info@ifc.ir   021-66724545
  پارسی   English   العربیه

Venture Capital and the Finance of Innovation, 2nd Edition

توضیحات

THE FINANCIAL PRINCIPLES EVERY VENTURE CAPITALIST NEEDS TO MASTER

In Venture Capital and the Finance of Innovation, Second Edition, future and current venture capitalists will find a useful guide to the principles of finance and the financial models that underlie venture capital decisions. Assuming no knowledge beyond concepts discovered in first-year MBA courses, the book will familiarize you with:

  • The relationships between risk and return in venture capital.
  • Total Valuation-the data and methods used to value a high-growth company.
  • Partial Valuation-how to visualize and evaluate the special features of VC transactions such as convertible preferred stock, participating preferred stock, payment-in-kind dividends, and liquidation preferences.

New to the Second Edition:

  • NEW Rankings of the best venture capitalists.
  • NEW web-based model (VCVtools.com) allowing easy visualization and valuation so multiple term sheets in a start-up.
  • Discussion of challenges facing venture capital in the second decade of the 21st century.


Andrew Metrick is a Professor of Finance and the Theodore Nierenberg Professor of Corporate Governance at the Yale School of Management, where he teaches a course in Venture Capital and the Finance of Innovation. He was previously a faculty member in the finance department at the Wharton School of the University of Pennsylvania, and in the economics department of Harvard University. In 2010 he served as the Chief Economist for President Obama's Council of Economic Advisers. Dr. Metrick received a BA in Economics and Mathematics from Yale and a Ph.D. in Economics from Harvard. He has received numerous teaching awards and distinctions, including recognition by BusinessWeek as one of the best teachers at Wharton.

Ayako Yasuda is an Assistant Professor of Management at the Graduate School of Management, University of California, Davis. She was previously a faculty member in the finance department at the Wharton School of the University of Pennsylvania; prior to her Ph.D. she worked at the Investment Banking Division of Goldman, Sachs & Co. Dr. Yasuda received a BA and Ph.D. in Economics from Stanford University. She has won numerous research grants and has been published in the Journal of Finance, Journal of Financial Economics, and the Review of Financial Studies.

Preface to the 2nd Edition-A Reader's Guide.

Acknowledgments.

PART I VC BASICS.

Chapter 1 The VC Industry.

1.1 What is Venture Capital?

1.2 What Do Venture Capitalists Do?

1.3 The History of Venture Capital.

1.4 Patterns of VC Investment in the United States.

1.4.1 Investments by Stage.

1.4.2 Investments by Industry.

1.4.3 Investments by U.S. Region.

Summary.

Key Terms.

References.

Chapter 2 VC Players.

2.1 Firms and Funds.

2.2 The Limited Partners.

2.3 VC Partnership Agreements.

2.3.1 Management Fees.

2.3.2 Carried Interest.

2.3.3 Restrictive Covenants.

Summary.

Key Terms.

References.

Exercises.

Appendices: Key Terms and Conditions for Three VC Funds.

Appendix 2.A: EarlyBird Ventures I.

Appendix 2.B: Talltree Ventures IV.

Appendix 2.C: Owl Ventures IX.

Chapter 3 VC Returns.

3.1 Industry Returns.

3.1.1 Definitions.

3.1.2 A Gross-Return Index.

3.1.3 A Net-Return Index.

3.2 Fund Returns.

3.2.1 Definitions.

3.2.2 Evidence.

Summary.

Key Terms.

References.

Exercises.

Chapter 4 The Cost of Capital for VC.

4.1 The Capital Asset Pricing Model.

4.2 Beta and the Banana Birds.

4.3 Estimating the Cost of Capital for VC.

Summary.

Key Terms.

References.

Exercises.

Chapter 5 The Best VCs.

5.1 The Economics of VC.

5.2 The Best VCs: A Subjective List.

5.3 VC Value Added and the Monitoring of Portfolio Firms.

Summary.

Key Terms.

References.

Chapter 6 VC Around the World.

6.1 The Global Distribution of VC Investing.

6.2 The Cost of Capital for International VC.

6.2.1 Baseline Model: The Global CAPM.

6.2.2 Objective and Extensions to the Global CAPM.

6.2.3 A Global Multifactor Model for Venture Capital.

Summary.

Key Terms.

References.

Exercises.

PART II TOTAL VALUATION.

Chapter 7 The Analysis of VC Investments.

7.1 VC Investments: The Historical Evidence.

7.2 The Investment Process.

Summary.

Key Terms.

References.

Chapter 8 Term Sheets.

8.1 The Basics.

8.1.1 Investors.

8.1.2 Price Per Share.

8.1.3 Pre-Money and Post-Money Valuation.

8.1.4 Capitalization.

8.2 The Charter.

8.2.1 Dividends.

8.2.2 Liquidation Preference.

8.2.3 Voting Rights and Other Protective Provisions.

8.2.4 Mandatory Conversion.

8.2.5 Redemption Rights.

8.3 Investor Rights Agreement.

8.3.1 Registration Rights.

8.3.2 Matters Requiring Investor-Director Approval.

8.3.3 Employee Stock Options.

8.4 Other Items.

8.4.1 Rights and Restrictions.

8.4.2 Founders' Stock.

Summary.

Key Terms.

References.

Exercises.

Chapter 9 Preferred Stock.

9.1 Types of Preferred Stock.

9.2 Antidilution Provisions.

Summary.

Key Terms.

References.

Exercises.

Chapter 10 The VC Method.

10.1 The VC Method: Introduction.

10.1.1 Exit Valuation.

10.1.2 Target Returns.

10.1.3 Expected Retention.

10.1.4 The Investment Recommendation.

10.2 The Standard VC Method.

10.3 The Modified VC Method.

Summary.

Key Terms.

References.

Exercises.

Chapter 11 DCF Analysis of Growth Companies.

11.1 DCF Analysis: Concepts.

11.2 DCF Analysis: Mechanics.

11.3 Graduation Value.

11.4 DCF Analysis: The Reality-Check Model.

11.4.1 Baseline Assumptions for the Reality-Check DCF.

Summary.

Key Terms.

References.

Exercises.

Chapter 12 Comparables Analysis.

12.1 Introduction to Comparables Analysis.

12.2 Choosing Comparable Companies.

12.3 Using Comparable Companies to Estimate the Cost of Capital.

Summary.

Key Terms.

References.

Exercises.

Appendix 12.A: Potential Comparables for Semico.

PART III PARTIAL VALUATION.

Chapter 13 Option Pricing.

13.1 European Options.

13.2 Pricing Options Using a Replicating Portfolio.

13.3 The Black-Scholes Solution.

13.4 American Options.

13.5 Random-Expiration Options.

13.6 Reading Exit Diagrams.

13.7 Carried Interest as an Option.

Summary.

Key Terms.

References.

Exercises.

Appendix 13.A RE Options: Technical Details.

Chapter 14 The Valuation of Preferred Stock.

14.1 Base-Case Option-Pricing Assumptions.

14.2 RP Valuation.

14.3 Excess Liquidation Preferences.

14.4 Dividends.

14.5 CP Valuation.

14.6 CP with Excess Liquidation Preferences or Dividends.

14.7 Combining RP and CP.

14.8 Comparing RP and CP.

Summary.

Key Terms.

References.

Exercises.

Chapter 15 Later-Round Investments.

15.1 Series B.

15.2 A Conversion Shortcut.

15.3 Series C.

15.4 Dividends in Later Rounds.

15.4.1 Accrued Cash Dividends.

15.4.2 PIK Dividends.

15.5 Beyond Series C.

Summary.

Key Terms.

Exercises.

Chapter 16 Participating Convertible Preferred Stock.

16.1 Binary Options.

16.2 The Valuation of PCP.

16.3 The Valuation of PCPC.

16.4 Series B and Beyond.

Summary.

Key Terms.

References.

Exercises.

Chapter 17 Implied Valuation.

17.1 Post-Money Valuation Revisited.

17.2 Measurement of Portfolio Value.

17.3 Down Rounds?

17.4 How to Avoid Valuation Confusion.

Summary.

Key Terms.

Exercises.

Chapter 18 Complex Structures.

18.1 Management Carve-outs.

18.2 Dealing with Partners.

18.3 A Complex Example.

Summary.

Key Terms.

Exercises.

PART IV THE FINANCE OF INNOVATION.

Chapter 19 R&D Finance.

19.1 R&D Around the World.

19.2 Two Touchstones.

19.2.1 Drug Development.

19.2.2 Energy Innovation.

19.3 How Is R&D Financed?

19.4 Where Do We Go from Here?

Summary.

Key Terms.

References.

Chapter 20 Monte Carlo Simulation.

20.1 Event Trees.

20.2 Simulation with Continuous Probability Distributions.

20.3 Simulation with Multiple Sources of Uncertainty.

Summary.

Key Terms.

Exercises.

Chapter 21 Real Options.

21.1 Decision Trees.

21.2 Real Options in R&D.

21.3 The Valuation of Real Options.

21.4 Risk-Neutral Probabilities.

21.5 Drugco, Revisited.

Summary.

Key Terms.

Exercises.

Chapter 22 Binomial Trees.

22.1 The Black-Scholes Equation, Revisited.

22.2 Multiple Strike Prices and Early Exercise.

22.3 Dividends.

Summary.

Key Terms.

References.

Exercises.

Chapter 23 Game Theory.

23.1 What Is Game Theory?

23.2 Simultaneous Games.

23.3 Sequential Games.

23.4 Game Theory and Real Options.

Summary.

Key Terms.

Exercises.

Chapter 24 R&D Valuation.

24.1 Drug Development.

24.2 Energy.

24.3 The Forest and the Trees.

Summary.

References.

Exercises.

Appendix A Sample Term Sheet.

Appendix B The VCFI Spreadsheets.

Appendix C Guide to Crystal Ball®.

Glossary.

Index.