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Building Wealth through Venture Capital

Book Description

Venture capital demystified, for both investors and entrepreneurs

Building Wealth Through Venture Capital is a practical how-to guide for both sides of the table—investors and the entrepreneurs they fund. This expert author duo combines renowned venture capital experience along with the perspective of a traditional corporate executive and investor sold on this asset class more recently to flesh out wealth-building opportunities for both investors and entrepreneurs. Very simply, this book will guide investors in learning how to succeed at making money in venture capital investment, and it will help entrepreneurs increase their odds of success at attracting venture capital funds and then employing those funds toward a lucrative conclusion.

The authors explain why venture capital will remain the asset class best-positioned to capitalize on technological innovation in the coming years. They go on to demystify the market for those seeking guidance on reaping its rich returns. Learn what it takes to succeed as an investor or entrepreneur, and gain the wisdom of experience as the authors explain key factors that determine outcomes.

Through a relaxed, down-to-earth narrative, the authors share their own experiences as well as those of their nationally-recognized colleagues. Illustrative anecdotes and personal interviews expand upon important points, and case studies demonstrate the practical effect of critical concepts and actions. World-class professional expertise and personal experience come together to help you:

  • Understand the nature of both venture capitalists and successful entrepreneurs
  • Develop wealth-building capabilities in investing in or attracting venture capital
  • Learn how entrepreneurs and investors can work together toward a lucrative conclusion
  • Examine the ways in which recent financial regulatory developments and technological advances already in place are democratizing access to venture capital, enabling unprecedented expansion of venture capital opportunities

As the field expands through these regulatory and technological developments, savvy participants will have unprecedented opportunity to benefit. Building Wealth Through Venture Capital explains what you need to know, and shows you how to navigate this arcane but lucrative asset class.

Table of Contents

  1. Cover
  2. Title Page
  3. Preface
    1. “Fairy Tales Can Come True, It Can Happen to You…”
  4. Introduction
    1. Innovation: The Path to Wealth Creation and What Venture Capital Is All About
  5. PART I: Understanding the Major Players
    1. CHAPTER 1: The Venture Capitalist: Funder of Dreams
    2. CHAPTER 2: The Entrepreneur: His Mind and His “Cultivation”
      1. DNA of the Entrepreneur
      2. Driven by Passion
      3. Motivated by the Opportunity to Make a Positive Difference
      4. The Need to Recognize Reality: Beware the Seduction of Money and Power
      5. The Importance of Fortunate Timing
      6. Experience and Maturity Can Be Important, Too
      7. Resolute, Energetic Drive Is the Most Common Denominator
      8. They're Not Just Resolute; They Are Bold and Daring, Too
      9. Environments That Cultivate Entrepreneurs
      10. The Emergence of an Entrepreneurial Ecosystem in Chicago
      11. The Age‐Old Question: Nature or Nurture?
  6. PART II: For the Investor: A Guide to Realizing Big Returns
    1. CHAPTER 3: Why Should You Invest in Venture Capital?
      1. It Makes Sense Even for Conservative Investors
      2. A Hedge Against Inflation and Lengthy Bear Markets
      3. Hedge Funds and Private Equity Buyout Funds No Longer So Attractive
      4. Venture Capital's Strong Historical Returns
      5. Don't Invest More Than You Can Afford to Lose
      6. Substantial Institutions Love Venture Capital
      7. Emotional Reasons for Venture Capital Investment
    2. CHAPTER 4: How to Find the Right Venture Capital Firm
      1. Surveying the Landscape of Venture Capital Firms
      2. Firm Selection by Venture Stage Focus
      3. Why Should You Care About a Firm's Venture Stage Focus?
      4. Firm Selection by Industry Focus
      5. Firm Selection Based on Geographic Focus
      6. The New Online Equity Crowdfunders
      7. Other Resources for Selecting a Venture Capital Firm
      8. Vetting Venture Capital Firm Candidates
    3. CHAPTER 5: Venture Capital Investment versus “Buffett's Real Rules” of Investment
      1. “Buffett's Real Rules”
      2. How Len's Venture Capital Investment Principles Are Similar
      3. Why Venture Capital Returns Can Beat Even Warren Buffett
    4. CHAPTER 6: Avoid the Seduction of Unicorns: Get in Early
      1. It's All High Risk, So Get in Early When the Biggest Returns Are Possible
      2. Excessive Unicorn Valuations: All the Risk without the Big Reward Potential
      3. Business Valuation 101
      4. Applying Business Valuation 101 to Venture Capital Investment
      5. Try Applying That Logic to Unicorns
      6. Why Many Unicorn Valuations Don't Make Sense to Us
      7. Unicorns Having Difficulty Exiting and Delivering Investor Returns
      8. Now You Know Why We Believe in Early‐Stage Investment
      9. Our Concerns for the Venture Capital Industry and Individual Investors
    5. CHAPTER 7: Finding the Highest Quality Investments at the Right Price
      1. The AOL Story
      2. How to Manage Risk, Play the Odds, and Win in an Evolving Market
      3. What It Takes to Hit Investment Home Runs
      4. How to Find the Potential Home Runs
      5. Price Can Matter, Too, and Can Be Tricky
      6. Need to Consider Non‐monetary Costs, Too
      7. Some Pricing Advice for the Entrepreneur
  7. PART III: For the Entrepreneur: A Guide to the Money Search and All That Follows
    1. CHAPTER 8: The Mating Dance: Prospecting for a Venture Capital Investor
      1. Actually, Lots of Sources and Lots of Available Dollars
      2. How to Appeal to the Venture Capitalist
      3. Prospecting for Gold, or, Better Yet, Drilling for Oil
      4. Venture Capitalists' View of Deal Stages
      5. Targeting Your Money Search Based on VC Industry Focus
      6. How to Do All This VC Screening
      7. An Alternative: Introduction through Expert Middlemen
      8. Making Contact with the VC
      9. Other Ways of Making Contact
      10. Evolution of the Venture Capital Community: Angel Groups and Online VC Portals
      11. More on Online Venture Capital Investment Platforms
    2. CHAPTER 9: The Final Exam: Due Diligence
      1. Is Due Diligence Really That Important?
      2. A Warning to Entrepreneurs: Beware of Limited Due Diligence
      3. Return on Due Diligence Investment Tough to Quantify
      4. Make No Mistake: Due Diligence Is Important
      5. What Due Diligence Is All About
      6. The Due Diligence Process
      7. The Focus of Due Diligence Questioning
      8. Importance of Treating the VC with Respect and Sincerity
      9. Time Can Be of the Essence
      10. Some Advice for Less Experienced VCs
      11. Some Advice for Less Experienced Investors
    3. CHAPTER 10: Finding Your Deal‐Doing Lawyer
      1. So Many Types of Lawyers to Consider
      2. Why You Need a Deal‐Doing Lawyer
      3. Knowledge of the Venture Capital Process
      4. Some Realities to Consider
      5. Finding the Right Legal Counsel
      6. Speed Can Be Important
      7. Lots of Legal Consistency
      8. Build Trust, Not Litigation
      9. The Typical Process
      10. Differing Degrees of Legal Orientation
    4. CHAPTER 11: Financing Has Arrived and “You're Married”…Now What?
      1. Now You Answer to a Higher Authority—a Board of Directors
      2. Be Ready to Make Management Changes
      3. Anticipate Complications and Management Challenges
      4. The Critical Search for Talent as the Venture Evolves
      5. Executive Search Consultants: Expensive, But Can Be Worth It
      6. The Board's Role as Guardians of the Venture and the Investors' Money
      7. Board Meetings
      8. Bankers and Suppliers: Sources of Lower Cost Funds
      9. Following the Money
      10. When Crisis Management Is Required
    5. CHAPTER 12: The Last Dance: A Successful Exit
      1. What Constitutes a Successful Exit?
      2. A Range of Exit Options
      3. IPO as a Badge of Honor
      4. Remaining Private May Better Meet the Entrepreneur's Needs
      5. Going Public Can Also Mean Vulnerability to Rumors and Ruin
      6. Other Risks of Going Public
      7. Beware of Investment Bankers' Inherent Drive to Go Public
      8. Investment Bankers and Venture Capitalists Are Not the Same
      9. The Groupon Story: A Post‐IPO Nightmare
      10. Lessons Reinforced by Groupon's Story
      11. Timely Liquidation Less Risky than Betting on Volatile Public Markets
      12. There Are Exceptions: The Nanophase Technologies Story
      13. Sale to or Merger with a Complementary Business
      14. Benefits of Being Acquired: The Cleversafe Story
      15. Issues to Consider Before Selling the Baby
      16. Truly “All's Well that Ends Well”
    6. CHAPTER 13: Interview with a Successful Entrepreneur
  8. PART IV: Looking Ahead: What’s to Come
    1. CHAPTER 14: The Foreseeable Future
      1. The Case for Even Greater Innovation and Venture Capital Opportunity
      2. Technology Advancement—and Investment—Opportunities
      3. Artificial Intelligence: Computers Becoming Even More Integral to Our Lives
      4. Will the Computer Be Wise?
      5. Big Data and Predictive Analytics: The Why of Everything
      6. Biology as a Computer
      7. Nanotechnology: The Domain of the Very Small
      8. Robotics: Machines Come to Life
      9. Virtual Reality: The Unreal Simulating the Real
      10. The Internet and the Coming “Third Wave”
      11. Biomedical Advances through Information Flow
  9. Acknowledgments
  10. About the Authors
  11. Index
  12. End User License Agreement