The work of venture capitalists includes: raising funds, managing funds, finding the best investment targets, negotiating and investing, managing investments to achieve their goals, and trying to satisfy their investors. In the past, venture capitalists spent about 60% of their time looking for investment opportunities, but now the proportion has dropped to 40%. Most of the other time is spent managing and monitoring the investment funds. Therefore, after getting the business plan and abstract, venture capitalists often just skim it in a very short time to decide whether it is worth spending time on this matter. There must be something that attracts him to take the time to study it carefully. So the first feeling is particularly important.
Second, the consultation between venture capitalists.
In a large venture capital company, relevant personnel will get together regularly to discuss the project proposal that has passed the preliminary examination and decide whether it is necessary to interview or reject it.
Third, the interview
If the venture capitalist is interested in the project proposed by the entrepreneur, he will contact the entrepreneur and directly understand his background, management team and enterprise. This is the most important meeting in the whole process. If it doesn't go well, the transaction will fail. If the interview is successful, the venture capitalist will want to know more about the enterprise and the market, and maybe he will mobilize other venture capitalists who may be interested in this project.
Fourth, responsibility review.
If the initial interview is successful, venture capitalists will start to check the operation of entrepreneurs and learn as much as possible about the project. They carefully evaluate the technology, market potential and scale of the target enterprise and management team through the review process, which includes contacting potential customers, consulting technical experts and holding several rounds of talks with the management team. Usually includes a visit to the company. Interview key personnel, evaluate equipment and supply and marketing channels. It may also include talking to corporate creditors, customers and former employers of relevant personnel. These people will help venture capitalists draw conclusions about the personal risks of entrepreneurs.
The evaluation of venture capital on the project is a combination of rationality and inspiration. Its rational analysis is similar to general business analysis, such as market analysis, cost accounting methods, business plan content, etc., and is basically the same as general enterprises. The difference is that inspiration occupies a certain proportion in venture capital, such as grasping technology and evaluating people.
Verb (abbreviation for verb) article list
After the review stage is completed, if the venture capitalist thinks that the applied project has a good prospect, he can start negotiations on the investment form and valuation. Usually entrepreneurs get a list of terms, summarizing the contents involved. This process may last for several months. Because the entrepreneur may not know the content of the negotiation, how much money he will pay, how many shares the venture capitalist hopes to get, who else will participate in the project, and what will happen to him and the current management team. For entrepreneurs, it takes time to study these contents and reduce the terms as much as possible.
Intransitive verbs sign contracts.
Venture capitalists try to match their investment returns with the risks they take. According to the practical plan, venture capitalists analyze the investment value in the next 3-5 years, first calculate their cash flow or income forecast, then decide the risk according to the evaluation of technology, management, skills, experience, business plan, intellectual property rights and work progress, choose the appropriate discount rate, and calculate the net present value of their venture enterprises. Investors from both sides reached the final transaction value through negotiation based on their respective evaluations of the enterprise value. Factors affecting the final transaction value include:
1, the market size of venture capital. The more funds in the venture capital market, the more urgent the demand for venture enterprises, which will lead to an increase in the value of venture enterprises. In this case, venture entrepreneurs can exchange venture capitalists' capital at a small cost.
2. Exit strategy. The market reaction to listing and M&A directly affects the value of venture enterprises. The research shows that listing and M&A are both possible exit ways, which are more conducive to improving the value of venture enterprises than simply withdrawing through M&A. ..
3. Venture universities can improve the value of venture enterprises by reducing risks and uncertainties in technology, market, strategy and finance.
4. Timing of capital market. Under normal circumstances, when the stock market is optimistic, the value of venture enterprises is also optimistic. After bargaining, the two sides entered the stage of signing an agreement and signed a contract representing the wishes and obligations of both entrepreneurs and venture capitalists. The memorandum about the contents of the contract is different on the east coast and west coast of the United States and other countries. On the west coast of the United States, the content list is a relatively complete document, while on the east coast, more formal signing procedures are needed. Once the final agreement is signed, entrepreneurs can get funds and continue to achieve the goals set in their business plans. In most agreements, there is also an exit plan, which simply summarizes how venture capitalists withdraw their funds and how to deal with the situation that budgets, major events and other goals have not been achieved.
Seven. Supervision after the investment takes effect
After the investment takes effect, venture capitalists will own shares in the venture enterprise and occupy a seat on the board of directors. Most venture capitalists play the role of consultants on the board of directors. They usually participate in several enterprises at the same time, so they have no time to play other roles. As consultants, they mainly put forward suggestions on improving business conditions to obtain more profits, help enterprises find new managers (managers), regularly contact entrepreneurs to track business progress, and regularly review financial analysis reports submitted by accounting firms. Since venture capitalists know all about the business fields they invest in, their suggestions will be of great reference value. In order to strengthen the control of enterprises, there are usually clauses in contracts that can change managers and accept mergers and acquisitions.
Eight. Other investment matters
Some venture capital companies sometimes buy shares in the form of convertible preferred shares, and have the right to expand their ownership in the company at an appropriate time, and have the priority of liquidation when the company liquidates. In order to reduce risks, venture capitalists often join hands to invest in a project, so that each venture capitalist's equity in the same enterprise is between 20% and 30%. On the one hand, it reduces risks, on the other hand, it brings more management and consulting resources to venture enterprises, provides multiple evaluation results for venture enterprises and reduces evaluation errors.
If venture enterprises are in trouble, venture capitalists may be forced to intervene or take over completely. He may have to hire other talented people to replace the original management team, or personally manage the venture enterprise.