Chinese venture capital funds have started to tap into international markets. In China, VC had a relatively late start, and its key terms were mainly borrowed from the US. In the course of localization, however, the differences have emerged in some aspects where the Chinese venture capital practice differs from that of the United States.
Provisions in VC agreements in China tend to place stricter requirements on companies’ founders. When negotiating with startups in the US, the venture capitalists often discover that an American party may resist some investment provisions, especially those that require the founders to bear personal liability or place special restrictions on their rights. Knowing the difference helps Chinese to negotiate and communicate with the US founders and companies.
In the US, warranties and representations are made by the company. Generally, founders do not give warranties and representations in their personal capacity. However, the common practice in China is for the founders and the company to jointly give warranties and representations, and the founders of the companies may be held personally liable.
The right of redemption is a common venture capital provision in both the United States and China. The main difference, however, is that in the United States, the redemption obligation is put on the investee company, where the founders of the company bear the redemption obligation in China if the company is a domestic company.
References https://www.vantageasia.com/know-the-differences-a-snapshot-of-chinese-and-us-venture-capital-provisions/ http://www.diva-portal.org/smash/get/diva2:320346/FULLTEXT02
Female founders do many things to get their business running. They take loans, raid their life savings, hit up family and friends, and even rely on credit cards. According to a new study from the Women Presidents’ Organization (WPO) and Ernst & Young (EY), only one percent ends up using venture capital.
The study looks at how 430 businesses established by women were funded over their lifetime. It included a mix of established and young companies; about 51 percent of businesses surveyed were founded 21 or more years ago.
The 1 percent should not shock you. Women got just 2.19 percent of all venture capital funding in 2016. Historically, the number of women-owned business funded by venture capitalists has been even worse. From 1991 to 1996, of 362 businesses that received venture funding, only 31 deals were with women-led ventures.
If women are not using venture capital, where are the funds coming from? 68 percent of those surveyed by WPO and EY says they used personal savings to fund their businesses. At 27 percent, a line of credit was among the most common responses. About 22 percent incurred personal debt, and about 18 percent received a loan from a friend or family members.
More than 75 percent of the entrepreneurs surveyed reported that they generated between $1 M and $20M in annual revenues, with 14 percent reporting more than $20 million.
References http://fortune.com/2017/04/26/women-venture-capital-funding/ https://republic.co/exclusive-only-1-of-female-founders-have-used-vc-money-to-fund-their-business
Growing businesses need funding and entrepreneurs find themselves raising funds from venture capitalists. In my view, there is much emphasis on raising funds from venture capital firms, instead of finding the right type of capital to match the specific needs of the business. Before raising equity capital, there are some other sources of funding that you should explore.
Cash flow from operations
An entrepreneur can decide to invest profits in areas that create high returns on investment. You should first maximize cash flow, and then use that cash flow to finance high-value investments.
You should invest any outside funds you have in the business. However, you should be careful not to put yourself in a very risky financial position. Investing in your own business allow you to retain ownership and avoid dilution that is caused by other capital providers.
Family and Friends
Like founder’s equity, getting funds from family and friends shows that you and your advisor believe in the business. Funds from family and friends also help you to avoid giving up control to people with potentially conflicting interests.
Bank loans are often the best source of funding. Typically, these must be backed by accounts receivable or inventory. Bank loans often require a personal guarantee.
With $18.1 million under management, the University Venture Fund (UVF) is the world’s largest student-run venture capital. UVF is a fund generalist with students from the University of Utah, Westminster College, Wharton School of Business and Brigham Young University. The fund has invested in around 18 companies with three exists and is continuing to look for new opportunities. UVF does not only invest in startup companies but also conducts value add projects for its portfolio companies.
Formed in 2001, UVF was the first experiential student venture fund in the United States. Supported by investors like Tim Draper, Geoff Wolley, and James Lee Sorenson and managed by professionals like Peter Harris Jared Hutchens, and Tom Stringham, UVF has proven the model that students can execute alongside industry top investors.
At UVF, best students come together to run a bona fide investment fund, doing what students do best—debate and research on investment deals that make a social impact.
UVF hosts an annual University Private Equity Summit. The event allows top VCs and investment experts to offer best practices and wisdom to about 300 attendees. Some of the speakers in the past events are Jeremy Andrus of SkullCandy and David Hornick of August Capital.
References https://www.linkedin.com/company-beta/19374/ https://www.forbes.com/sites/cherylsnappconner/2013/01/19/students-running-a-vc-fund-the-university-venture-fund-says-yes/#6bf6a05f71c9 These Utah College Students Have Millions Of Dollars To Invest In Your Startup
Investors are not known for using the most advanced tools out there. But there is a new generation of tools that enable venture capitalists to take the game to a new level. Start-ups are disrupting how ventures capitalists are doing business, just as they have changed every other industry.
Big data Provider
Big data is changing the world of venture capitalist as much as any other industry. Big data providers pull together a wealth of information from social media, SEC filings, and the company’s proprietary Start-up Index. To keep up with venture capital business, having the right data provider is becoming a necessity.
Contact management software
Most venture capitalists’ time is spent on communications. Venture capitalists who have control over their communications, handle their work load efficiently. A good contact management software is key to that process. A tool like RelateIQ automates as much communication as possible; pulling almost all investor’s communications into one place and making sure that they’re reminded to take appropriate actions
Project management software
While communications make up the lion’s share of venture capitalists’ day, they probably have many other projects they need to work on. Venture capitalists have many different projects such as giving speeches or writing blog posts. A VC needs a particularly robust option.
References https://www.salesforceiq.com/blog/modern-vc-toolbox https://www.wsj.com/articles/venture-capital-firms-use-big-data-to-seek-out-the-next-big-thing-1493086200
Last week, one of my friends asked me the kind of personality traits venture capitalists look for in entrepreneurs. Based on my observations over the year of meeting both venture capitalists and entrepreneurs, I have maintained a mental list. Three traits that venture capitalist are looking in entrepreneurs are:
Venture capitalists always look for tenacious entrepreneurs. Tenacity comes up as one of the most critical ingredients to realizing success in entrepreneurship. Venture capital firms such as ENIAC Ventures look for the ability of the founders to break through walls. Start-ups have many ups and downs, and entrepreneurs must overcome every challenge.
Clarity of thought
A straight line between a solution and a problem shows a mastery of information that presents a person as an entrepreneur who knows his or her stuff. Venture capitalist wants entrepreneurs who understand their industry and entrepreneurship in general.
Venture capitalist evaluates why an entrepreneur is interested in solving a particular problem. Some VCs like funding entrepreneurs who are trying to solve personal problems. The conviction to find a solution for a particular problem is stronger when an entrepreneur is passionate about it.
References https://www.entrepreneur.com/article/294701 https://www.inc.com/bill-carmody/5-qualities-vcs-look-for-in-an-entrepreneur.html
Before we define Venture-Capital-Backed IPO, it is important to understand initial public offering or IPO. IPO is the very first sale of shares issued by a company to the public.A company is considered private before an IPO, with a few f shareholders made up mainly of early investors and professional investors.
Venture-Capital-Backed IPO is the selling of shares in a company to the public that has earlier been funded by venture capitalists. The alternative toventure-capital-backed IPO is an acquisition. Known as exit strategies, both options allow entrepreneurs and venture capitalists get money out of their investments. Open Table and Tesla Motors are examples of companies that were formerly venture-capital-backed IPOs.
Many sources regularly report on venture-backed IPOs. In lean economic periods, there are fewer venture-capital-backed IPOs due to low investor confidence. Afterthe financial crisis, the period between 2008 and 2009 was characterized by low numbers of venture-capital-backed IPOs.During that period only 10 VC-backed companies went public.
According to Grabow, about 39 VC-backed companies had an IPO in 2016. Of these companies, 13 venture-backed IPOs were tech, according to Shoshanna Delventhal of Investopedia. Today, there are about 17,000 VC-backed companies. It is expected that this year will see many venture-capital-backed IPOs.