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| Foreword | |
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| Preface | |
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| Acknowledgments | |
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| Introduction | |
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| Creditica Software Inc. Case Study | |
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| Understanding the Basics of the Venture Capital Method | |
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| Developing a Financing Map | |
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| Creating a Set of Stepping-Stones for a New Business | |
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| Matching the Financing Strategy to the Stepping-Stones | |
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| Developing a Map of Possible Stepping-Stones | |
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| Capturing as Much of the Prize as You Can | |
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| Getting to the First Stepping-Stone | |
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| Why New Ventures Are Not Fully Funded from the Start | |
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| Fleshing Out the First Stepping-Stone | |
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| Options at the End of Each Stage of Investment | |
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| The Chief Financial Officer as Strategist | |
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| Why Corporations Fail in Creating New Businesses | |
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| The Unique Cash Flow and Risk Dynamics of Early-Stage Ventures | |
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| Costs Known-Revenues Unknown | |
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| J Curves and Peak Cash Needs | |
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| Milestone Funding: Option or Investment? | |
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| A 12- to 24-Month Ticking Clock | |
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| Timing Is Everything-Buy Low, Sell High | |
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| A Five- to Seven-Year Marathon in Three to Four Stages | |
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| Gross Margins of 80 to 100% | |
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| No Correlation between the Amount of Money Raised and the Company's Success | |
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| A Tension between the "Lemons Ripening Early" and the "Valley of Death" | |
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| A Binary Payoff Profile | |
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| Raising the Finance | |
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| Determining the Amount of Capital to Raise and What to Spend It On | |
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| An Established Company-Estimating the Amount of Capital to Raise | |
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| A New Company-Estimating the Amount of Capital to Raise | |
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| Activities in a New Business That Absorb Capital | |
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| Investors' Views of the Five Capital-Absorbing Activities | |
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| Businesses with Different Capital-Absorbing Profiles | |
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| Getting Behind How Venture Capital Firms Think | |
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| Structure of Venture Capital Funds | |
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| Types of Investors in Venture Capital Funds | |
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| Size and Internal Structure of VC Firms | |
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| How VC Firms Are Compensated | |
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| Valuation of Investments within a VC Portfolio | |
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| Cash Flows and J Curve at a Fund Level | |
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| Expected Returns on a VC Fund | |
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| Expected Returns on Individual Investments in a VC Fund | |
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| It's All about Big Winners | |
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| Portfolio Construction | |
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| Sorting Out Conflicts of Interest | |
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| Creating a Winning Business Plan | |
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| Market Power-the Key Ingredient Missing in Most Business Plans | |
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| Evidence to Include in the Business Plan | |
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| Potential for Accelerated Growth in a Big, Accessible Market | |
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| Achievable Position of Market Power | |
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| Capable, Ambitious, Trustworthy Management | |
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| Plausible, Value-Enhancing Stepping-Stones | |
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| Realistic Valuation | |
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| Promising Exit Possibilities | |
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| Valuing the Early-Stage Venture | |
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| Valuing Early-Stage Companies | |
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| Traditional Valuation Methods-Why They Don't Work for Early-Stage Ventures | |
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| Are Valuations of Technology Companies Crazy? | |
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| Corporate Finance Theory-Technology Company Valuation | |
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| Triangulation Process of Venture Capitalists | |
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| How the Company Can Maximize Its Valuation | |
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| Why Big Companies Buy Small Companies | |
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| Value of Small Companies Compared to Large Companies | |
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| Negotiating the Deal: Term Sheets | |
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| Agreeing on a Term Sheet with a Venture Capitalist | |
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| Percentage Ownership of the Company Granted to the Investor | |
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| What Each Side Tries to Achieve in a Term Sheet | |
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| Why It Isn't Like Investing in a Public Company | |
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| Terms for Splitting the Rewards | |
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| Exit Preferences, Linked to the Type of Preferred Stock | |
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| Staging of Investment against Milestones | |
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| Options to Invest More Money at a Defined Price per Share | |
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| Preferred Dividends | |
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| Antidilution | |
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| Problems with Ratchets | |
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| Pay-to-Play Clauses | |
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| Washout Financing Rounds-Down (and Out!) Rounds | |
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| Allocating Control Between Founders/Management and Investors | |
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| Restricted Transactions/Protective Covenants | |
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| Structure of the Board of Directors | |
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| Redemption | |
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| Forced Sale | |
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| Registration Rights | |
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| Tagalong Rights, Dragalong Rights | |
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| Information Rights | |
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| Right of Access to the Premises and Records and Right to Appoint a Consultant | |
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| Preemption Rights | |
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| Transfer Provisions | |
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| Exclusivity Clause | |
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| Aligning the Interests of Founders/Management and Investors | |
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| Founders' Stock | |
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| Option Pool | |
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| Vesting Arrangements | |
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| Noncompete Agreements | |
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| Intellectual Property Assignment | |
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| Warranties and Representations | |
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| Exercises | |
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| Term Sheet Exercises | |
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| Security Portal Inc. | |
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| Standard Term Sheet Clauses | |
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| Index | |