Professor Sandeep Dahiya Georgetown University Venture Capital Professor Sandeep Dahiya Georgetown University

ONSET Ventures How would you compare ONSET to a more traditional source of capital such as a Bank? (Would TallyUp care if the money came from a bank instead of a VC?)

What is a VC? (1) A VC is a financial intermediary, meaning that they take the investors’ capital and invest it directly in portfolio companies. (2) A VC will only invest in private companies. This means that once the investments are made, the companies cannot be immediately traded on a public exchange. (3) A VC takes an active role in monitoring and helping the companies in his portfolio. (4) A VC’s primary goal is to maximize his financial return by exiting investments through a sale or an initial public offering (IPO). (5) VCs invest in order to fund the internal growth of companies. Angel Investor Mutual Fund Corporate Investment Buyout Fund

ONSET Ventures How would you compare ONSET to a more traditional source of capital such as a Bank? (Would TallyUp care if the money came from a bank instead of a VC?) Guiding principles of ONSET – Do they make sense? Which type of entrepreneur is or is not a good fit for ONSET? Why? Why is ONSET limiting itself to 80-95 million range when there is a strong demand from investor?

This Course No easy answers – Boot Camp (Up to 100+pages of reading before class!!) Main Perspective Key aspects and practices of industry How these key features are a response to the difficult environment Constant comparison of the US and European experience

We will follow the “Venture Capital Cycle” Investing Capital Exit and returning capital Fund raising

Raising Capital Highly complex and arcane legal issues We shall focus on high level themes Perspective of capital suppliers Structure of rewards Profound effect on behavior is important for everyone!

ONSET Ventures The first fund (1984) – Do you find anything unusual about this fund? Highlights from the Offering (Ex1) – If you were investing in ONSET III what would you focus on? Why?

Investing Capital Challenges Responses by VCs Uncertainty Asymmetric Information Nature of Firm’s assets Conditions of relevant financial and product markets Responses by VCs Active Screening Stage Financing Syndication Use of Stock options/grants with strict vesting requirements Contingent control mechanisms – Covenants and restrictions Strategic composition of Board of Directors

ONSET Ventures Revisit the guiding principles of ONSET How are the applied/not applied to Tally Up investment? Analyze Tally Up using the challenges/responses framework we just saw

Investing Capital Challenges Responses by VCs Uncertainty Asymmetric Information Nature of Firm’s assets Conditions of relevant financial and product markets Responses by VCs Active Screening Stage Financing Syndication Use of Stock options/grants with strict vesting requirements Contingent control mechanisms – Covenants and restrictions Strategic composition of Board of Directors

Exiting Investments Failure Success “Liquidity Event” Disappear Zombie Companies “Living Dead” Success “Liquidity Event” Critical … yet controversial Can cause severe heartburns for an entrepreneur IPO Sale to another company

Why Take this Course? There are few VC related employement opportunities? Broader perspectives Would be entrepreneurs – know the other side Would be investors – know the incentives and organizational issues Would be professionals (Bankers) – know the dynamics

Grading Class Participation 20% Home Work/Quiz 30% Final Exam 50%