Practice Emphasis | Professional
Affiliations | Education
Community Activities | Professional
Affiliations | Home | Links
Introduction to Venture Capital:
The Venture Capital industry pools resources
from institutional and private investors and professionally selects investments
in early-stage and growth-oriented companies prior to public offerings.
Institutional and private investors include public and private pension
funds, insurance companies, major corporate funds and high net-worth
individuals. A Venture Capital fund
may specialize in its investments by industry (biomedical, computer software,
etc.), by geography (Southern California, Southeast, New England, etc.), by size
(only over $10 million, only under $3 million, etc.), by stage of company
development (early-stage or seed capital, third round financing, pre-IPO
funding, etc.) and by any means designed to distinguish itself from its peers
both to attract its own funding and to attract companies looking for funding.
1- Stages of Typical Deal
2- Venture Capital Terms: Economics
- Company Valuation and Business Due Diligence
- Term Sheet
- Legal Due Diligence.
- Definitive Documentation.
3- Venture Capital Terms: Dividend Rights
- Valuation of Company.
- Determination of Price Per Share.
- Concept of "Fully Diluted" Common Stock Outstanding.
- Convertible Securities.
4 - Venture Capital Terms: Liquidation Preference
on Common Stock Dividends.
vs. Non-Participating Preferred.
- Venture Capital Terms: Redemption
Definition of "Liquidation":
Strategy for Investors.
by Preferred Holders.
Capital Terms: Conversion Rights
- Venture Capital Terms: Conversion
- Venture Capital Terms: Exceptions to
- Venture Capital Terms: Voting Rights
and Protective Provisions
- Venture Capital Terms: Board of
- Venture Capital Terms: Right of First
12- Venture Capital Terms: Right of First
Refusal and Co-Sale
on an "As Converted" Basis.
Outstanding Preferred vs. Series Vote.
- Actions Requiring Approval.
13- Venture Capital Terms: Registration
- ROFR Gives Investors Initial Right to Purchase Shares to be Sold by Founders.
- Co-Sale Gives Investors Ability to Sell When Company Founders Sell.
- Founders May Also Request ROFR or Co-Sale Right With Respect to Sales by Major Investors.
- Registerable Securities
- Demand Rights
- Time Period
- Dollar Amounts
- "Piggyback" Rights.
- S-3 Registrations.
- Cut-Back Provisions.
- Covenant re: Additional Registration Rights.
- Market Stand-Off.
- Venture Capital Final Documentation
- Stock Purchase Agreement.
- Representations and Warranties.
- Closing Conditions.
- Legal Opinions.
- Other Document Deliveries.
- Other Provisions.
- Registration Rights Agreement.
- Amended Certificate of Incorporation or Certificate of Determination.
- Investor's Rights Agreement.
- Voting Agreement.
- Shareholders Agreement, ROFR/Co-Sale Agreement.