Venture capital (VC) is financial capital provided to early-stage, high-potential, high risk, growth startup companies. The venture capital fund makes money by owning equity in the companies it invests in, which usually have a novel technology or business model in high technology industries, such as biotechnology, IT, software, etc. The typical venture capital investment occurs after the seed funding round as growth funding round (also referred as Series A round) in the interest of generating a return through an eventual realization event, such as an IPO or trade sale of the company. Venture capital is a subset of private equity. Therefore all venture capital is private equity, but not all private equity is venture capital.

In addition to angel investing and other seed funding options, venture capital is attractive for new companies with limited operating history that are too small to raise capital in the public markets and have not reached the point where they are able to secure a bank loan or complete a debt offering. In exchange for the high risk that venture capitalists assume by investing in smaller and less mature companies, venture capitalists usually get significant control over company decisions, in addition to a significant portion of the company's ownership (and consequently value).

Venture capital is also associated with job creation (accounting for 21% of US GDP), the knowledge economy, and used as a proxy measure of innovation within an economic sector or geography. Every year there are nearly 2 million businesses created in the USA, and only 600-800 get venture capital funding. According to the National Venture Capital Association 11% of private sector jobs come from venture backed companies and venture backed revenue accounts for 21% of US GDP.

History

A venture may be defined as a project prospective of converted into a process with an adequate assumed risk and investment With few exceptions, private equity in the first half of the 20th century was the domain of wealthy individuals and families. The Vanderbilts, Whitneys, Rockefellers, and Warburgs were notable investors in private companies in the first half of the century. In 1938, Laurance S. Rockefeller helped finance the creation of both Eastern Air Lines and Douglas Aircraft and the Rockefeller family had vast holdings in a variety of companies. Eric M. Warburg founded E.M. Warburg & Co. in 1938, which would ultimately become Warburg Pincus, with investments in both leveraged buyouts and venture capital.

Origins of modern private equity

Before World War II, money orders (originally known as "development capital") were primarily the domain of wealthy individuals and families. It was not until after World War II that what is considered today to be true private equity investments began to emerge marked by the founding of the first two venture capital firms in 1946: American Research and Development Corporation. (ARDC) and J.H. Whitney & Company.

ARDC was founded by Georges Doriot, the "father of venture capitalism" (former dean of Harvard Business School and founder of INSEAD), with Ralph Flanders and Karl Compton (former president of MIT), to encourage private sector investments in businesses run by soldiers who were returning from World War II. ARDC's significance was primarily that it was the first institutional private equity investment firm that raised capital from sources other than wealthy families although it had several notable investment successes as well. ARDC is credited with the first trick when its 1957 investment of $70,000 in Digital Equipment Corporation (DEC) would be valued at over $355 million after the company's initial public offering in 1968 (representing a return of over 1200 times on its investment and an annualized rate of return of 101%).

Former employees of ARDC went on and established several prominent venture capital firms including Greylock Partners (founded in 1965 by Charlie Waite and Bill Elfers) and Morgan, Holland Ventures, the predecessor of Flagship Ventures (founded in 1982 by James Morgan). ARDC continued investing until 1971 with the retirement of Doriot. In 1972, Doriot merged ARDC with Textron after having invested in over 150 companies.

J.H. Whitney & Company was founded by John Hay Whitney and his partner Benno Schmidt. Whitney had been investing since the 1930s, founding Pioneer Pictures in 1933 and acquiring a 15% interest in Technicolor Corporation with his cousin Cornelius Vanderbilt Whitney. By far Whitney's most famous investment was in Florida Foods Corporation. The company developed an innovative method for delivering nutrition to American soldiers, which later came to be known as Minute Maid orange juice and was sold to The Coca-Cola Company in 1960. J.H. Whitney & Company continues to make investments in leveraged buyout transactions and raised $750 million for its sixth institutional private equity fund in 2005.

Early venture capital and the growth of Silicon Valley

One of the first steps toward a professionally-managed venture capital industry was the passage of the Small Business Investment Act of 1958. The 1958 Act officially allowed the U.S. Small Business Administration (SBA) to license private "Small Business Investment Companies" (SBICs) to help the financing and management of the small entrepreneurial businesses in the United States.

During the 1960s and 1970s, venture capital firms focused their investment activity primarily on starting and expanding companies. More often than not, these companies were exploiting breakthroughs in electronic, medical, or data-processing technology. As a result, venture capital came to be almost synonymous with technology finance. An early West Coast venture capital company was Draper and Johnson Investment Company, formed in 1962 by William Henry Draper III and Franklin P. Johnson, Jr. In 1962 Bill Draper and Paul Wythes founded Sutter Hill Ventures, and Pitch Johnson formed Asset Management Company.

It is commonly noted that the first venture-backed startup is Fairchild Semiconductor (which produced the first commercially practical integrated circuit), funded in 1959 by what would later become Venrock Associates. Venrock was founded in 1969 by Laurance S. Rockefeller, the fourth of John D. Rockefeller's six children as a way to allow other Rockefeller children to develop exposure to venture capital investments.

It was also in the 1960s that the common form of private equity fund, still in use today, emerged. Private equity firms organized limited partnerships to hold investments in which the investment professionals served as general partner and the investors, who were passive limited partners, put up the capital. The compensation structure, still in use today, also emerged with limited partners paying an annual management fee of 1-2.5% and a carried interest typically representing up to 20% of the profits of the partnership.

The growth of the venture capital industry was fueled by the emergence of the independent investment firms on Sand Hill Road, beginning with Kleiner, Perkins, Caufield & Byers and Sequoia Capital in 1972. Located, in Menlo Park, CA, Kleiner Perkins, Sequoia and later venture capital firms would have access to the many semiconductor companies based in the Santa Clara Valley as well as early computer firms using their devices and programming and service companies.

Throughout the 1970s, a group of private equity firms, focused primarily on venture capital investments, would be founded that would become the model for later leveraged buyout and venture capital investment firms. In 1973, with the number of new venture capital firms increasing, leading venture capitalists formed the National Venture Capital Association (NVCA). The NVCA was to serve as the industry trade group for the venture capital industry. Venture capital firms suffered a temporary downturn in 1974, when the stock market crashed and investors were naturally wary of this new kind of investment fund.

It was not until 1978 that venture capital experienced its first major fundraising year, as the industry raised approximately $750 million. With the passage of the Employee Retirement Income Security Act (ERISA) in 1974, corporate pension funds were prohibited from holding certain risky investments including many investments in privately held companies. In 1978, the US Labor Department relaxed certain of the ERISA restrictions, under the "prudent man rule," thus allowing corporate pension funds to invest in the asset class and providing a major source of capital available to venture capitalists.

1980s

The public successes of the venture capital industry in the 1970s and early 1980s (e.g., Digital Equipment Corporation, Apple Inc., Genentech) gave rise to a major proliferation of venture capital investment firms. From just a few dozen firms at the start of the decade, there were over 650 firms by the end of the 1980s, each searching for the next major "home run". While the number of firms multiplied, the capital managed by these firms increased by only 11% from $28 billion to $31 billion over the course of the decade.

The growth of the industry was hampered by sharply declining returns and certain venture firms began posting losses for the first time. In addition to the increased competition among firms, several other factors impacted returns. The market for initial public offerings cooled in the mid-1980s before collapsing after the stock market crash in 1987 and foreign corporations, particularly from Japan and Korea, flooded early stage companies with capital.

In response to the changing conditions, corporations that had sponsored in-house venture investment arms, including General Electric and Paine Webber either sold off or closed these venture capital units. Additionally, venture capital units within Chemical Bank and Continental Illinois National Bank, among others, began shifting their focus from funding early stage companies toward investments in more mature companies. Even industry founders J.H. Whitney & Company and Warburg Pincus began to transition toward leveraged buyouts and growth capital investments.

The venture capital boom and the Internet Bubble (1995 to 2000)

By the end of the 1980s, venture capital returns were relatively low, particularly in comparison with their emerging leveraged buyout cousins, due in part to the competition for hot startups, excess supply of IPOs and the inexperience of many venture capital fund managers. Growth in the venture capital industry remained limited throughout the 1980s and the first half of the 1990s increasing from $3 billion in 1983 to just over $4 billion more than a decade later in 1994.

After a shakeout of venture capital managers, the more successful firms retrenched, focusing increasingly on improving operations at their portfolio companies rather than continuously making new investments. Results would begin to turn very attractive, successful and would ultimately generate the venture capital boom of the 1990s. Yale School of Management Professor Andrew Metrick refers to these first 15 years of the modern venture capital industry beginning in 1980 as the "pre-boom period" in anticipation of the boom that would begin in 1995 and last through the bursting of the Internet bubble in 2000.

The late 1990s were a boom time for venture capital, as firms on Sand Hill Road in Menlo Park and Silicon Valley benefited from a huge surge of interest in the nascent Internet and other computer technologies. Initial public offerings of stock for technology and other growth companies were in abundance and venture firms were reaping large returns.

The private equity crash (2000 to 2003)

The Nasdaq crash and technology slump that started in March 2000 shook virtually the entire venture capital industry as valuations for startup technology companies collapsed. Over the next two years, many venture firms had been forced to write-off large proportions of their investments and many funds were significantly "under water" (the values of the fund's investments were below the amount of capital invested). Venture capital investors sought to reduce size of commitments they had made to venture capital funds and in numerous instances, investors sought to unload existing commitments for cents on the dollar in the secondary market. By mid-2003, the venture capital industry had shriveled to about half its 2001 capacity. Nevertheless, PricewaterhouseCoopers' MoneyTree Survey shows that total venture capital investments held steady at 2003 levels through the second quarter of 2005.

Although the post-boom years represent just a small fraction of the peak levels of venture investment reached in 2000, they still represent an increase over the levels of investment from 1980 through 1995. As a percentage of GDP, venture investment was 0.058% in 1994, peaked at 1.087% (nearly 19 times the 1994 level) in 2000 and ranged from 0.164% to 0.182 % in 2003 and 2004. The revival of an Internet-driven environment in 2004 through 2007 helped to revive the venture capital environment. However, as a percentage of the overall private equity market, venture capital has still not reached its mid-1990s level, let alone its peak in 2000.

Venture capital funds, which were responsible for much of the fundraising volume in 2000 (the height of the dot-com bubble), raised only $25.1 billion in 2006, a 2% decline from 2005 and a significant decline from its peak.

Funding

Venture capitalists are typically very selective in deciding what to invest in; as a rule of thumb, a fund may invest in one in four hundred opportunities presented to it , looking for the extremely rare, yet sought after, qualities, such as innovative technology, potential for rapid growth, a well-developed business model, and an impressive management team. Of these qualities, funds are most interested in ventures with exceptionally high growth potential, as only such opportunities are likely capable of providing the financial returns and successful exit event within the required timeframe (typically 3–7 years) that venture capitalists expect.

Because investments are illiquid and require the extended timeframe to harvest, venture capitalists are expected to carry out detailed due diligence prior to investment. Venture capitalists also are expected to nurture the companies in which they invest, in order to increase the likelihood of reaching an IPO stage when valuations are favourable. Venture capitalists typically assist at four stages in the company's development:

Idea generation;

Start-up;

Ramp up; and

Exit

Because there are no public exchanges listing their securities, private companies meet venture capital firms and other private equity investors in several ways, including warm referrals from the investors' trusted sources and other business contacts; investor conferences and symposia; and summits where companies pitch directly to investor groups in face-to-face meetings, including a variant known as "Speed Venturing", which is akin to speed-dating for capital, where the investor decides within 10 minutes whether s/he wants a follow-up meeting. In addition there are some new private online networks that are emerging to provide additional opportunities to meet investors.

This need for high returns makes venture funding an expensive capital source for companies, and most suitable for businesses having large up-front capital requirements which cannot be financed by cheaper alternatives such as debt. That is most commonly the case for intangible assets such as software, and other intellectual property, whose value is unproven. In turn this explains why venture capital is most prevalent in the fast-growing technology and life sciences or biotechnology fields.

If a company does have the qualities venture capitalists seek including a solid business plan, a good management team, investment and passion from the founders, a good potential to exit the investment before the end of their funding cycle, and target minimum returns in excess of 40% per year, it will find it easier to raise venture capital.

Financing stages

There are typically six stages of venture round financing offered in Venture Capital, that roughly correspond to these stages of a company's development.

Seed Money: Low level financing needed to prove a new idea, often provided by angel investors. Crowd funding is also emerging as an option for see funding.

Start-up: Early stage firms that need funding for expenses associated with marketing and product development

First-Round (Series A round): Early sales and manufacturing funds

Second-Round: Working capital for early stage companies that are selling product, but not yet turning a profit

Third-Round: Also called Mezzanine financing, this is expansion money for a newly profitable company

Fourth-Round: Also called bridge financing, 4th round is intended to finance the "going public" process

Between the first round and the fourth round, venture-backed companies may also seek to take venture debt.

Venture capital firms and funds

Venture capitalists

A venture capitalist (also known as a VC) is a person or investment firm that makes venture investments, and these venture capitalists are expected to bring managerial and technical expertise as well as capital to their investments. A venture capital fund refers to a pooled investment vehicle (often an LP or LLC) that primarily invests the financial capital of third-party investors in enterprises that are too risky for the standard capital markets or bank loans. Venture capital firms typically comprise small teams with technology backgrounds (scientists, researchers) or those with business training or deep industry experience.

A core skill within VC is the ability to identify novel technologies that have the potential to generate high commercial returns at an early stage. By definition, VCs also take a role in managing entrepreneurial companies at an early stage, thus adding skills as well as capital (thereby differentiating VC from buy-out private equity, which typically invest in companies with proven revenue), and thereby potentially realizing much higher rates of returns. Inherent in realizing abnormally high rates of returns is the risk of losing all of one's investment in a given startup company. As a consequence, most venture capital investments are done in a pool format, where several investors combine their investments into one large fund that invests in many different startup companies. By investing in the pool format, the investors are spreading out their risk to many different investments versus taking the chance of putting all of their money in one start up firm.

Structure

Venture capital firms are typically structured as partnerships, the general partners of which serve as the managers of the firm and will serve as investment advisors to the venture capital funds raised. Venture capital firms in the United States may also be structured as limited liability companies, in which case the firm's managers are known as managing members. Investors in venture capital funds are known as limited partners. This constituency comprises both high net worth individuals and institutions with large amounts of available capital, such as state and private pension funds, university financial endowments, foundations, insurance companies, and pooled investment vehicles, called fund of fund.

Types

Venture Capitalist firms differ in their approaches. There are multiple factors and each firm is different.

Some of the factors that influence VC decisions include:

Business situation: Some VCs tend to invest in new ideas, or fledgling companies. Others prefer investing in established companies that need support to go public or grow.

Others invest solely in certain industries. Others prefer operating locally while others will operate nationwide.

Company expectations often vary. Some may want a quicker public sale of the company, or expect fast growth. The amount of help a VC provides can vary from one firm to the next.

Roles

Within the venture capital industry, the general partners and other investment professionals of the venture capital firm are often referred to as "venture capitalists" or "VCs". Typical career backgrounds vary, but broadly speaking venture capitalists come from either an operational or a finance background. Venture capitalists with an operational background tend to be former founders or executives of companies similar to those which the partnership finances or will have served as management consultants. Venture capitalists with finance backgrounds tend to have investment banking or other corporate finance experience.

Although the titles are not entirely uniform from firm to firm, other positions at venture capital firms include:

Venture partners – Venture partners are expected to source potential investment opportunities ("bring in deals") and typically are compensated only for those deals with which they are involved.

Principal – This is a mid-level investment professional position, and often considered a "partner-track" position. Principals will have been promoted from a senior associate position or who have commensurate experience in another field such as investment banking or management consulting.

Associate – This is typically the most junior apprentice position within a venture capital firm. After a few successful years, an associate may move up to the "senior associate" position and potentially principal and beyond. Associates will often have worked for 1–2 years in another field such as investment banking or management consulting.

Entrepreneur-in-residence (EIR) – EIRs are experts in a particular domain and perform due diligence on potential deals. EIRs are engaged by venture capital firms temporarily (six to 18 months) and are expected to develop and pitch startup ideas to their host firm (although neither party is bound to work with each other). Some EIR's move on to executive positions within a portfolio company.

Structure of the funds

Most venture capital funds have a fixed life of 10 years, with the possibility of a few years of extensions to allow for private companies still seeking liquidity. The investing cycle for most funds is generally three to five years, after which the focus is managing and making follow-on investments in an existing portfolio. This model was pioneered by successful funds in Silicon Valley through the 1980s to invest in technological trends broadly but only during their period of ascendance, and to cut exposure to management and marketing risks of any individual firm or its product.

In such a fund, the investors have a fixed commitment to the fund that is initially unfunded and subsequently "called down" by the venture capital fund over time as the fund makes its investments. There are substantial penalties for a Limited Partner (or investor) that fails to participate in a capital call.

It can take anywhere from a month or so to several years for venture capitalists to raise money from limited partners for their fund. At the time when all of the money has been raised, the fund is said to be closed and the 10 year lifetime begins. Some funds have partial closes when one half (or some other amount) of the fund has been raised. "Vintage year" generally refers to the year in which the fund was closed and may serve as a means to stratify VC funds for comparison. This free database of venture capital funds shows the difference between a venture capital fund management company and the venture capital funds managed by them.

Compensation

Venture capitalists are compensated through a combination of management fees and carried interest (often referred to as a "two and 20" arrangement):

Management fees – an annual payment made by the investors in the fund to the fund's manager to pay for the private equity firm's investment operations. In a typical venture capital fund, the general partners receive an annual management fee equal to up to 2% of the committed capital.

Carried interest – a share of the profits of the fund (typically 20%), paid to the private equity fund’s management company as a performance incentive. The remaining 80% of the profits are paid to the fund's investors Strong Limited Partner interest in top-tier venture firms has led to a general trend toward terms more favorable to the venture partnership, and certain groups are able to command carried interest of 25-30% on their funds.

Because a fund may run out of capital prior to the end of its life, larger venture capital firms usually have several overlapping funds at the same time; this lets the larger firm keep specialists in all stages of the development of firms almost constantly engaged. Smaller firms tend to thrive or fail with their initial industry contacts; by the time the fund cashes out, an entirely-new generation of technologies and people is ascending, whom the general partners may not know well, and so it is prudent to reassess and shift industries or personnel rather than attempt to simply invest more in the industry or people the partners already know.

Main alternatives to venture capital

Because of the strict requirements venture capitalists have for potential investments, many entrepreneurs seek seed funding from angel investors, who may be more willing to invest in highly speculative opportunities, or may have a prior relationship with the entrepreneur.

Furthermore, many venture capital firms will only seriously evaluate an investment in a start-up company otherwise unknown to them if the company can prove at least some of its claims about the technology and/or market potential for its product or services. To achieve this, or even just to avoid the dilutive effects of receiving funding before such claims are proven, many start-ups seek to self-finance sweat equity until they reach a point where they can credibly approach outside capital providers such as venture capitalists or angel investors. This practice is called "bootstrapping".

There has been some debate since the dot com boom that a "funding gap" has developed between the friends and family investments typically in the $0 to $250,000 range and the amounts that most Venture Capital Funds prefer to invest between $1 to $2M. This funding gap may be accentuated by the fact that some successful Venture Capital funds have been drawn to raise ever-larger funds, requiring them to search for correspondingly larger investment opportunities. This 'gap' is often filled by sweat equity and seed funding via angel investors as well as equity investment companies who specialize in investments in startup companies from the range of $250,000 to $1M. The National Venture Capital Association estimates that the latter now invest more than $30 billion a year in the USA in contrast to the $20 billion a year invested by organized Venture Capital funds.

Crowd funding is emerging as an alternative to traditional venture capital. Crowd funding is an approach to raising the capital required for a new project or enterprise by appealing to large numbers of ordinary people for small donations. While such an approach has long precedents in the sphere of charity, it is receiving renewed attention from entrepreneurs such as independent film makers, now that social media and online communities make it possible to reach out to a group of potentially interested supporters at very low cost. Some crowd funding models are also being applied for startup funding, for example, Grow VC. One reason develop is the problems of the traditional VC model. The traditional VC are shifting their focus to later face investments and ROI of many VC funds have been low or negative.

In industries where assets can be securitized effectively because they reliably generate future revenue streams or have a good potential for resale in case of foreclosure, businesses may more cheaply be able to raise debt to finance their growth. Good examples would include asset-intensive extractive industries such as mining, or manufacturing industries. Offshore funding is provided via specialist venture capital trusts which seek to utilise securitization in structuring hybrid multi market transactions via an SPV (special purpose vehicle): a corporate entity that is designed solely for the purpose of the financing.

In addition to traditional venture capital and angel networks, groups have emerged which allow groups of small investors or entrepreneurs themselves to compete in a privatized business plan competition where the group itself serves as the investor through a democratic process.

Law firms are also increasingly acting as an intermediary between clients that seek venture capital and the firms that provide it.

Geographical differences

Venture capital, as an industry, originated in the United States and American firms have traditionally been the largest participants in venture deals and the bulk of venture capital has been deployed in American companies. However, increasingly, non-US venture investment is growing and the number and size of non-US venture capitalists have been expanding.

Venture capital has been used as a tool for economic development in a variety of developing regions. In many of these regions, with less developed financial sectors, venture capital plays a role in facilitating access to finance for small and medium enterprises (SMEs), which in most cases would not qualify for receiving bank loans.

In the year of 2008, while the Venture Capital fundings are still majorly dominated by U.S. (USD 28.8 B invested in over 2550 deals in 2008), compared to International fund investments (USD 13.4 B invested in everywhere else), there have been an average 5% growth in the Venture capital deals outside of the U.S- mainly in China, Europe and Israel. Geographical differences can be significant. For instance, in the U.K., 4% of British investment goes to venture capital, compared to about 33% in the U.S.

United States

Venture capitalists invested some $6.6 billion in 797 deals in U.S. during the third quarter of 2006, according to the MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association based on data by Thomson Financial. A National Venture Capital Association survey found that a majority (69%) of venture capitalists predicted that venture investments in the U.S. would have leveled between $20–29 billion in 2007.

Canada

Canadian technology companies have attracted interest from the global venture capital community as a result, in part, of generous tax incentive through the Scientific Research and Experimental Development (SR&ED) investment tax credit program. The basic incentive available to any Canadian corporation performing R&D is a refundable tax credit that is equal to 20% of "qualifying" R&D expenditures (labour, material, R&D contracts, and R&D equipment). An enhanced 35% refundable tax credit of available to certain (i.e. small) Canadian-controlled private corporations (CCPCs). Because the CCPC rules require a minimum of 50% Canadian ownership in the company performing R&D, foreign investors who would like to benefit from the larger 35% tax credit must accept minority position in the company - which might not be desirable. The SR&ED program does not restrict the export of any technology or intellectual property that may have been developed with the benefit of SR&ED tax incentives.

Canada also has a fairly unique form of venture capital generation in its Labour Sponsored Venture Capital Corporations (LSVCC). These funds, also known as Retail Venture Capital or Labour Sponsored Investment Funds (LSIF), are generally sponsored by labor unions and offer tax breaks from government to encourage retail investors to purchase the funds. Generally, these Retail Venture Capital funds only invest in companies where the majority of employees are in Canada. However, innovative structures have been developed to permit LSVCCs to direct in Canadian subsidiaries of corporations incorporated in jurisdictions outside of Canada.

Europe

Europe has a large and growing number of active venture firms. Capital raised in the region in 2005, including buy-out funds, exceeded €60bn, of which €12.6bn was specifically for venture investment. The European Venture Capital Association includes a list of active firms and other statistics. In 2006 the top three countries receiving the most venture capital investments were the United Kingdom (515 minority stakes sold for €1.78bn), France (195 deals worth €875m), and Germany (207 deals worth €428m) according to data gathered by Library House.

European venture capital investment in the second quarter of 2007 rose 5% to 1.14 billion Euros from the first quarter. However, due to bigger sized deals in early stage investments, the number of deals was down 20% to 213. The second quarter venture capital investment results were significant in terms of early-round investment, where as much as 600 million Euros (about 42.8% of the total capital) were invested in 126 early round deals (which comprised more than half of the total number of deals). Private equity in Italy was 4.2 billion Euros in 2007.

Israel

Israel’s venture capital industry has rapidly developed from the early 1990s, and has about 70 active venture capital funds, of which 14 are international VCs with Israeli offices. Israel's thriving venture capital and Business incubator industry played an important role in the booming high-tech sector. In 2008, venture capital investment in Israel rose 19 percent to $1.9 billion.

Asia

India is fast catching up with the West in the field of venture capital and a number of venture capital funds have a presence in the country (IVCA). In 2006, the total amount of private equity and venture capital in India reached US$7.5 billion across 299 deals.

China is also starting to develop a venture capital industry (CVCA).

Vietnam is experiencing its first foreign venture capitals, including IDG Venture Vietnam ($100 million) and DFJ Vinacapital ($35 million)

Middle East and North Africa

The Middle East and North Africa (MENA) venture capital industry is an early stage of development, but growing. The MENA Private Equity Association Guide to Venture Capital for entrepreneurs lists VC firms in the region, and other resources available in the MENA VC ecosystem.

Confidential information

Unlike public companies, information regarding an entrepreneur's business is typically confidential and proprietary. As part of the due diligence process, most venture capitalists will require significant detail with respect to a company's business plan. Entrepreneurs must remain vigilant about sharing information with venture capitalists that are investors in their competitors. Most venture capitalists treat information confidentially, but as a matter of business practice, they do not typically enter into Non Disclosure Agreements because of the potential liability issues those agreements entail. Entrepreneurs are typically well-advised to protect truly proprietary intellectual property.

Limited partners of venture capital firms typically have access only to limited amounts of information with respect to the individual portfolio companies in which they are invested and are typically bound by confidentiality provisions in the fund's limited partnership agreement.

Popular culture

Robert von Goeben and Kathryn Siegler produced a comic strip called ''The VC'' between the years 1997-2000 that parodied the industry, often by showing humorous exchanges between venture capitalists and entrepreneurs. Von Goeben was a partner in Redleaf Venture Management when he began writing the strip.

Mark Coggins' 2002 novel ''Vulture Capital'' features a venture capitalist protagonist who investigates the disappearance of the chief scientist in a biotech firm in which he has invested. Coggins also worked in the industry and was co-founder of a dot-com startup. In the Dilbert comic strip, a character named 'Vijay, the World's Most Desperate Venture Capitalist' frequently makes appearances, offering bags of cash to anyone with even a hint of potential. In one strip, he offers two small children with good math grades money based on the fact that if they marry and produce an engineer baby he can invest in the infant's first idea. The children respond that they are already looking for mezzanine funding.

Drawing on his experience as reporter covering technology for the ''New York Times'', Matt Richtel produced the 2007 novel ''Hooked'', in which the actions of the main character's deceased girlfriend, a Silicon Valley venture capitalist, play a key role in the plot.

In the TV series Dragons' Den, various startup companies pitch their business plans to a panel of venture capitalists. In the 2005 movie, Wedding Crashers, Jeremy Grey (Vince Vaughn) and John Beckwith (Owen Wilson) are two bachelors who create appearances to play at different weddings of complete strangers, and a large part of the movie follows them posing as venture capitalists from New Hampshire.

A documentary, ''Something Ventured'', chronicled the recent history of American technology venture capitalists.

See also

Venture capital financing

Corporate Venture Capital

History of private equity and venture capital

List of venture capital firms

Adventure capital

Angel investor

Crowd funding

Enterprise Capital Fund a type of Venture Capital fund in the UK

IPO

M&A

National Venture Capital Association

Private equity

Private equity secondary market

Seed funding

Sweat equity

Social Venture Capital

Notes

References

Campbell, Katherine. Smarter Ventures: A Survivor's Guide to Venture Capital Through the New Cycle. Financial Times Management Press. ISBN 0-273-65403-9

Gompers, Paul, and Josh Lerner, "The Venture Capital Cycle", 2nd ed., MIT press, 2004.

Ortgiese, Jens: ''Value Added by Venture Capital Firms''. Eul publishing, 2007, ISBN 978-3-89936-621-1

What Are Venture Capitalists Looking For in an RFID Start-up?, RFID Radio

Introduction to Venture Capital and Private Equity Finance, The Encyclopedia of Private Equity

VentureSource. Venture Capital Industry Overview, 1Q07. Dow Jones VentureSource.

Hervé Lebret, "Start-Up : what we may still learn from Silicon Valley", CreateSpace, 2007, ISBN 1-4348-2006-8

Josephson, Matthew, "The Money Lords; the great finance capitalists, 1925-1950", New York, Weybright and Talley, 1972.

External links

The Global Venture Capital and Private Equity Country Attractiveness Index

Category:Private equity Category:Financial terminology

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name	William Bill
religion	Church of England
title	Dean of Westminster
period	1560-1561
predecessor	John Feckenham
successor	Gabriel Goodman
birth date	circa 1505
birth place	Atwell, Hertfordshire
death date	15 July 1561
death place	}}

William Bill (cir 1505-15 July 1561) was Master of St Johns College, Cambridge (1547-1551?), Vice-Chancellor of the University of Cambridge (1548) and twice Master of Trinity College, Cambridge (1551–1553, 1558–1561), Provost of Eton College (1558–1561) and Dean of Westminster (1560–1561).

He was born to John and Margaret Bill of Ashwell, Hertfordshire. He had two brothers and two sisters. His brother Thomas became physician to Henry VIII of England. William was educated at St Johns College, Cambridge, gaining his BA in 1532. He was elected a Fellow of St Johns College in 1535, and gained his MA in 1546. He received a BD during the period 1544-1546. In 1547, he was elected Master of St Johns College, and also received a Doctor of Divinity. In 1551, he was appointed Master of Trinity College. He was appointed Lord High Almoner from 1558–1561 and helped revise the liturgy of Edward VI of England. Following the accession of Mary I of England in 1553, he lost all his former positions. John Christopherson was appointed in his stead to the Mastership of Trinity. When Elizabeth I of England acceded in 1558, he was appointed Provost of Eton College, and re-appointed as Master of Trinity College. He was subsequently appointed Dean of Westminster on 30 June 1560 but died the following year.

He was buried in St Benedict's Chapel, Westminster Abbey, where his tomb and small brass figure can still be seen.

There are varying reports of whether or not he married during his lifetime.

References

The Master of Trinity at Trinity College, Cambridge

http://cerebus.dartmouth.edu/genealogy/ps01/ps01_245.html

http://www.westminster-abbey.org/library/burial/bill.htm

Category:1500s births Category:1561 deaths Category:Fellows of St John's College, Cambridge Category:Masters of St John's College, Cambridge Category:Masters of Trinity College, Cambridge Category:Deans of Westminster Category:Clergy of the Tudor period Category:Burials at Westminster Abbey Category:16th-century English people Category:People of the Tudor period

Name	Eric Schmidt
Birth date	April 27, 1955
Birth place	Washington, D.C., United States
Residence	Atherton, California, U.S.
Occupation	Executive Chairman of Google
Alma mater	Princeton University (B.S. 1976)University of California, Berkeley (M.S. in 1979 and PhD in 1982)
Salary	$557,466 compensation in 2006
Networth	US$7 billion (2011)
Website	Google Inc. Profile }}

Eric Emerson Schmidt (born April 27, 1955) is an American engineer, executive chairman of Google and former member of the board of directors of Apple Inc. From 2001–2011, he served as chief executive of Google. He is a co-author of the lex lexical analyzer software for Unix. He has also sat on the boards of trustees for Carnegie Mellon University and Princeton University.

Biography

Schmidt was born in Washington, D.C. and grew up in Blacksburg, Virginia. After graduating from Yorktown High School, Schmidt attended Princeton University where he earned a B.S. in Electrical Engineering in 1976. At the University of California, Berkeley, he earned an MS in 1979 for designing and implementing a network linking the campus computer center, the CS and the EECS departments, and a PhD in 1982 in EECS with a dissertation about the problems of managing distributed software development and tools for solving these problems. He was joint author of ''lex'' (a lexical analyzer and an important tool for compiler construction). He taught at Stanford Business School as a part time professor.

Schmidt lives in Atherton, California, with his wife Wendy.

He is also on the list of ARTnews 200 top art collectors.

He is also a member of the Bilderberg Group and attended the Swiss 2011 Bilderberg conference in St. Moritz, Switzerland.

The Eric Schmidt Family Foundation

The Eric Schmidt Family Foundation addresses issues of sustainability and the responsible use of natural resources. Wendy and Eric Schmidt, working with Heart Howerton, a San Francisco architectural firm that specializes in large-scale land use, have inaugurated several projects on the island of Nantucket that seek to sustain the unique character of the island, and to minimize the impact of seasonal visitation on the island's core community. Wendy Schmidt offered the prize purse of the Wendy Schmidt Oil Cleanup X CHALLENGE, a challenge award for efficient capturing of crude oil from seawater motivated by the Deepwater Horizon oil spill.

Career

Early career

Early in his career, Schmidt held a series of technical positions with IT companies, including Bell Labs, Zilog and Xerox’s famed Palo Alto Research Center (PARC).

From Sun to Google

Schmidt joined Sun Microsystems in 1983 as its first software manager. He rose to become director of software engineering, vice president and general manager of the software products division, vice president of the general systems group, and president of Sun Technology Enterprises. In April 1997, he became CEO and chairman of the board of Novell.

Schmidt left Novell after the acquisition of Cambridge Technology Partners. Google founders Larry Page and Sergey Brin interviewed Schmidt. Impressed by him, they recruited Schmidt to run their company in 2001 under the guidance of venture capitalists John Doerr and Michael Moritz.

Google

Schmidt joined Google's board of directors as chairman in March 2001 and became the company's CEO in August 2001. At Google, Schmidt shared responsibility for Google's daily operations with founders Page and Brin. As indicated by page 29 of Google's 2004 S-1 Filing Schmidt, Page, and Brin ran Google as a triumvirate. Schmidt had legal responsibilities typically assigned to the CEO of a public company and focused on management of the vice presidents and the sales organization.

According to Google's website, Schmidt also focuses on "building the corporate infrastructure needed to maintain Google's rapid growth as a company and on ensuring that quality remains high while product development cycle times are kept to a minimum."

In 2007, ''PC World'' ranked Schmidt as the first on the list of the 50 most important people on the web, along with Google co-Founders Larry Page and Sergey Brin.

In 2009, Schmidt was considered one of the "TopGun CEOs" by Brendan Wood International, an advisory agency.

On January 20, 2011, Google announced that Schmidt would step down as CEO of Google, but continue as the executive chairman of the company, and act as an adviser to co-founders Page and Brin. Page replaced Schmidt as CEO on April 4, 2011.

The 2011 book ''In the Plex: How Google Thinks, Works, and Shapes Our Lives'' by Steven Levy claims that in 2001, Schmidt requested that a political donation he made be removed from Google search results. The request was not fulfilled. Schmidt has denied this ever occurred.

Apple

Schmidt was elected to Apple's board of directors on August 28, 2006. On August 3, 2009, it was announced that Schmidt would resign from the board of directors at Apple due to conflict of interests amid the growing competition between Google and Apple.

President Barack Obama

Schmidt "was a campaign advisor and major donor to Barack Obama, and when he announced he was leaving that perch, he planned to remain 'at the forefront of Google’s government relations team.' And Obama even has considered him for Commerce Secretary." Schmidt was an informal advisor to the Obama presidential campaign and began campaigning the week of October 19, 2008, on behalf of the candidate. He had been mentioned as a possible candidate for the chief technology officer position which Obama created in his administration. After Obama won, Schmidt was a member of President Obama's transition advisory board. He proposed that the easiest way to solve all of the problems of the United States at once, at least in the domestic policy, is by a stimulus program that rewards renewable energy and, over time, attempts to replace fossil fuels with renewable energy. He has since become a new member of the President's Council of Advisors on Science and Technology PCAST.

New America Foundation

The New America Foundation is a non-profit public policy institute and think tank, founded in 1999. Schmidt is the current chairman of the board of directors. He succeeded founding chairman James Fallows in 2008.

Compensation

Upon being hired, Eric Schmidt was paid a salary of $250,000, and an annual performance bonus. He was granted 14,331,703 shares of class B common stock at 30 cents per share, and 426,892 shares of Series C preferred stock at purchase price of $2.34.

Schmidt and the Google founders agreed to a base salary of $1 in 2004 (which continued through 2010), with other compensation of $557,465 in 2006, $508,763 in 2008 and $243,661 in 2009. He did not receive any additional stock, or options in 2009 or 2010. Most of his compensation was for "personal security" and charters of private aircraft. Schmidt is one of the few people who became billionaires (in United States dollars) based on stock options received as an employee in a corporation of which he was neither the founder nor a relative of the founder. In its 2011 'World's Billionaires' list, Forbes ranked Schmidt as the 136th richest person in the world, with an estimated wealth of $7 billion. Google gave him $100 million in 2011 as a parting gift.

Views

During an interview, aired on December 3, 2009 on the CNBC documentary "Inside the Mind of Google", Schmidt was asked, "People are treating Google like their most trusted friend. Should they be?" His reply was: "I think judgment matters. If you have something that you don’t want anyone to know, maybe you shouldn’t be doing it in the first place, but if you really need that kind of privacy, the reality is that search engines including Google do retain this information for some time, and it’s important to remember, for example, that we are all subject in the United States to the Patriot Act. It is possible that that information could be made available to the authorities." At the Techonomy conference on August 4, 2010, Schmidt expressed that technology is good, but he said that the only way to manage the challenges is "much greater transparency and no anonymity." Schmidt also stated that in an era of asymmetric threats, "true anonymity is too dangerous."

In August 2010, Schmidt clarified his company's views on network neutrality: "I want to be clear what we mean by Net neutrality: What we mean is if you have one data type like video, you don't discriminate against one person's video in favor of another. But it's okay to discriminate across different types, so you could prioritize voice over video, and there is general agreement with Verizon and Google on that issue."

Proposition 8

In 2008, Schmidt was part of a group of Silicon Valley leaders who supported the defeat of Proposition 8 in California.

See also

List of billionaires

70/20/10 Model — business model advocated by Schmidt

RechargeIT

References

External links

;Speeches

Eric Schmidt and Larry Page speaking at Stanford (May 1, 2002)

Eric Schmidt talks about innovation on Executive Talks, November 2006

Schmidt-ceo-of-google.html Eric Schmidt interview by iinnovate, March 2007

YouTube: Eric Schmidt at the Seoul Digital Forum. (2007.06.05)

Eric Schmidt speaks as part of NASA 50 years Lecture Series, January 17, 2008

Mobile World Congress 2010 Keynote: Eric Schmidt, CEO, Google(Feb 2010)

iTunes: Google making of a modern company.

;Articles

CNET: Google balances privacy, reach (July 14, 2005), which uses Eric Schmidt as an example of the personal information held by Google.

Princeton University Board of Trustees

Category:1955 births Category:American art collectors Category:American billionaires Category:American chief executives Category:American electrical engineers Category:Apple Inc. employees Category:Businesspeople from Washington, D.C. Category:Google employees Category:Living people Category:People from Washington, D.C. Category:Princeton University alumni Category:University of California, Berkeley alumni

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Arthur Rock (born August 19, 1926) is an American venture capitalist of Silicon Valley, California. He was an early investor in major firms including Intel, Apple Computer, Scientific Data Systems and Teledyne.

He graduated with a Bachelor's degree in business administration from Syracuse University in 1948 and earned an MBA from Harvard Business School in 1951.

Rock started his career in 1951 as a security analyst in New York City, and then joined the corporate finance department of Hayden, Stone & Company, where he focused on raising money for small high-technology companies.

After graduating from Harvard, he worked as an investment banker in New York. In 1957, when the Traitorous Eight left Shockley Semiconductor Laboratory, Rock was the one who helped them find Sherman Fairchild to start Fairchild Semiconductor.

In 1961, he moved to California. Along with Thomas J. Davis, Jr., formed the San Francisco venture capital firm Davis & Rock. In 2003, Rock donated $25 million to the Harvard Business School to establish the Arthur Rock Center for Entrepreneurship.

He is married to lawyer Toni Rembe.

References

See also

Rock's Law

Category:1926 births Category:Living people Category:American businesspeople Category:Venture capitalists Category:Harvard Business School alumni Category:Syracuse University alumni Category:American billionaires

Sir Ronald Cohen (born 1945) is an Egyptian-born British businessman and political figure, known as "the father of British venture capital" and "the father of social investment".

Biography

Early life

Cohen was born in Egypt; his family are Sephardi Jews, originally from Aleppo, Syria, though his mother, Sonia Douek, is English by nationality. In 1957, following the Suez Crisis, Cohen's family was forced to abandon all their assets and flee Egyptian President Nassar's persecution of Jews. The family (including younger brother Andre) moved to England. Though initially speaking only a few words of English, Cohen went to Orange Hill grammar school in North London, now part of Mill Hill County High School where despite describing it as "a school of very doubtful reputation" he excelled.

Cohen won a scholarship to Oxford University, where he became president of the Oxford Union, and earned a degree in Philosophy, Politics, and Economics at Exeter College. He subsequently attended Harvard Business School, where he was a member of the Harvard Business School Rugby Club.

Business career

After leaving Harvard Business School, Cohen worked as a management consultant for McKinsey & Company in the United Kingdom and Italy. In 1972, along with two former business school colleagues as partners, he founded Apax Partners, one of Britain's first venture capital firms. The company grew slowly at first, but expanded rapidly in the 1990s, becoming Britain's largest venture capital firm, and "one of three truly global venture capital firms". Apax provided startup capital for over 500 companies, and provided money for many others, including AOL, Virgin Radio, Waterstone's, and PPL Therapeutics, the company that cloned Dolly the sheep. In 1996 Cohen helped establish Easdaq, a technology focused stock exchange intended to be the European counterpart to the American Nasdaq. He is the recipient of a Jubilee Award for services to Israeli business, awarded by Benjamin Netanyahu and the BVCA's Lifetime Achievement Award. He is a member of the Harvard Board of Overseers and is also a fellow of Exeter College, Oxford.

In 2002, alongside Jon Moulton, he was the inaugural inductee into the Private Equity Hall of Fame, at the British Venture Capital Association and Real Deals' Private Equity Awards..

Political career

In 1974 Cohen stood as the parliamentary candidate for the Liberal Party in Kensington North, and in 1979 he stood as its European candidate in London West.

In 1996 he switched allegiance to the Labour Party, becoming a supporter of Tony Blair. In 2004, Cohen was the Labour Party's fourth largest financial supporter, after Lord Sainsbury, Sir Christopher Ondaatje and Lord Hamlyn.

Personal

In 1972 Cohen married Carol Belmont; they divorced in 1975. In 1983 he married a second time, to Claire Enders; they divorced in 1986. Cohen married his third wife in 1987, Sharon Harel, daughter of Yossi Harel, the commander of the Holocaust survivors' ship ''Exodus''. Sharon is a film producer, her credits include ''Gosford Park''. They have two children Tamara and Jonathan, and live in London.

Social Investment

Cohen has been a pioneer in the area of social investment. In 2000, he became Chairman of the Social Investment Task Force(SITF). The remit of the SITF was "to set out how entrepreneurial practices could be applied to obtain higher social and financial returns from social investment, to harness new talents and skills, to address economic regeneration and to unleash new sources of private and institutional investment" . The SITF made several recommendations to Government, including that it: (1) introduce Community Investment Tax Relief (CITR); (2) match finance to help set up the first community development venture capital fund; (3) encourage banks to disclose more of their lending activities; (4) to support legislative and regulatory changes to provide greater latitude and encouragement for charitable trusts and foundations to invest in community development finance; and (5) to create the Community Development Finance Association (cdfa) to provide support for community development finance institutions (CDFIs) .

In 2002, he co-founded and became chairman of Bridges Ventures, an innovative sustainable growth investor that delivers both financial returns and social and environmental benefits . Bridges Ventures has raised four successful funds to date: Bridges Ventures Funds I and II, the Bridges Sustainable Property Fund and the Bridges Social Entrepreneurs Fund. The organisation currently has £150million under management . The portfolio includes a number of businesses who invest in regeneration areas or have a sustainable business model. Bridges Ventures has had several successful exits to date, including The Office, Simply Switch, HS Atec and Harlands of Hull .

In 2003, Sir Ronald co-founded the Portland Trust with Sir Harry Solomon, co-founder and former chairman and CEO of Hillsdown Holdings. The aim of Portland Trust is to help develop the Palestinian private sector and relieve poverty through entrepreneurship in Israel. Portland Trust is involved in a number of important initiatives, including the development of financial and economic infrastructure, housing, trade, investment, and entrepreneurship . The Portland Trust has offices in London, Tel Aviv and Ramallah.

In 2005, Sir Ronald chaired the Commission on Unclaimed Assets. which looked into how unclaimed funds from dormant bank accounts could be used to benefit the public. The final recommendation of the Commission was that the funds should be used to a social investment bank be created to help finance charitable and voluntary projects by providing seed capital and loan guarantees.

In 2007 he co-founded and became a non-executive director of Social Finance, a London-based advisory that has worked to create a social investment market in the UK. The organisation provides access to capital, designs social finance interventions and offers advice to investors and social sector entities interested in delivering significant social impact . It has developed the social impact bond which is a financial instrument that is an outcomes-based contract in which public sector commissioners commit to pay for significant improvement in social outcomes for a defined population. Social Finance has set up a pilot social impact bond with the Ministry of Justice (MoJ) in September 2010 to reduce re-offending amongst male prisoners leaving HMP Peterborough who have served a sentence of less than 12 months. During the Peterborough Prison pilot, experienced social sector organisations, such as St. Giles Trust and The Ormiston Children and Families Trust, will provide intensive support to 3,000 short-term prisoners over a six year period, both inside prison and after release, to help them resettle into the community. If this initiative reduces re-offending by 7.5%, or more, investors will receive from Government a share of the long term savings. If the SIB delivers a drop in re-offending beyond the threshold, investors will receive an increasing return the greater the success at achieving the social outcome, up to a maximum of 13% .

In 2010, Sir Ronald Cohen chaired a review of the work of the SITF in 2010 and published a report titled ''Social Investment: Ten Years On'' which assess the changes that had happened over the last decade in the area of social investment. The report found that there are three specific iniatives that will help define the future of the social investment market in the UK: (1) establishing the infrastructure necessary to create a dynamic market in social investment through initiatives such as the Social Investment Bank; (2) creating new tools to deliver social change through financial instruments such as the social impact bond; (3) engaging the financial sector to invest in disadvantaged areas through the Community Reinvestment Act .

Other charitable involvements

In January 2005, Cohen became a Director of the British Museum.

Cohen is a member of the executive committee of the International Institute of Strategic Studies.

Controversies

Cohen was chairman of Apax at the time of the Apax owned British United Shoe Machinery pension collapse which left 544 workers, many of them long service, without any pension. Collapse followed demerger from USM-Texon and asset transfer between the companies. Pension funds were transferred to the new BUSM scheme two weeks before receivership, and 4 days before a new revaluation was due. MPs Edward Garnier, Patricia Hewitt and Ashok Kumar all called for a proper enquiry, Garnier citing the "mysterious circumstances" under which the pensions “disappeared”, whilst Hewitt said “it is clearly important that such serious allegations are properly investigated.” No new investigation took place leading Kumar to say "I think these people needed flogging. I feel so angry on behalf of decent upright citizens robbed of their basic human rights. ...'These are greedy, selfish, capitalists who live on the backs of others."

Bibliography

References

External links

Category:Knights Bachelor Category:British businesspeople Category:British management consultants Category:British philanthropists Category:McKinsey & Company people Category:Private equity and venture capital investors Category:Presidents of the Oxford Union Category:British Jews Category:Sephardi Jews Category:1945 births Category:Living people Category:Harvard Business School alumni Category:People from London Category:Apax Partners Category:Egyptian Jews Category:Trustees of the British Museum

he:רונלד כהן