1. 70-397 Venture Finance Fall 2002 Slide 1 Wrapping Up Section 1 Sourcing Investment Models Screening © Andrew W. Hannah

2. 70-397 Venture Finance Fall 2002 Slide 2 Agenda Assignments due tonight Question Card B The Venture Capitalist The Venture Capitalist Case Section 1: Summary Section 2: Evaluating © Andrew W. Hannah

3. 70-397 Venture Finance Fall 2002 Slide 3 The Venture Capitalist “The venture capitalist plays a role in the management of the companies receiving investment” – Is this true? Who really has control? What is most important to/from a venture capitalist? Role Power Impact What attributes make an effective venture capitalist? How dependent on the individual is this? What does this mean? Could this model work with a public company as we struggle as a financial community with governance? © Andrew W. Hannah

4. 70-397 Venture Finance Fall 2002 Slide 4 Section 1 Key Concepts Sources of funds for entrepreneurs The difference between Angels and Venture Capitalists Overview of the Investment Lifecycle: Sourcing Evaluating Valuing Structuring Negotiating Supporting Harvesting History of Venture Capital Understand statistical significance and expected value © Andrew W. Hannah

5. 70-397 Venture Finance Fall 2002 Slide 5 The Portfolio What matters… Expected return profile How do deals usually do? Are strike outs common? Are home runs? Distribution of outcomes Can you limit losses? Do home runs matter? Time spans – how long to exit Shows the importance of loss management © William C. Hulley

6. 70-397 Venture Finance Fall 2002 Slide 6 Section 1 Key Concepts (Cont.) Fund economics How funds work How VC’s get paid What VC’s do Raise, invest, harvest Sourcing Investment models Screening What’s next? © Andrew W. Hannah

7. 70-397 Venture Finance Fall 2002 Slide 7 The Entrepreneur’s Focus StageStateSource Start-upYou and an ideaYour pocket SeedYou+ and a plan, some technology Angels EarlyTeam, prototype, some proof Angels and VC’s LaterReal customersVC’s and loans © Andrew W. Hannah

8. 70-397 Venture Finance Fall 2002 Slide 8 Entrepreneurs’ Tools of the Trade The Teaser: Business overview A [four] page document that gets the the reader hooked The Deck: PowerPoint presentation Your business boiled down to 20 slides The Book: Business Plan Why this is a good investment opportunity © Andrew W. Hannah

9. 70-397 Venture Finance Fall 2002 Slide 9 Question Card B… What did you learn? What do you need to know? © Andrew W. Hannah

10. 70-397 Venture Finance Fall 2002 Slide 10 Section 2: Evaluating the Deal © Andrew W. Hannah Business Opportunity People Deal Context

11. 70-397 Venture Finance Fall 2002 Slide 11 The Harvard Model People Stakeholders The team Entrepreneur Business Opportunity Size The model Customer Timing Deal Price Structure Context The economy Technology Regulation Competition The evaluation is the great time killer: 40 +hours © Andrew W. Hannah

12. 70-397 Venture Finance Fall 2002 Slide 12 Next Week Guest Speakers Richard Pilston, CTO – PolyTronics Eric Boughner, VP Product Marketing – PolyTronics Overview of Class Project Gurus in the Garage Teams assigned WA pp 245 - 285 © Andrew W. Hannah