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Note: Business 2.0 is now part of CNNmoney and some older articles are no longer available

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In the Internet Economy, the right B-plan isn't a B-plan at all, but a great 8-point startup story (inc. business case, customer, solution, alternatives, accomplishments, background, company details and basic financials)

To understand venture capitalists - and get them to open their wallets for you - is as simple as understanding greed and fear, says Sanchez Capital Partners' Gene Lowenthal.

part of Red Herring's 10 Trends 2000 special, this article talks about the increasing competition among VCs to fund a limited supply of good ideas and teamsand the associated implications and strategies

article highlights Dot Edu, a new VC firm with its roots in the academic world. Also discusses Information Technology University (ITU) and UniversityAngels.com

Bill Reichert offers a top ten list of myths and realities that are guaranteed to raise someone's ire.

(find part II at http://www.herring.com/index.asp?layout=story&channel=40000004&doc_id=900014290)

This .pdf BRIE working paper provides a basic history, overview and expanded discussion about venture capital.

Recently, three different research groups that track venture investing came up with as many different conclusions about the industry. Why? Yes, methodologies differ. But more importantly, each firm defines venture capital differently.

Article talks about how VCs are treating their admin staff members in wake of the talent crunch.

Article focuses on the early (angel) stage investing when traditional valuation methods are of limited value. Discusses the idea of a bridge loan with convertible warrants based on a Series A round.

Find a wide selection of interviews with business luminaries in our Interviews Section

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No, it's not the person behind Benchmark's $2.5 billion payoff with eBay. Try Kleiner Perkins' Vinod Kholsa, who parlayed a less than $5 million investment into Juniper Networks into shares worth more than $8 billion.

As the biggest technology vendors increasingly act as venture capitalists, what are they getting in return?

VCs are supposed to earn their substantial keep by identifying promising opportunities and turning them into profitable businesses. Following the pack would seem to undermine the very principle of venture investing. Yet VCs have largely mirrored the public markets, first pouring irrational sums into Net retailing plays, and then moving on to b-to-b, and then to infrastructure, and then to wireless, and then to fiber optics.

Editor's Note: the original site is out of business so I am linking to the archive.org archive of the article - it can be quite slow at times...

NCOE looks at the latest development in the VC industry - Community Development Venture Capital (CDVC). CDVCs seek to tap the proven approach of traditional venture capital, but, for a different purpose: they aim to bring new investment to regions and sectors not participating in the current economic boom.

Editor's Note: see related article, "Community Development Venture Capital: A Double-Bottom Line Approach to Poverty Alleviation" at:
http://unepfi.net/venture/CVCbackground.pdf

Entrepreneurs often say they're looking for smart money. So it should come as no surprise that more of them are shunning old-school venture capitalists in favor of savvy tech veterans who have started their own investment funds...

Valuation advisor Phil McGuigan, of Gordon & Glickson, discusses how to determine a valuation of an early-stage company seeking investors. In sharing examples, he highlights the recipe for investment and the necessary ingredients, such as a management team and a business plan.

The Profit Dynamics Inc. Venture Capital Surveys were conducted during 1998, 1999 and 2000 by contacting over 500 of the most active venture capital companies across the United States by e-mail, fax and postal mail. A total of 250 companies over the three years completed and returned the survey.

While other surveys attempt to answer the questions of how much capital is invested in what industries, what companies and what geographic locations, this survey answers more qualitative questions that are important to entrepreneurs.

Sections include:
How Long to Close
How To Contact
With What (what VCs want to receive)
Valuation Factors
Probability
Competition
Define Management
Substitutes?
Find The Deals?
Decision to Invest
Why No?
Worst Business Plan Mistakes
Common Plan Mistakes
First Impressions
Improve Your Chances

For a glimpse inside the world of venture capital, BusinessWeek spent several days following Robert E. Davoli, a partner at Sigma Partners, to board meetings and partner sessions on both coasts.

Venture capitalist Mike Frank gives his "Ten Commandments of Fundraising" in an attempt to provide a primer for inexperienced entrepreneurs, and a helpful recap for seasoned entrepreneurs who want to go over the basics of the VC game.
1. Thou shalt focus, focus, focus thy plan.
2. Thou shalt weave a story.
3. Thou shalt understand thy audience.
4. Thou shalt arrive via referral.
5. Thou shalt be crisp in thy plan.
6. Thou shalt fine-tune thy presentation.
7. Thou shalt thoroughly research and evaluate current and prospective competition.
8. Thou shalt get real about financial projections.
9. Thou shalt not obsess on valuation.
10. Thou shalt understand potential exit strategies.

This installment of the regular VC P.S. series looks at the downsides of corporations doing in-house venture capital VC funds. Issues discussed include: lawsuits, brain drain, infighting, distraction, and giving up.

Editor's Note: find part 2 at
http://www.redherring.com/Article.aspx?a=7763

Kick 'em while they're down. Though a somewhat topical piece, this article takes an interesting look at some of the mistakes made by VC firms in funds raised in 1998 and 1999, using certain famous firms as sacrificial examples.

*** Abstract ***
Using a unique dataset of private equity funds over the last two decades, this paper analyzes the cash flow, return, and risk characteristics of private equity. Unlike previous studies, we have detailed cash flow data for each fund, rather than aggregate or accounting returns. We also know the exact timing of investments and capital returns to investors and the number and types of companies each fund invested in. We document the draw down and capital return schedules for the typical private equity fund, and show that it takes several years for capital to be invested, and over ten years for capital to be returned to generate excess returns. We provide several determining factors for these schedules, including existing investment opportunities and competition amongst private equity funds. In terms of performance, we document that private equity generates excess returns on the order of five to eight percent per annum relative to the aggregate public equity market. Moreover, while we estimate the betas of the private equity funds' portfolios to be greater than one, we show that on a risk-adjusted basis the excess value of the typical private equity fund is on the order of 24 percent relative to the present value of the invested capital. One interpretation of this magnitude is that it represents compensation for holding a 10-year illiquid investment.

Alan Warms, founder and CEO of Participate.com offers the following rules of the VC game for would-be entrepreneurs:
- GET BRANDED
- THINK LONG TERM
- BE PREPARED
- USE YOUR VC
- TRUST YOUR VC
- BE AN ANTIBIOTIC
- KEEP IT SIMPLE

Questions include:
What is a "double trigger"?
What is a secondary offering?
What is a "limit order"?
What is "spinning" and how does it relate to IPOs?
How low can a company's stock price go before it runs the risk of being de-listed?
What is a "pre-syndicate bid"?
What is a "direct public offering"?
What is a private placement?
What is a syndicate?
When is an investment letter used?
What is stabilization?
What is an insider?
What is a collar?
What is a "comfort letter"?
What is a "firm commitment offering"?
What is a "market maker?"
Are there ways around a lock-up?
Do venture capital funds fall under the general category of hedge funds?
Do technology companies use special vesting schedules?
What is the bargain element?
Which are the most commonly filed SEC forms?

At a time when most entrepreneurs will jump like trained poodles to be rewarded by venture capitalists, Reed Taussig refuses to say, "How high?" He has created his own set of rules for VCs who want to work with him.

Venture Capitalists Always Find Something To Complain About

Note: Business 2.0 is now part of CNNmoney and some older articles are no longer available

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In an age of easy money, the clubby world of venture capitalists has given way to something more aggressive and cutthroat.

The title of this .pdf article is a bit misleading - it does include a sample VC term sheet (which is very useful) but it doesn't give any kind of in-depth explanation of its sections. Also, the term sheet comes at the end of the document.

Editor's Note: the beginning includes an overview of the VC process. Although it's a good overview, you can get the exact same info plus some in a different document found at:
http://www.netpreneur.org/funding/VC_Report.pdf

An excellent .pdf document looking at the history, process, and particulars of the venture capital world. Written for the benefit of entrepreneurs seeking VC funding, so as you would expect it offers very practical advice for how to deal with VCs.

Two years ago, Crosspoint Venture Partners made headlines when it canceled a $1 billion fund in the making. The cause was cloudy, but the high-profile VC firm sent the first signal that not everything was peachy among the elite billion-dollar VC club that emerged at the height of the Internet bubble.

A somewhat topical piece on VC but offers an interesting historical perspective on VC spending levels and associated returns.