The video recording of this presentation can be found here: https://mospace.umsystem.edu/xmlui/handle/10355/9812This presentation introduced Expo attendees to the concept of a venture capital business model and suggested a process by which an entrepreneur might seek an investor

Clevinger, Brian

University of Missouri: MOspace

2010 Missouri Technology ExpoOctober 7, 2010UNDERSTANDING VENTURE CAPITAL BUSINESS MODEL AND WHAT WE ARE LOOKING FORP R O L O GVENTURE CAPITAL FOR L IFE SCIENCESSCIENCE-BASED CONSUMER-CENTRIC INVESTMENTSPREVENTION  |  DETECTION  |  TREATMENT VC BUSINESS MODELTo understand how VCs operate you must know three things10 year limited partnershipReturn capital to limited partnersDivide profits 80/20High risk, high return modelOut of  10 investments3 will not return investment24 will break even or return less than 2X3 must return >5XEvery investment must have a 5X potentialFew technologies/companies have 5X potentialGrowth will be too slow for 10 year investment periodExits through IPO or M&A very difficultFunding rate of about 1%VC-BACKEDIPOSINLIFESCIENCE681012IPO ExitsVC-backed life science IPOs by QuarterIPO pipeline increasingLife science IPOs resumingWill trend continue?M&A exits improving, but future uncertainSCIENCE024IPO Exits3C O N F I D E N T I A LBuyers are risk averseVC FUNDRAISINGACTIVITY15020025030020,00025,00030,00035,00040,000$MCapital Raised Number of fundsAmounts raised are lowest levels since 3Q03Funds with final close in ‘09  took 2+ years to raise capital38 VC funds raised C O N F I D E N T I A L 405010005,00010,00015,0002005 2006 2007 2008 2009 2010 (as of 2Q)$1.9B in 2Q10, a decrease of 49% compared to 1Q10DUE DILIGENCE RISK ASSESSMENTFunding process can take 6 to 9 monthsManagementtechnical and business Technicalstage of developmentIPpatents issued and applied for Venture capital review5Syndication time limiting stepMarketaddressable markets, bottom up analysis FinancialHow much, how long, how many rounds Exit comparables Close as you can and currentPROCESSCarefully prepared and presented materials are very importantVenture capital reviewPresentationsNon confidential summaryPowerpoint deck for introFull business planProcess6Introduction from trusted sourceExecutive summary Phone presentation In-person partnership presentationPrepare, execute and follow upDo your due diligence on venture fundsTalk to portfolio CEOsKnow fund size, vintage year & portfolioPractice, practice practiceFinal thoughtsCONFIDENTIAL 7A “no” is an opportunity to improveBe a pest and stay alive 

Understanding venture capital buisness model and what we are looking for

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