VENTURE INVESTMENT
KEY POINTS
· Estimating Market & Revenue
o
o Expert or Market Research Reports (Gartner etc.,)
o Comparable Companies
o Use Probabilistic modeling such as Monte Carlo Analysis
o Decision Tree analysis
o Apply Porter’s 5 forces model to review qualitatively
· Rsik Mitigation
o Use of High Discount Rates (around 50%)
o Portfolio of products ( Not all the eggs in one basket)
o Staggering of Investment
· Management of the Investment
o To be more constructive
· Anti dilution rights & drag along rights
· Exit Strategy
o GREED IS GOD
VC PROCESS
· Business Plans
· Initial Price Indication
· Term Sheet
o Basic conditions & exclusivity
· Due diligence
o Projections
o Detailed Business plans
o Pricing
o All other terms
· Documentation
o Negotiation of documents
STRUCTURING
· Equity
· Convertible Debuntures
o Rate of Interest
o Conversion period
o Basis of conversion
· Convertible preference
o Rate of Interest – Tax implications
o Conversion period
o Basis of conversion
· Equity with performance linked warrants
· Issues
o Legal
o Effect of structure on exit options
o Structuring of the fund
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