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From Concept to Wall Street: A Complete Guide to Entrepreneurship and Venture Capital

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From Concept to Wall Street: A Complete Guide to Entrepreneurship and Venture Capital

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Description

  • Copyright 2003
  • Dimensions: 7 X 9-1/4
  • Pages: 328
  • Edition: 1st
  • Book
  • ISBN-10: 0-13-034803-1
  • ISBN-13: 978-0-13-034803-6
  • eBook (Watermarked)
  • ISBN-10: 0-13-148029-4
  • ISBN-13: 978-0-13-148029-2

From Concept to Wall Street is the definitive guide to the new realities of venture capital. Two leading experts in venture-backed entrepreneurship offer start-to-finish coverage of the entire process: planning, teambuilding, protecting intellectual property, identifying and negotiating funding, and managing to - and through - IPOs or M+As. Drawing on immense personal experience - and the lessons of recent years - Dr. Oren Fuerst and Dr. Uri Geiger offer a complete roadmap for entrepreneurs, investors, and advisors in every VC-funded industry.

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Table of Contents



Foreword.


Preface.


Acknowledgments.


About the Authors.


1. Introduction.

Book Structure . Glossary.

I. ESTABLISHMENT AND DEVELOPMENT OF VENTURES.

2. Beginnings—Establishing a Venture.

The Price of Success and Failure. The Idea. The Management Team. External Advisors. Incorporation. Incorporation in Delaware.

3. Financial and Business Planning.

The Company's Business Cycle. Financial Statements. Financial Projections. Cost Structure Analysis and Forecasting. Cash Flow Forecasting. Market Analysis and Strategic Planning. Strategic Alliances. The Business Plan.

4. Employee Recruitment and Compensation.

Employee Recruiting. Employee Compensation in the Technology Segments. Granting Options to Employees. Taxation of Stock Options. Performance-based Compensation. Incentives to Tie Employees to the Company. Considerations in Employment Termination.

5. Intangible Capital and Intellectual Property.

Patents. Copyright Law. Trademark Law. Trade Secrets. Issues with Employees. NDA-Non-Disclosure Agreements. Considerations in the Granting of Licenses.

II. FINANCING THE VENTURE.

6. Milestones and Sources of Financing the Venture.

Financing in Stages. Milestones in Venture Development. Scope of Financing and the Company's Value. Stages in Raising Venture Capital. Sources of Capital.

7. Practical Aspects of Raising Venture Capital.

Basic Terms. Deciding How Much Capital to Raise. Valuing the Company for the Purpose of Raising Capital/Determining According to Which Value Capital Will be Raised. The Process of Raising Venture Capital.

8. Legal and Contractual Aspects of Raising Venture Capital.

Legal Restrictions on Raising Private Capital.

9. Valuation of Companies.

Methods Based on Multiples. Methods for Discounting Cash Flows and Residual Income. The Real Options Method. Value to Investors or Strategic Investors and Buyers. The Discount Rate Used by Venture Capital Funds. Issuing Stock to Investors. The Venture Capital Method. Appendix-Basic Terms in Measurement.

III. VENTURE CAPITAL INVESTORS.

10. Venture Capital Funds.

Private Equity Funds and Venture Capital Funds. Venture Capital Investment Characteristics. Venture Capital Funds and Their Investors. Venture Capital Funds and Their Portfolios. The Added Value of Venture Capital Funds. The Development of the Venture Capital Industry in the United States. The Venture Capital Industry at the Dawn of the Third Millennium. The Structure and Activities of Venture Capital Funds. Exit Strategies of Investments by Venture Capital Funds. The Return on Venture Capital Funds.

11. Other Venture Capital Investors.

Private Investors (Angels). Corporate and Other Investors. Financial Institutions Which Invest Directly in Funds. Other Sources of Capital.

IV. RAISING CAPITAL FROM THE PUBLIC.

12. Raising Capital from the Public-Introduction.

Deciding to Go Public. Preparing the Company for an IPO.

13. The Public Offering Process.

Stock Markets in the United States. Forming the IPO Team. The Process. The Underwriting Agreement. The Registration Statement. Liability under U.S. Securities Laws. Changes in the Registration Process. Following the IPO. Selling Shares That Are Exempt from Registration. Foreign Companies Raising Capital.

V. MERGERS AND ACQUISITIONS, BANKRUPTCIES, AND DISSOLUTION.

14. Mergers and Acquisitions (M&A)-Introduction.

The Scope of the Phenomenon. Types of Corporate Restructuring. Strategic Classification. Why Do Mergers and Acquisitions Occur? Do Mergers and Acquisitions Create Value? Sales and Mergers Versus IPOs. Case Study-The Sale of Chromatis to Lucent.

15. Conducting the M&A Transaction.

Mergers. Sale and Acquisition of Assets. M&A Strategy. The Consideration in Mergers and Acquisitions. The Process. Tender Offers.

16. Additional Legal Aspects.

Legal Rules Governing Mergers and Acquisitions. Merger or Acquisition Agreements. Antitrust Issues. Fairness Opinions.

17. Other Restructuring.

Other Types of Restructuring: Spin-offs, Split-offs, Carve-outs, and Letter Stocks. Equity Carve-outs (Spin-out IPOs). Letter Stocks/Targeted Stocks. The Rationale of Separate Listing of Units.

18. Bankruptcy and Dissolution of Companies.

Legal Rules Governing Bankruptcy and Dissolution in the United States. Additional Issues Concerning Bankruptcy of Startup Companies.

Glossary.
Further Readings.
Index.

Preface

Preface

Over the past decade, thousands of new ventures were established every year around the world, and tens of billions of dollars were invested by venture capitalists. Technological vision, an entrepreneurial spirit, and success stories of other entrepreneurs and investors have led many talented people to get involved in the technology-intensive, or high tech, industry as entrepreneurs, investors, or consultants. The far-reaching changes experienced by the global economy, and in particular, the introduction of the PC and the Internet, have dramatically accelerated the pace of development of new ventures, and their number. Furthermore, during the second half of the 1990s, the technological changes and vast resources invested in many high tech ventures, in both the private and public markets, have caused many to believe that the ratio of risk to return was never as low as during that period.

The unprecedented prosperity of the U.S. stock markets in the 1990s led to enormous financial investments in venture capital and in promising startup companies around the world. Such a volume of funds, unmatched in human history, supported thousands of new and existing ventures every year.

The severe economic crisis that befell the capital markets and started in the year 2000 symbolized, for many, the end of an era in capital markets and entrepreneurship. For us, this was an expected awakening after several years of euphoria in the market. We are confident the high tech industry will continue to supply the global economy with developments that will streamline business systems, decrease production costs, and improve the quality of life of citizens worldwide.

Despite the substantial slowdown in the capital market, technological changes have not come to a halt, and companies are being established, developed, and have raised capital. Technological progress is visible everywhere in fields such as communications, electronics, hardware, software, information technologies, biotechnology, genomics, and medical devices.

From Concept to Wall Street was written to fulfill the need for a central source of information for entrepreneurs, investors, consultants, employees, and anyone involved or interested in entrepreneurship and the venture capital industry.

In this book we combine our practical and academic experience, with the experience of leading experts in their respective fields, to communicate a mass of material in a manner that is as coherent and straightforward as possible, without sacrificing depth.

The book describes the lifecycle of the venture, from its establishment, though its various capital raising activities and its venture development process, including strategy formulation, business planning, and implementation, up to the IPO or acquisition by another company. The book addresses all the material aspects, theoretical and practical, of venture capital investment, venture creation and development, through the eventual investment realization.

The focus is on venture capital-backed companies (independent or part of larger organizations) and issues pertaining to their value maximization. At the same time, the book details the types of investors in those companies—their nature, method of operation, and the manner by which they are organized.

In the past few years, the venture capital process has changed dramatically, first with the dot.com explosion, again with the dot.com collapse, following by the collapse of the tech sector. These changes have underlined the importance of deep understanding of the venture process in order to guarantee the construction of economically solid entrepreneurial companies, leading to the successful fund raising for these firms, to their rapid and sustainable growth, and finally the success for their investors.

From Concept to Wall Street is the first book on venture capital and entrepreneurship to reflect these radical transformations and their impact on venture creation and development. Leveraging our experience and benefiting from the insights of countless experts, this book covers all you need to know to succeed in this industry-whatever your sector and whatever your role.

Dr. Oren Fuerst Dr. Uri Geiger
New York, July 2002

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