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MBS e-Course:

Venture Investing

Venture Investing

e-Coach for Private and Corporate Investors

By Vadim Kotelnikov, Founder, Ten3 BUSINESS e-COACH - Innovation Unlimited, 1000ventures.com

Investoment Opportunity Selection and Evaluation by Investors (slide show) Start-up Business Plan: Executive SummaryStart-up Business PlanStart-up Business Plan: Executive SummaryMilestone Chart Cash Flow ForecastManagement Team Start-up Business Plan Investors Selection Criteria: Business Anagels and VC Firms Due Diligence: Study AreasInitial Screening: Company Assessment WorksheetInitial Screening: Company Assessment WorksheetDue DiligenceNegotiating and Closing the Deal Valuation of a Start-up CompanyCompany Ownership and Exit Strategies (slide show) 1000ventures.comLegal Contract: Structuring the DealFunding: Typical Terms of Preferred Stock Issued to Venture CapitalistsVenture FinancingTen3 Business e-Coach: why, what, and how

Six Questions for Measuring the Potential Investment

  • How long will it take for profits to pay back the investment?

  • When will the cash stop flowing out and start returning?

  • Do we really have to make this investment?

  • What is the return on investment?

  • Is that return comfortably above the true cost of the capital invested?

  • Looking ahead, and allowing for interest rates, what is the future pay-off worth in today's values?

A to Z of Venture Investing

A-F: Opportunity Introduction

  • Do most inventors approaching you lack business skills? If you don't want to miss a great investment opportunity but have no time to teach them the A,B,C, etc. of venture financing, just advise them to go thoroughly the steps of the free Ten3 Step-by-Step Guide or the MBS e-Course on "Venture Financing". This will make your  communication with first-time entrepreneurs much more enjoyable and effective.

G-M: Initial Screening

N-T: Due Diligence

  • Investigate and evaluate the investment opportunity by conducting due diligence research: qualify risks, analyze and verify factors presented in the investment proposal

U-Z: Negotiating and Closing the Deal

Related Chapters of the Business e-Coach:

Master of Business Synergies (MBS)

Venture Investing

Business Angels

Examples of Successful Investment Deals (slide show)

Corporate Investing in External Start-ups

GE Equity (case study)

Nortel Telecom (case study)

Evaluation of a Start-Up Company

Business Plan Evaluation

Due Diligence

How To Get Well Prepared Clients

It's easy now. Just advise your prospective clients to follow the procedures of the free Ten3 step-by-step guide to venture financing or the MBS e-course on "Venture Financing". It will provide them with free guidance on when, how and what type of finance they should seek, how to prepare a sound venture proposition and a business plan, how to prepare and make a venture presentation, and how to negotiate and structure the deal.

As a venture investor, this problem must be well known to you: too many inventors ask you to invest in their idea, but few can demonstrate sound skills of converting ideas into a profitable business. Indeed, most inventors lack entrepreneurial and business skills. According to Saratoga Ventures, only 6 out of 1000 business ideas get funded on average by venture capitalists. It does not mean that the remaining 994 out of 1000 ideas are not good enough. It's just you know that ideas are a dime a dozen, only execution skills count. So, you invest in people, not in ideas.

The Ten3 Business e-Coach can help you to turn inventors approaching you into good entrepreneurs without any effort from your side. Our step-by-step guide on raising funds for start up ventures would help first-time entrepreneurs to understand your investment strategy and preferences and develop a business proposal that meets your expectations. All you need to do now is to advise ill-prepared inventors to go through all its  steps thoroughly and come back to you afterwards. And enjoy the results.

Syndicates of Venture Capital Investors

Some VC firms form venture capital keiretsu, loosely formed blocks of firms that invest together.

Corporate Investing (more)

Corporations are a major - and rapidly growing - source of funds for new ventures.  Strategic benefits of corporate venture investing may include:

Passion-driven:

  • Discovery of unmet customer needs and unserved emerging markets

  • Potentially high return on investment

  • Supplements to internal research and product/service development investments

  • Improved efficiency of the value chain management, in particular supply chain and customer relationships

  • Development of new business relationships

  • Preparing potential candidates for strategic alliance or acquisition

Fear-driven:

  • Reducing the risk of missing a new turn in technological development

  • Preventing competitors from acquiring a breakthrough technology

  • Motivating internal talents to outperform outside ventures

Valuation

The value of a company is the future cash that can be taken out of the business, discounted back to the present. The key to successful business valuation and investing is accurately estimating the magnitude and timing of these future cash flows, which are determined by:

  • How profitable a company is (defined by how much its return on invested capital exceeds its weighted average cost of capital)

  • How much it can grow the amount of capital it can invest at high rates over time.

  • How sustainable its excess returns are.2

 

 

Bibliography:

  1. "Venture Catalyst", Donald L. Laurie, 2001

  2. "Sustainable Competitive Advantage", Whitney Tilson, 2000

Ten3 Business e-Coach, version 2004b. Founder - Vadim Kotelnikov. © Vadim Kotelnikov, Ten3 East-West & GIVIS

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