...ECONOMY 26 Luring a big firm to town is not the secret to job growth DEFEND YOUR RESEARCH 30 Are morning people wired for success? VISION STATEMENT 32 The social web’s east-west divide COLUMN 38 Warren Bennis looks back on his surprising path to fame New Thinking, Research in Progress hbr.org New Thinking, Research in Progress hbr.org FIRST The VC Shakeout Venture capital hasn’t worked for a decade and must be radically restructured if it’s going to influence innovation—and make solid returns to investors. by Joseph Ghalbouni and Dominique Rouziès 83% 0% VC QUARTERLY RETURN RATES, 1981–2009 SOURCE CAMBRIDGE ASSOCIATES LLC U.S. VENTURE CAPITAL INDEX 2% T ILLUSTRATION: ANDREW BANNECKER he sky is falling on the venture capital rainmakers. Over the past 10 years their quarterly internal rate of return (IRR)—the primary measure of VC success—was dismal, hovering in the single percentage points and sometimes dipping into negative territory. Many firms have struggled to market new funds. Their main sources of profitability—IPOs of their portfolio firms—are fewer and farther between. Their backup strategy—selling their portfolio companies to other firms—is getting tougher and the prices are falling. Investments that once generated cash after just two years now take six to 10 years to reach liquidity. A 2010 New York Times story on lean start-ups cites experts who see a “shrinking role for venture capitalists in seeking and backing promising young...
Words: 2033 - Pages: 9
...The VC Breaks/Andrew Ryan case study is a fairly typical example, based on my experience in medium to large size companies/corporations, of how corporate cultures are mishandled. This is yet another example of an improperly managed, yet much needed, culture change. From the beginning Ryan was put in a very difficult position where success was unlikely without a great deal of support from senior leadership and buy-in at all levels. What ends up happening is what Bridges warns about when he said “without proper transition, people and organizations end up mentally and emotionally back where they started and the change doesn’t work.” WHAT WAS THE SITUATION RYAN FACED IN HIS ASSIGNMENT AT VC BREAKS? It was clear that VC Breaks needed to make significant changes to maintain market share and relevancy industry wide. Externally, the economy was dramatically shifting consumer needs for VC’s current product line. Internally, weak executive leadership had not only allowed but fostered resentment between two critical departments that must collaborate to be successful. Bridges would categorize these changes as both reactive and developmental. It is also clear that VC Breaks had no corporate culture prior to being acquired by Crossroads. Departments were allowed to develop their own cultures and suited the personalities of their leadership, not the needs of the company or customer. After being acquired by a new parent company, VC is being forced to adopt and implement a new...
Words: 1347 - Pages: 6
...Entrepreneurship” was born out of the desire, want and curiosity of kbs+’s staff to understand the crazy world of entrepreneurship. “Creative Entrepreneurship” curates the perspectives of leading entrepreneurs and venture capitalists as a guide for people interested in learning more. Each writer graciously contributed their work to create a curated resource for creative entrepreneurs. This book is the teaching and inspirational aid for our kbs+ Ventures Fellows – a highly select group of kbs+ staffers from all levels and areas of the agency – who go through a six-month educational program to immerse themselves in the startup and venture capital world. Share this entrepreneurial inspiration with friends using @kbspvc or #kbspvcbook. If you would like to share any inspiration, thoughts or feedback, please contact us at @kbspvc anytime – we look forward to hearing from you. Thank you for downloading our book! Darren Herman Taylor Davidson Creative Entrepreneurship Darren Herman Taylor Davidson a kbs+ partner We have received explicit permission from all authors of the works found in this book. Unless otherwise stated, we do not claim to have written or own any of this work. We are purely aggregating it into a simple book format for the education of anyone who picks up this book. The price of this book is free; if anyone tries to sell this book to you, please report them to us. Hopefully this book inspires you as much as it does us. We do not guarantee you will start the next successful...
Words: 88947 - Pages: 356
...Preliminary and incomplete Do not quote without authors’ permission How Do Venture Capitalists Choose Investments? by Steven N. Kaplan and Per Strömberg* First Draft: August 2000 This Draft: August 2000 Abstract In this paper, we consider how venture capitalists (VCs) choose or screen their investments by studying the contemporaneous investment analyses produced by 10 venture capital firms for investments in 42 portfolio companies. Consistent with most academic and anecdotal accounts, we find that it is common for VCs to consider explicitly the attractiveness of the opportunity – the market size, the strategy, the technology, customer adoption, and competition – the management team, and the deal terms. We also provide evidence on how the venture capitalists expect to monitor those investments. In at least half of the investments, the VC expects to play an important role in recruiting management. Finally, we complement the investment analyses with information from the financial contracts for the investments and consider the relation of the analyses with the contractual terms and with subsequent performance. In both analyses, the evidence suggests that the VC’s initial appraisal of the management team is important. Stronger management teams obtain more attractive contracts and are more likely to take their companies public. G24: Investment banking; Venture Capital; Brokerage G32: Financing policy; Capital and ownership structure * Graduate School of Business...
Words: 12264 - Pages: 50
..."a huge, unexploited opportunity in startup funding:" the growing disconnect between VCs, whose current business model requires them to invest large amounts, and a large class of startups that need less than they used to. Increasingly, startups want a couple hundred thousand dollars, not a couple million. [1] The opportunity is a lot less unexploited now. Investors have poured into this territory from both directions. VCs are much more likely to make angel-sized investments than they were a year ago. And meanwhile the past year has seen a dramatic increase in a new type of investor: the super-angel, who operates like an angel, but using other people's money, like a VC. Though a lot of investors are entering this territory, there is still room for more. The distribution of investors should mirror the distribution of startups, which has the usual power law dropoff. So there should be a lot more people investing tens or hundreds of thousands than millions. [2] In fact, it may be good for angels that there are more people doing angel-sized deals, because if angel rounds become more legitimate, then startups may start to opt for angel rounds even when they could, if they wanted, raise series A rounds from VCs. One reason startups prefer series A rounds is that they're more prestigious. But if angel investors become more active and better known, they'll increasingly be able to compete with VCs in brand. Of course, prestige isn't the main reason to prefer a series A round....
Words: 4010 - Pages: 17
...1/08/2012 Introduction to Financial Statements Accounting System 1- Financial Transaction (input): a. Analyze b. Record c. Classify d. Summarize e. Report 2- Financial Statements (output) f. Companies prepare four financial statements from the summarized accounting data: i. Balance sheet ii. Income statement iii. Retained earnings statement iv. Statement of cash flows * GAAP – Generally Accepted Accounting Principles * FASB and SEC work together to form the GAAP * FASB- Financial Accounting Standards Board * SEC- Securities and Exchange Commission Business Activities: * Financing * Borrowing money * Issuing shares of stock for cash * Investing * Use money to invest in long time assets to help run the business * Operating * Supplies, salaries, etc Corporations are basically a different entity altogether- an "invisible" person. Income statement= Revenue-Expenses (See examples in slides) Operating Cycles: basically comes down to using money to perform services or create merchandise, sell product/merchandise, and receive money. Assets= Liabilities + Equity Financial Leverage: more borrowed money 01/15/2013 Current assets: accounts receivable, cash, inventory, supplies, prepaid expenses… * Accounts receivable vs notes receivables: * Accounts receivable: current customers owe money to you. You provide...
Words: 916 - Pages: 4
...Chapter 2 – How to Raise Money Lucas Bennett 3 Feb 2015 Do or do not, there is no try. Always talk with confidence in the success of your product. Attitude determines outcome. Investors will be more likely to invest. Determining how much money you need to raise will determine who you will be courting for seed money. All financial planning models that determine financial need will be wrong. Therefore, it is wiser to plan how long you want to operate your startup until the next meaningful milestone and/or how long to get users or expected revenue growth and/or what is your burn rate. Generally there should be real progress around a year. (approximate at best). When determining a goal for seed money never ask for more than is absolutely necessary, a VC may hold back investment because they believe you will not meet your necessary goals. Additionally, do not give a range of goals. For example, between 5 Million and 7 Million. Be precise. Things you will need before courting a VC: (1) A short description of your business also known as your elevator pitch. This is a quick description of your business. Typically between one and three paragraphs and describes the product, the team, and the business. Concludes with a very direct paragraph about whatever next step you want. (2) An executive summary is a 1-3 page description of your idea, product, team and business. This is your first impression with the firm and expect it to be passed around. Therefore it...
Words: 725 - Pages: 3
...Innovation - takes many forms Incremental : Adding a new feature to an existing product Examples: Next generation pacemaker that are safe for MRI, Biodegradable, diagnostic stents Healthcare Innovation - takes many forms Disruptive: New value creation, paradigms change Example: DES, TAVI It is difficult to foresee Disruptive Solutions They are rare to find: Requires excellent access to the best deal flow and deep intuition about the relevant markets The validity of their claim is more difficult to substantiate : Requires more thorough due diligence Development and execution risks are bigger : Needs better team and more focused entrepreneurs This is the ultimate challenge for early stage VCs: Market intuition > Technology validation > People assessment Healthcare Innovation In healthcare, we’ve innovated new technologies and products While innovation in service and business models has lagged Core Challenges: Serve larger populations with less resources...
Words: 1244 - Pages: 5
...Over the previous six months, he and his four co-founders from AMSL had made tremendous progress in developing the underlying science that would enable the company to attract venture capital funding. Within the past 24 hours, Tompkins had participated in three meetings about issues that might have a dramatic impact on the future success of the business. The first meeting had taken place the day before with Paige Miller, a 1995 Harvard Business School (HBS) graduate who had been doing some consulting for NanoGene, and whom Tompkins was trying to recruit to join the management team. The second had taken place that morning between Tompkins and his four co-founders. He had just finished the third with Susan Stone, a venture capitalist (VC) who Tompkins hoped would become a lead investor for NanoGene’s Series A funding. Tompkins’s co-founders included Don Rupert, the head of AMSL, as well as three fellow scientists from the lab: Mark Masterson, Ravi Rhoota, and Gary Garfield. The five had met that morning to discuss negotiating a compensation package that would entice Miller to join NanoGene as its VP of Operations. Miller had considerable experience in the life sciences industry as VP of Operations at a successful biotech company. (See Exhibit 1 for resume.) Tompkins and his team were eager to have her on board. However, as Tompkins and Miller began to negotiate her compensation package, they soon realized that they were very far...
Words: 5828 - Pages: 24
...nanotechnology. Over the previous six months, he and his four co-founders from AMSL had made tremendous progress in developing the underlying science that would enable the company to attract venture capital funding. Within the past 24 hours, Tompkins had participated in three meetings about issues that might have a dramatic impact on the future success of the business. The first meeting had taken place the day before with Paige Miller, a 1995 Harvard Business School (HBS) graduate who had been doing some consulting for NanoGene, and whom Tompkins was trying to recruit to join the management team. The second had taken place that morning between Tompkins and his four co-founders. He had just finished the third with Susan Stone, a venture capitalist (VC) who Tompkins hoped would become a lead investor for NanoGene’s Series A funding. Tompkins’s co-founders included Don Rupert, the head of AMSL, as well as three fellow scientists from the lab: Mark Masterson, Ravi Rhoota, and Gary Garfield. The five had met that morning to discuss negotiating a compensation package that would entice Miller to join NanoGene as its VP of Operations. Miller had considerable experience in the life sciences industry as VP of Operations at a successful biotech company. (See Exhibit 1 for resume.) Tompkins and his team were eager to have her on board. However, as Tompkins and Miller began to negotiate her compensation package, they soon realized that they were very far apart in terms of...
Words: 5947 - Pages: 24
...ONSET Ventures: Written Case Submission In 1984, ONSET Ventures was established as a seed stage venture fund by Terry Opdendyk and David Kelley. With $5 million in capital, this “feeder” fund was created with the help of three later-stage venture capital firms, and investments from 31 CEOs as well as various entrepreneurs. The goal of this initial fund was to make seed stage investments that would later be backed by the larger, later-stage VC firms. During this time, Opdendyk embarked on a study of 300 separate investments from various VC firms. From this analysis, ONSET developed an investment model that allowed the firm to prosper. ONSET’s model contains six factors that help the firm locate and invest in attractive opportunities. First, a full-time mentor with both start-up and larger business experience is assigned to the portfolio company’s management team. This mentor is an independent advisor to the management team and helps the company during the incubation process. Opdendyk found that the presence of a mentor typically increased the success rate of the investment from less than 25% without a mentor to over 80% with a mentor. I agree with this element of ONSET’s model. During the start-up phase, management teams can struggle to come up with effective strategies and properly assess the risks involved. By bringing in an outside consultant in the form of a mentor, a fresh set of eyes can examine the strategy to ensure that the management team is thinking rationally about...
Words: 2215 - Pages: 9
...The North Vietnamese Communist leadership's ability to reassess and adapt during the Vietnam War was reflected in how well they combined guerilla and conventional operations to achieve their strategic goal of unifying Vietnam under communist rule. Throughout the conflict, the Viet Cong (VC) were employed to conduct guerilla operations while North Vietnamese Army (NVA) and VC "main force" units were used to transition to conventional operations. Guerilla operations enabled Hanoi to inflict a steady flow of casualties on US forces which increased anti-war sentiment in America. NVA and VC main force conventional operations reinforced the US Army's conventional approach to the fight which caused the Americans to alienate the people of South Vietnam. By alienating the South Vietnamese people, the Americans enhanced the VC's ability to conduct guerilla operations and control rural population centers which weakened the credibility of the Government of South Vietnam (GVN). The combined effects of guerilla and conventional operations supported the North Vietnamese strategy of a protracted conflict that was sure to weaken the resolve of the United States and eventually defeat the GVN. The relationship between conventional and guerilla operations was a key element of the Vietnamese communists’ “Dau Tranh” strategy to fight and win the Vietnam War. A brief description of the Dua Tranh (meaning struggle) strategy is appropriate since it was the basis for North Vietnam’s success. The strategy...
Words: 2534 - Pages: 11
...Journal of Management http://jom.sagepub.com/ New Venture Teams: A Review of the Literature and Roadmap for Future Research Anthony C. Klotz, Keith M. Hmieleski, Bret H. Bradley and Lowell W. Busenitz Journal of Management published online 26 June 2013 DOI: 10.1177/0149206313493325 The online version of this article can be found at: http://jom.sagepub.com/content/early/2013/06/26/0149206313493325 Published by: http://www.sagepublications.com On behalf of: Southern Management Association Additional services and information for Journal of Management can be found at: Email Alerts: http://jom.sagepub.com/cgi/alerts Subscriptions: http://jom.sagepub.com/subscriptions Reprints: http://www.sagepub.com/journalsReprints.nav Permissions: http://www.sagepub.com/journalsPermissions.nav >> OnlineFirst Version of Record - Jun 26, 2013 What is This? Downloaded from jom.sagepub.com at Jonkoping University Library on November 11, 2013 493325 research-article2013 JOMXXX10.1177/0149206313493325Journal of Management / Month XXXXKlotz et al. / New Venture Teams Journal of Management Vol. XX No. X, Month XXXX 1–30 DOI: 10.1177/0149206313493325 © The Author(s) 2013 Reprints and permissions: sagepub.com/journalsPermissions.nav New Venture Teams: A Review of the Literature and Roadmap for Future Research Anthony C. Klotz Oregon State University Keith M. Hmieleski Texas Christian University Bret H. Bradley Lowell W. Busenitz University of Oklahoma As entrepreneurship...
Words: 16153 - Pages: 65
...14/05/2014 Mixed Costs Total Mixed Cost VC Per Unit (Slope) Purpose of Mixed Cost Analysis To predict cost at an activity level with no historical record: Total mixed cost line can be expressed as: 2N Y Total Utility Cost Fixed Cost (Intercept) Level of Activity If your fixed monthly utility charge is $40, your variable cost is $0.03 per kilowatt hour, can you predict the utility of next month when you plan to use 2,000 kilowatt hours? Y = a + bX Variable Cost per KW Fixed Monthly Utility Charge Y = $40 + ($0.03 × 2,000) Y = $100 X Activity (Kilowatt Hours) A mixed cost has both fixed and variable components. Total cost CHANGES with activity level but NOT IN PROPORTION The High-Low Method 1. Find the data with highest & lowest activity level 2. Compare high vs low point data to get the slope, b, unit VC 3. Use either high or low point data to get a, total fixed cost Assume the following hours of maintenance work and the total maintenance costs for six months. Y = a + bX • From Algebra, if we know any two points on a line, we can determine its slope. 2. Break-Even Analysis (J. Smith ~ Taxi Driver) Break Even Point is the point at which costs and sales are equal CM = fixed costs. Fixed costs (FC) Insurance Car payment Interest Dispatcher fees Variable costs (VC) Gas Maintenance & repairs neither gain nor loss $ (principal or amortization) Value of Costs or Revenue Step 2, the slope or b is determined by difference...
Words: 1150 - Pages: 5
...Miles Davis) or they can continue partner up with a VC such as Brentwood in exchange of ownership. 2. Partnership: Perlman is pressured to partner with a CE from his initial investor and from the dwindling bank account. WebTV can’t really make any profit until they have this kind of partnership, unless they decide to go an entirely new route and try to go at it alone, which is very risky because of their current financial condition and the market itself. Another partnership they are considering on doing is with a VC called Brentwood, but it was not mentioned how much of the company’s stake the VC wants with a $30-$40 million valuation range. 3. Control of Company: This is a very important term for WebTV in the company's point of view. WebTV is introducing a new product to the market where they have received positive feedback from surveys (page 4), they would want to keep as much control as they can to keep the prestige of being the first ones to have this product as well as hold the decision making power regarding their product. However, they are running out of funds and should make a compromise with other companies. For CE’s they have three possible partnerships, LSI Logic Corp where they will invest $3 million ($30 million valuation) but they will have to use LSI semiconductors, Sony where they will have to grant them the “exclusivity clause,” and with Philips that were inconclusive (page 9). Also, making a deal with a VC like...
Words: 1287 - Pages: 6
