1. VCIC ® Team Prep Session VC 101 This PPT was created for organizers of internal events to help prepare student teams to compete.
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7. Raising a Fund LP 2 LP 3 LP 4 VC Firm (GPs) Fund 1 $$$$ LP 1 LP n Pledge $$ Commitments only. No actual cash changes hands. Pledge $$ Pledge $$ Pledge $$ Pledge $$
8. Raising a Fund CalPERS Parish Capital VC Firm (GPs) Fund 1 $$$$ UNC Endowment AIG Pledge $$ Pledge $$ Pledge $$ Pledge $$ Pledge $$ Example NC Pension Fund
14. Fund Life: 10 Years Invest and Reserve Follow-On Rounds Harvest “ Raise” Fund Year 0 5 10
15. Example Successful Investment Invest and Reserve Follow-On Rounds Harvest Series A Due Diligence Hit Milestones Hit Milestones Series B EXIT Find Deal Series A ROI is calculated on 6 years Series B ROI is calculated on 3 years 0 2 3 5 8 10
18. Portfolio of 10-25 Investments A B A B A B A B C A B A B Bust A Bust B A Bust A Bust A B C A D B Exit Exit Big Exit Exit 0 2 3 5 8 10
19. Portfolio of 10-25 Investments Big Exit A B A B A B A B C A B A B Bust A Bust B A Bust A Bust A B C A D B 3 2 5 6 8 9 11 10 Exit Exit Exit 4 1 7 0 2 3 5 8 10
20. Exit Scenario A B A B A B A B C A B A B Bust A Bust B A Bust A Bust A B C A D B Exit Exit Big Exit Exit ? ? ? Bust Exit ? 0 2 3 5 8 10
21. First Fund Invest and Reserve Follow-On Rounds Harvest “ Raise” Fund Year 0 5 10
44. Up Round: 1 on 1, 2 on 3 Inv = $1M Series A Series B Post = $5M Pre = $1M Post = $2M Inv = $2M Pre = $3M Shares at $1 Shares now $1.5 1M VC shares 1M Founder shares 2M total shares 1.33M Series B shares 2M Series A shares 3.33M shares Ownership Series A VC Shares 1M/2M = 50% Diluted to 1M/3.33M = 30% Series B VC Shares 1.33M/3.33M = 40% Founders Same as Series A VC shares Things go well Hit milestones Increased valuation
45. Dilution Original Shares Added Shares New Share Pool Original Shares Same quantity of blue. Lower percentage.
46. Why Dilution is Bad Original Pool Every 1% you lose of a 20X Exit is going to hurt 20 times more
47. Up Round: 2 on 4 12 on 12 Inv = $2M Series A Series B Post = $24M Pre = $4M Post = $6M Inv = $12M Pre = $12M Shares at $1 Shares at $2 2M VC shares 4M founders shares 6M total shares 6M Series B shares 6M Series A shares 12M shares Ownership Series A VC Shares 2M/6M = 33% Diluted to 2M/12M = 16.7% Series B VC Shares 6M/12M = 50% Founders 4M/6M = 67% Diluted to 4M/12M=33.3%
48. Down Round Inv = $1M Series A Series B Post = $2.5M Pre = $1M Post = $2M Inv = $1M Pre = $1.5M 1M shares 1M shares 2M shares 1.33 shares 2M shares 3.33M shares Shares at $1 Shares at $0.75 Remember, these are negotiated (so you start here, then do the math) The rest is math VC ownership after Series B (50% x 1.5/2.5) + 1/2.5 =1.75/2.5 = 70% OR 2.33M shares ÷ 3.33M total = 70% 1 on 1 1 on 1.5
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52. 25% Option Pool Example Inv = $1M Series A Pre = $1M Post = $2M No Option Pool 1M VC shares 1M Founder shares 2M total shares Inv = $1M Series A Founders Post = $2M 25% Option Pool = 500K shares 1M VC shares 500K Founder shares 2M total shares 500K option shares Option Pool Pre = $1M
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56. Invest Startup Startup Startup Startup Startup Startup Startup Startup Startup Startup Startup Portfolio VC Firm (GPs) $$ $$ $$ $$ $$ $$ Fund 1 $$$$ Capital Call $$ Capital Call $$ Capital Call $$ Capital Call $$ Capital Call $$ LP 2 LP 3 LP 4 LP 1 LP n
57. Exits Single Home Run dud dud dud Triple VC Firm (GPs) Fund 1 $$$$ $$ $$ $$ dud dud dud dud Single Single Double dud $$$$$$$$$$ $$ $$ $$$ $ $ $ $$ $$ Single LP 2 LP 3 LP 4 LP 1 LP n
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62. Understand the “Ecosystem” Fund 1 Fund 3 Fund 2 The game is not “picking the right deal.” It is laying the groundwork for continued success. Raise $ Invest Follow-On Harvest Raise $$$ Invest Follow-On Harvest Raise $$$$ Invest Follow-On Harvest 11 Deals 16 Deals 25 Deals