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What is Venture Capital and why should I consider it?

What is Venture Capital and why should I consider it?. Presentation by Dr. Andreas O. Tobler November 5, 2009. What is Private Equity/Venture Capital?.

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What is Venture Capital and why should I consider it?

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  1. What isVenture Capital and why should I consider it? Presentation by Dr. Andreas O. Tobler November 5, 2009

  2. What isPrivate Equity/Venture Capital? Whether you're preparing to launch a startup or want to grow your business, one thing is for certain: You’re going to need money. Debt and equity financing are two different financial strategies: • Debt means borrowing money for your business • Equity entails injecting your own or other stakeholders’ cash into your company

  3. What isPrivate Equity? • Private Equity provides equity capital to enterprises not quoted on a stock market • Private Equity can be used to • develop new products and technologies

  4. What isPrivate Equity? • Private Equity provides equity capital to enterprises not quoted on a stock market. • Private Equity can be used to • develop new products and technologies • to expand working capital

  5. What isPrivate Equity? • Private Equity provides equity capital to enterprises not quoted on a stock market. • Private Equity can be used to • develop new products and technologies • to expand working capital • to make acquisitions or to strengthen a company’s balance sheet

  6. What isPrivate Equity? • Private Equity provides equity capital to enterprises not quoted on a stock market. • Private Equity can be used to • develop new products and technologies • to expand working capital • to make acquisitions or to strengthen a company’s balance sheet. • to resolve ownership and management issues – a succession in family-owned companies

  7. What isPrivate Equity? • Private Equity provides equity capital to enterprises not quoted on a stock market. • Private Equity can be used to • develop new products and technologies • to expand working capital • to make acquisitions or to strengthen a company’s balance sheet. • to resolve ownership and management issues – a succession in family-owned companies • to buy out or buy in of a business by experienced managers

  8. What isVenture Capital? Venture capitalis, strictly speaking, a subset of private equity and refers to equity investments made for • the launch • early development or • expansion of a business. (Definition of EVCA – European Private Equity and Venture Capital Association)

  9. Mechanism of Venture Capital

  10. Mechanism of Venture Capital €20,000 BioStartUp Co.

  11. Mechanism of Venture Capital Business Plan €20,000 BioStartUp Co.

  12. Mechanism of Venture CapitalBusiness Plan Contents • Executive Summary • Market Opportunity • Market Analysis • Technology Platform & Product Overview • COMMERCIAL PLAN • Research & Development • Manufacturing & Quality Control • Clinical & Regulatory • Intellectual Property • Corporate Structure • Management • Board of Directors, Consultants & Professionals • Corporate Governance • MARKET PLAYERS/Competition • Risk • Financial Plan/ Capital Requirements • Exit Strategy • SUPORTING DOCUMENTS

  13. Mechanism of Venture Capital Business Plan €20,000 BioStartUp Co.

  14. Mechanism of Venture Capital Business Plan €20,000 BioStartUp Co.

  15. Mechanism of Venture Capital„Due Diligence“ Performance of an investigation of a business: • Legal Due Diligence • Financial Due Diligence • Business Due Diligence • Technological Due Diligence

  16. Mechanism of Venture Capital„Due Diligence“ Specific Due Diligence areas of concern may also include: • Labor • Tax • IT • Environment • Intellectual property • Real and personal property • Insurance and liability coverage • Debt instrument review • Employee benefits and labor matters • International transactions

  17. Mechanism of Venture Capital Business Plan €20,000 BioStartUp Co.

  18. Mechanism of Venture Capital BioStartUp Co. 30% of Capital €200,000

  19. Mechanism of Venture Capital BioStartUp Co.

  20. European Private Equity Annual Funds Raised

  21. Swiss Private EquityDeal Value & Number of Companies

  22. European Private EquityFunds Raisedby Type of Investor

  23. „Angel“ Investors • Angel investors are wealthy individuals or networks that are willing to fund small businesses • Angels are the largest source of seed and start-up capital for businesses • Angel investors tend to fund small businesses for longer periods of time and expect a lower return on investment than do venture capital firms

  24. „Venture Capital“ Investors • Venture Capital firms, on the other hand, provide equity for businesses with the expectation of high returns on their investments within three to five years • VCs generally fund companies with significant growth potential – both, Microsoft and Google attracted VC funding

  25. Advantages of Venture Capital The major advantages of equity (VC) funding are: • You receive capital to start/grow your business along planned timelines • You become part of a financial network • You gain access to valuable strategic advise and support

  26. Drawbacks of Venture Capital The major drawbacks of equity (VC) financing are: • You are no longer the full owner of your business • You will be relinquishing not just financial control, but will no longer be the sole arbiter of the business’s creative and strategic direction

  27. Facts & Figures CEEAnnual investment value in the CEE region, 2003-2008

  28. Facts & Figures CEE 2008 • Total investment levels reached €2.5bn in CEE • CEE companies attracted close to 5% of total private equity investment across Europe • Investment activity was highly concentrated in the 5 biggest countries in the region: Poland, Hungary, the Czech Republic, Ukraine and Romania Source: EVCA – Central and Eastern Europe Statistics 2008

  29. Facts & Figures CEE 2008 • The number of venture companies financed increased, driven by the financing of more start-up businesses • Life sciences attracted more investment than any other sector • The communications sector was the most active in terms of numbers of companies financed Source: EVCA – Central and Eastern Europe Statistics 2008

  30. Facts & FiguresAnnual investment value in CEE, 2007-2008

  31. Facts & FiguresCEE investment bysector in 2008

  32. ClosingRemarks • You should consider starting your own company as one of many possible career paths • If you do, you should consider Venture Capital to grow your company • If you do, you need a business plan • Contact as many VCs as possible • Be prepared for thorough due diligence • Negotiate hard and fair • Once funded, keep communication open and information flowing • Work hard and stay focused

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