The venture adventure.When it comes to venture capital investing, is earlier better? Here's a look at the various stages and rounds of investing. COMPANY DEVELOPMENT STAGES: * Startup: The initial research and development stage, when company has a concept or product under development. Usually little or no revenue coming in. * Early: Company has product in pilot production or has just begun selling product or service. Revenues small. * Expansion: Company's product/service has begun hitting the market and revenues are growing. But company needs funds to reach next stage of growth or enter broader market. * Later: Company's product/service is widely available and likely to be generating positive cash flow. Company looking to reconfigure To change the status of something. in anticipation of selling to strategic buyer, private equity group or to go public. ROUNDS OF INVESTING: * Seed: Investment in company before there is a real product or company organized. May take place of investments by friends, family or angel investors An individual who invests his or her own money in a private company, which is typically a startup. An angel investor is not an employee or member of a bank, venture capital firm or other financial institution that normally makes such investments. . Seed investments are typically small-under $2 million--and require the entrepreneur to give up a large equity stake. Less common than other rounds. * Series A: Initial investment in start-up or early stage company. Usually a commitment of $1 million to $5 million in exchange for hefty heft·y adj. heft·i·er, heft·i·est 1. Of considerable weight; heavy. 2. Rugged and powerful. See Synonyms at heavy. 3. stake in company, perhaps exceeding 50 percent. Sometimes this commitment comes in sequential amounts called tranches Tranches A piece, portion or slice of a deal or structured financing. This portion is one of several related securities that are offered at the same time but have different risks, rewards and/or maturities. "Tranche" is the French word for "slice". , with company having to meet benchmarks to get remaining funds. The investor stake is in the form of series "A" Preferred Stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. . One of the riskiest forms of venture investing venture investing The acquiring of a stake in a start-up company by a brokerage firm or analyst by obtaining discounted, pre-IPO shares. Critics claim venture investing causes analysts to have a vested interest in seeing a stock appreciate in value and so , but payoff is potentially high. Venture capital firms Name Location Founding date Managing Partners/Directors Specialty Capital managed 5AM Ventures Menlo Park, CA; Waltham, MA 2002 John Diekman, PhD (managing partner), Scott Rocklage, PhD (managing partner), Andrew Schwab (managing partner) life sciences $200M [1] look for at least three times this initial investment value when exiting. * Series B: Second round of investment in company, usually in early or expansion stage. With marketable product, less risky investment than series A, but still considerable risk. Percentage stake for venture capital investor usually smaller, in the 20 percent range. * Series C or above: Later rounds of investment in company. Commitments usually larger, often exceeding $10 million. But less risk, since company has demonstrated solid revenue growth. Stakes for venture capital investors smaller, often under t0 percent. But potential for large payouts in relatively short time frame as company is near the stage where ready to sell or go public and create an "exit," or "liquidity event" for investors. * Mezzanine mez·za·nine n. 1. A partial story between two main stories of a building. 2. The lowest balcony in a theater or the first few rows of that balcony. : Term usually applied to the final round of venture capital funding before the company is ready to file for an initial public offering. Financing is usually structured to be repaid through proceeds of the public offering, often within months of an investment. --Howard Fine Sources: PricewaterhouseCoopers/National Venture Capital Association Money Tree Report; Fundingpost.com--Venture Capital Glossary A term used by Microsoft Word and adopted by other word processors for the list of shorthand, keyboard macros created by a particular user. See glossaries in this publication and The Computer Glossary. . |
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