratt’s Guide to Venture Capital Sources at asDeitiruc e, S4.1p gnihsilbuP (cid:211) 1999 1.4 Summary and Conclusions se rgyu n atsiesmnstvreerau vcaheoctntase ry. ptsa eeegr eicntfhrrinoTaudEvonsuf g n l dida h nsnteteaiuir wvafpunoiratirs cngodelevps xs s eee’env0tta9aih9lw1 n,egvn ii .yrtds bdse ttg eskenne vackaihcln nBoryrtiaoditaoelinsmufbtabfuiopni stnem m n,dorgise canhwcllit eneitw ryiegmsosulvinieraobrrasvghaeenbtpionxriep otvthepiaremt re i od. gni t lss)eie0gv0ndn 0A niae,rac 0org0j un5af oi$morsd–on 0fue0 fh0dt,e5e2s$( s e).t0sa0dm 0nif,uto0 os0slr E0tal,nta 3eoul$mtne–tnng0sia n0epa0vu,n-0it0r5a$t(s laud i0v0i0d,n0i 0d7 e – std0nee es e0oghy0temt0intb3avoi,la–tnrn0lr0SifU5i12b$ legna.srotsevni luf se s rtehuac cthcneltu o tusti n-cI sfah tno cgsneeiiiamhrh titenrdmaoApmi eses rco -t uno owsteahotoer ntctlva eeslnpfrsevrioioin dipsfeiditeshanvcratgaoatrnpe g nne. o iu s,,dd nxeysluwiarceulettuoivocnnttli hn o notsiccyepaicvilitbliuonPpi tne mfyt.oe ssn deloenvlmvaniii ktets crrhaoc-puopsrups egaP 9 (cid:211) ret npeiChsruenerper tT0nI0EM02
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