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Venture Capital

Private equity financing provided by investors to businesses with high growth potential.

What does the future hold for Venture Capital investing in the era of crypto incentived ownership and AI leverage of human capital. How long before DAOs dominate venture capital investing?

Schema​

Investment​

With AI small teams can emerge from anywhere and operate at 1000x traditional capacity.

How will VCs change how the place their bets? What is the right size of investment?

Zero to One​

The Historical Playbook.

How is value created? captured, aggregated, wasted, shared, distributed?

  • What is valuable?
  • What processes create value?
  • What assets add leverage to those processes?
  • What type of people required? customers, employees, partners, investors?
  • How easy to prove value proposition?
  • How much prior knowledge required?

Framework​

Framework for making investment decisions

  1. Investment Thesis
  2. Valuation Method
  3. Deal (Structure) Flow

Strategy​

How the fund intends to make money for the investors. Investment strategy covers:

Golden Rule: invest in great people.

Valuation Method​

The process of determining the worth of a startup or company, used to negotiate investment terms.

Evolve a due diligence checklist for investigating a company's financial and legal status before making an investment.

  • core thesis?
  • future predictions?
  • investment strategy?

Valuation Methods

  • income-based
  • comparative
  • cost-based

DCF Analysis

This is the most popular business valuation methodology because it considers the money the company will earn in the future, even if the project isn't making a profit currently.

DCF valuation is based on a company's future cash flows, bringing them to the current time using discounting.

Deal Structure​

Who are the top performing venture capitalists? What is key to their success? Who are behind the times?

  1. Fund size
  2. Strong partnerships
  3. Clear deal structure
  4. Proof of critical path
  5. Technical domain expertise
  6. Ability to Coach mindset for growth
  7. Can advise on platforms that scale

Roles​

Angel investor: an individual who provides funding for startups in exchange for ownership equity or convertible debt.

General Partner: A GP is responsible for directing investments. They make decisions on behalf of the firm, negotiate deals, and work closely with the companies they invest in to help them grow and succeed. General Partners play a key role in raising funds from Limited Partners (LPs).

Limited Partners: LPs, are investors in venture capital funds. It is possible for LPs to allocate capital to different stages as an asset class. Common categories of LP:

  • family offices
  • pension funds
  • endowments
  • sovereign wealth funds
  • corporates

Glossary​

Common terms and their meaning.

Pitch - a presentation made by a startup to potential investors in order to secure funding.

  • Term sheet: a document outlining the terms and conditions of an investment, including the amount of funding, valuation, and ownership percentage.
  • Dilution: the reduction in ownership percentage of existing shareholders as a result of new investment.
  • Cap table: a document showing the ownership structure of a company, including the percentage of ownership held by each shareholder.
  • Burn rate: the rate at which a company is spending its capital, often used to evaluate its financial sustainability.