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Freeman Kenneth M.. Building Wealth through Venture Capital
Preface
“Fairy Tales Can Come True, It Can Happen to You…”
Introduction
Innovation: The Path to Wealth Creation and What Venture Capital Is All About
PART I. Understanding the Major Players
CHAPTER 1. The Venture Capitalist: Funder of Dreams
CHAPTER 2. The Entrepreneur: His Mind and His “Cultivation”
DNA of the Entrepreneur
Driven by Passion
Motivated by the Opportunity to Make a Positive Difference
The Need to Recognize Reality: Beware the Seduction of Money and Power
The Importance of Fortunate Timing
Experience and Maturity Can Be Important, Too
Resolute, Energetic Drive Is the Most Common Denominator
They're Not Just Resolute; They Are Bold and Daring, Too
Environments That Cultivate Entrepreneurs
The Emergence of an Entrepreneurial Ecosystem in Chicago
The Age‐Old Question: Nature or Nurture?
PART II. For the Investor: A Guide to Realizing Big Returns
CHAPTER 3. Why Should You Invest in Venture Capital?
It Makes Sense Even for Conservative Investors
A Hedge Against Inflation and Lengthy Bear Markets
Hedge Funds and Private Equity Buyout Funds No Longer So Attractive
Venture Capital's Strong Historical Returns
Don't Invest More Than You Can Afford to Lose
Substantial Institutions Love Venture Capital
Emotional Reasons for Venture Capital Investment
CHAPTER 4. How to Find the Right Venture Capital Firm
Surveying the Landscape of Venture Capital Firms
Firm Selection by Venture Stage Focus
Why Should You Care About a Firm's Venture Stage Focus?
Firm Selection by Industry Focus
Firm Selection Based on Geographic Focus
The New Online Equity Crowdfunders
Other Resources for Selecting a Venture Capital Firm
Vetting Venture Capital Firm Candidates
CHAPTER 5. Venture Capital Investment versus “Buffett's Real Rules” of Investment
“Buffett's Real Rules”
How Len's Venture Capital Investment Principles Are Similar
Why Venture Capital Returns Can Beat Even Warren Buffett
CHAPTER 6. Avoid the Seduction of Unicorns: Get in Early
It's All High Risk, So Get in Early When the Biggest Returns Are Possible
Excessive Unicorn Valuations: All the Risk without the Big Reward Potential
Business Valuation 101
Applying Business Valuation 101 to Venture Capital Investment
Try Applying That Logic to Unicorns
Why Many Unicorn Valuations Don't Make Sense to Us
Unicorns Having Difficulty Exiting and Delivering Investor Returns
Now You Know Why We Believe in Early‐Stage Investment
Our Concerns for the Venture Capital Industry and Individual Investors
CHAPTER 7. Finding the Highest Quality Investments at the Right Price
The AOL Story
How to Manage Risk, Play the Odds, and Win in an Evolving Market
What It Takes to Hit Investment Home Runs
How to Find the Potential Home Runs
Price Can Matter, Too, and Can Be Tricky
Need to Consider Non‐monetary Costs, Too
Some Pricing Advice for the Entrepreneur
PART III. For the Entrepreneur: A Guide to the Money Search and All That Follows
CHAPTER 8. The Mating Dance: Prospecting for a Venture Capital Investor
Actually, Lots of Sources and Lots of Available Dollars
How to Appeal to the Venture Capitalist
Prospecting for Gold, or, Better Yet, Drilling for Oil
Venture Capitalists' View of Deal Stages
Targeting Your Money Search Based on VC Industry Focus
How to Do All This VC Screening
An Alternative: Introduction through Expert Middlemen
Making Contact with the VC
Other Ways of Making Contact
Evolution of the Venture Capital Community: Angel Groups and Online VC Portals
More on Online Venture Capital Investment Platforms
CHAPTER 9. The Final Exam: Due Diligence
Is Due Diligence Really That Important?
A Warning to Entrepreneurs: Beware of Limited Due Diligence
Return on Due Diligence Investment Tough to Quantify
Make No Mistake: Due Diligence Is Important
What Due Diligence Is All About
The Due Diligence Process
The Focus of Due Diligence Questioning
Importance of Treating the VC with Respect and Sincerity
Time Can Be of the Essence
Some Advice for Less Experienced VCs
Some Advice for Less Experienced Investors
CHAPTER 10. Finding Your Deal‐Doing Lawyer
So Many Types of Lawyers to Consider
Why You Need a Deal‐Doing Lawyer
Knowledge of the Venture Capital Process
Some Realities to Consider
Finding the Right Legal Counsel
Speed Can Be Important
Lots of Legal Consistency
Build Trust, Not Litigation
The Typical Process
Differing Degrees of Legal Orientation
CHAPTER 11. Financing Has Arrived and “You're Married”…Now What?
Now You Answer to a Higher Authority – a Board of Directors
Be Ready to Make Management Changes
Anticipate Complications and Management Challenges
The Critical Search for Talent as the Venture Evolves
Executive Search Consultants: Expensive, But Can Be Worth It
The Board's Role as Guardians of the Venture and the Investors' Money
Board Meetings
Bankers and Suppliers: Sources of Lower Cost Funds
Following the Money
When Crisis Management Is Required
CHAPTER 12. The Last Dance: A Successful Exit
What Constitutes a Successful Exit?
A Range of Exit Options
IPO as a Badge of Honor
Remaining Private May Better Meet the Entrepreneur's Needs
Going Public Can Also Mean Vulnerability to Rumors and Ruin
Other Risks of Going Public
Beware of Investment Bankers' Inherent Drive to Go Public
Investment Bankers and Venture Capitalists Are Not the Same
The Groupon Story: A Post‐IPO Nightmare
Lessons Reinforced by Groupon's Story
Timely Liquidation Less Risky than Betting on Volatile Public Markets
There Are Exceptions: The Nanophase Technologies Story
Sale to or Merger with a Complementary Business
Benefits of Being Acquired: The Cleversafe Story
Issues to Consider Before Selling the Baby
Truly “All's Well that Ends Well”
CHAPTER 13. Interview with a Successful Entrepreneur
PART IV. Looking Ahead: What’s to Come
CHAPTER 14. The Foreseeable Future
The Case for Even Greater Innovation and Venture Capital Opportunity
Technology Advancement – and Investment – Opportunities
Artificial Intelligence: Computers Becoming Even More Integral to Our Lives
Will the Computer Be Wise?
Big Data and Predictive Analytics: The Why of Everything
Biology as a Computer
Nanotechnology: The Domain of the Very Small
Robotics: Machines Come to Life
Virtual Reality: The Unreal Simulating the Real
The Internet and the Coming “Third Wave”
Biomedical Advances through Information Flow
Acknowledgments
About the Authors
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