Entrepreneurial Finance: Strategy, Valuation, and Deal Structure

Learning Objectives

After reading this chapter you should be able to:

• Understand the development of the venture capital market and its current status

• Describe the structure of a typical venture capital fund and understand how changes in regulations that govern institutional investors influence the structure

• Explain the venture capital fund structure and how the structure influences the kinds of investors who invest in the fund, as well as the kinds of investments the fund seeks

• Understand the roles of the general partners of a fund and how those roles may change over the life of a fund

• Understand the contract structure that exists between investors in a fund (limited partners) and the general partner, and how the structure promotes efficient investment and asset management

• Understand the important role of reputation in defining relationships among venture capitalists, investors, and portfolio companies