Venture Capital and Private Equity Contracting

Chapter 10. The Investment Process

10.1. Introduction and Learning Objectives

Part III contains Chapters 10 to 14 and considers the structure and governance of venture capital and private equity fund investments in entrepreneurial firms. The investment process may be viewed as involving the following issues:

1. Due diligence (screening potential investee firms)
2. Selecting the stage of entrepreneurial firm development at which to invest (the various stages were indicated in Chapter 1) and industry in which to invest (e.g., biotech, computers, etc.)
3. Staging (number of financing rounds)
4. Valuation
5. Syndication (number of investors)
6. Board seats
7. Contracts between the fund and its investee firms, which includes decisions over matters that include, ...