<p></p><p>VENTURE CAPITAL:<br/>A PRACTICAL GUIDEBOOK FOR<br/>BUSINESS OWNERS, MANAGERS,<br/>AND ADVISORS<br/>TABLE OF CONTENTS<br/>ABOUT THE AUTHOR............................................................................vii<br/>INTRODUCTION....................................................................................ix<br/>SECTION I: SOURCES OF CAPITAL ............................................................1<br/>Owners; Friends and Family ..........................................................1<br/>Earnings (Company-Generated Funds) ...........................................2<br/>Commercial and Bank Loans; Government Loans and Aid ............2<br/>Strategic Alliances; Joint Ventures ..................................................4<br/>Private Placements .........................................................................5<br/>FIG. 1—Securities Law Compliance for Private<br/>Placements: What You Need to Know ...........................7<br/>Venture Capital ............................................................................10<br/>Going Public—The IPO ...............................................................11<br/>Practical Tip..........12<br/>SECTION II: VENTURE CAPITAL FUNDING ...............................................13<br/>Pursuing Venture Capital: Opportunities &amp; Challenges ................14<br/>Choosing and Making the Most of a VC Partner ..........................16<br/>Practical Tip..........18<br/>Venture Capital Fundamentals: Understanding<br/>Venture Capitalists and the Investment Process;<br/>Planning and Preparing for a VC Transaction ...............................18<br/>1) Understand the business and goals of VC investors ............18<br/>2) Understand the investment process—from initial<br/>contact through funding .....................................................20<br/>Practical Tip ..........22<br/>3) Assemble and build a strong management<br/>(and advisory) team ............................................................24</p><p>4) Present a clear, compelling opportunity<br/>via the business plan ...........................................................25<br/>Practical Tip ..........27<br/>5) Be prepared—get and keep your house in order .................27<br/>Practical Tip ..........28<br/>Key Objectives of VC Investors—What Makes<br/>Venture Capitalists Tick? ..............................................................29<br/>1) Maximizing the upside .......................................................29<br/>2) Protecting the downside .....................................................32<br/>3) Monitoring and influencing progress and development ......34<br/>a) The governance vehicle: the investor rights agreement ...35<br/>b) Employment agreements for founders ............................39<br/>4) Assisting with exit strategies and liquidity ...........................40<br/>a) Classic friendly exits ......................................................40<br/>Practical Tip ..........41<br/>Practical Tip ..........43<br/>b) Other exits .....................................................................43<br/>SECTION III: WHAT TO EXPECT IN A VC TRANSACTION:<br/>KEY TERMS, FEATURES, AND ATTRIBUTES ................................................45<br/>Forms of Investment and Related Provisions ................................45<br/>1) Equity and related protective provisions .............................45<br/>2) Debt only ...........................................................................49<br/>3) Mix of equity and debt .......................................................49<br/>Other Mechanisms to Achieve or Assure Financial Upside ..........50<br/>1) Equity ownership and liquidity considerations ....................50<br/>a) Valuation issues .............................................................50<br/>b) First refusal and preemptive purchase rights ..................50<br/>c) Staged, milestone-based funding ....................................51<br/>d) Registration rights ..........................................................51<br/>e) Other registration concerns ............................................52<br/>2) Alignment of founder and management incentives .............53<br/>a) Initial position and vesting .............................................53<br/>b) Equity-based compensation plans, grants, agreements ...53<br/>c) Additional management .................................................54<br/>。。。。。。。</p>