Sunday, July 30, 2006

Venture Capital FAQ Series

Over the next few months, I would like to give my perspective on the following topics related to the Venture Capital (VC) and Private Equity (PE) industries. To the uninitiated, this asset class can be somewhat confusing. It's good to dig in and fully understand the business of Venture Capital and some of the things that motivates VC partners and drives their behavior. I will touch on aspects that will hopefully be of interest to both entrepreneurs and investors alike. Much has already been written about these topics, and I do not intend to reproduce all of that here. Instead, I will just add some of my color commentary, for what it's worth.

Please leave a comment below if you'd like me to consider others. I will try to cover one topic per week.

  1. My experience with the Venture Capital and Private Equity industries

  2. VC Firms and VC-funded Startups: Not So Different!

  3. What is an Entrepreneur in Residence (EIR)?

  4. What is the difference between Venture Capital and Private Equity?

  5. What does the future hold for Venture Capital as an Asset Class?

  6. What is a Limited Partner?

  7. What is a Private Placement Memorandum (PPM)?

  8. Do VC's only buy Preferred Shares?

  9. What is the VC's Business Model? How does the VC firm make money? How are the individual partners compensated?

  10. How big is the Venture Capital industry?

  11. What are some good Venture Capital related sites?

  12. How does an Angel investor differ from a VC investor?

  13. What are Warrants? Am I under arrest?

  14. What's the difference between a Seed and a Bridge?

  15. Should I take VC money or bootstrap my business?

  16. What is a Fund of Funds?

  17. What is a Venture Partner?

  18. What is the difference between General Partner, Partner, Director, Managing Director, Principal, and SVP/VP titles?

  19. Is a Seed investment different than a Series A investment?

  20. What is a Term Sheet?

  21. What does Participating Preferred mean?

  22. What is a Liquidation Preference?

  23. What is Internal Rate of Return (IRR)? Does it matter?

  24. What is Net Asset Value (NAV)?

  25. What is the downside risk of being a Partner at a VC firm?

  26. Why do some VC's like to syndicate a deal and others don't?

  27. What's the difference between a fund-based VC and a budget-based VC?

  28. How do corporate VC's differ from traditional VC's?

  29. Is Venture Capital really a hits business?

  30. What is a tranche, why are they done, and should I be worried about accepting such terms?

  31. What is a Leveraged Buyout (LBO)?

  32. What is "Pay To Play"?

  33. All Money is Green, Right?

Note: I do not intend to address these topics in this order. Nor do I expect to cover every topic. Some topics are big enough to require multiple posts. Let me know what you would like to hear about and I'll factor that into what I choose to write about this week. Also, please send your ideas and thoughts on these topics to as I work on a number of these in parallel.

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  1. [...] Check out my Venture Capital FAQ Series for more random babbling from me. [...]

  2. [...] VCs are wrong more often than they are right. I’m working on a post about that for my Venture Capital FAQ Series of articles. The business model of the asset class allows for that. So, I don’t think that you should latch on to one of these ideas and build a plan around it. Instead, you need to be true to yourself and your particular skills/knowledge. Your company needs to be your idea. You need to have the passion. You need to have a deep understanding of the market you are entering. You need to understand the technology, markets, distribution channels, competitive forces, key people, etc. Don’t chase someone else’s idea of what is going to be big. Chase your own. [...]

  3. [...] An Entrepreneur in Residence, Part 1 Published August 25, 2006 Venture Capital 4 Comments This post is part of my Venture Capital FAQ Series. [...]

  4. [...] write about some of my experiences with the Venture Capital and Private Equity industries. See my Venture Capital FAQ Series for a list of possible topics (and leave a comment if you want to see something else). So, what [...]


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