MGMT 496 – 696 Structuring & Managing the Venture Capital Processes
Future-is-Now Ventures
Future-is-Now Ventures is a venture capital fund with the following:
Just raised its first fund of $25 Million
5 Limited Partners (LPs) each investing at 20%
4 General Partners (Professor White is one of the GPs)
10 year fund
Invest in a wide range of industries. Focus is Series Seed and Series A startup ventures that use technology to disrupt an industry.
2% management fee and 20% carry.
Future-is-Now Ventures
Future-is-Now Ventures is a venture capital fund with the following:
Just raised its first fund of $25 Million
5 Limited Partners (LPs) each investing at 20%
4 General Partners (Professor White is one of the GPs)
10 year fund
Invest in a wide range of industries. Focus is Series Seed and Series A startup ventures that use technology to disrupt an industry.
2% management fee and 20% carry.Business Memo #3: Deal Sourcing Using Equity Crowdfunding Platforms
Future-is-Now Ventures
Scenario: You are a VC analyst with Future-is-Now Ventures. Your GPs have become intrigued with Equity Crowdfunding platforms as a way to improve/increase deal flow.
You are tasked with signing up with the below platforms, reviewing at least 20 companies, and identifying 3 companies to potentially be added to your deal flow. The GPs also want you to recommend one as “the most investable”. You will prepare a written memo of your analysis. Be prepared to make brief remarks.
Keep in mind two items:
“Return the fund” goal for each of the three proposed investments (20x – 22x return) and
investment size for each investment (4 GPs x 5 investments each x $1,000,000 per investment). So we are looking for approximately $300,000 – $600,000 for Seed Series/Series A investment and leave the remainder (dry powder) for follow on rounds.
Important Criteria when screening companies:
Proposed (Initial) Investment Amount: For Future is Now Ventures it is $200,000 – $400,000 (to fit our fund, correct?) (total is about $1M for initial + dry powder)
“Minimum Amount to Invest”: Only look at companies where it is $3,000 or less (to fit my actual investment! :<) )
Make sure the “investment period” is open through December!
Important Criteria when screening companies:
Proposed (Initial) Investment Amount: For Future is Now Ventures it is $200,000 – $400,000 (to fit our fund, correct?) (total is about $1M for initial + dry powder)
“Minimum Amount to Invest”: Only look at companies where it is $3,000 or less (to fit my actual investment! :<) )
Make sure the “investment period” is open through December!
Action Steps:
1. Register as an investor with these three Crowdfunding Platforms:
Wefunder
Seedinvest
Microventures
StartEngine
2. Review each website extensively to understand the rules for investing and how to search.
3. Review at least 15 – 20 companies (preferably in your previously identified industries) to get to your “top 3” and then “top 1” recommendation as most “investable”.
4. Prepare your memo! See next page for template. Submission date/time: See Syllabus/CANVAS.
Business Memo #3 Template: Maximum of 6 pages (for content + Appendices), single space (1.0 – 1.25, 11 or 12 point font). The memo structure is as follows:
Memo Salutation
Brief Summary/Introduction and BLOT (1/2 page)
Company 1, 2, 3 (for each) (Use APA citation where appropriate) (1 – 1.5 pages for each. Start on new page for each of these)
Deal Snapshot:
Deal Snapshot:
Deal Snapshot (Smart approach: Separate into a separate box )
Company Name and website link:
Industry:
Platform:
Funds Raised to date and closing period:
Investment vehicle (equity, convertible note, SAFE) and terms:
Type (CF, Reg A+, Reg D):
In your Memo Analysis: “Integrate (weave in) throughout your data/outcomes from your Venture Rating Model, VC-1 Model, VC-1 Dilution & Cap Table. Make sure you explain WHY for: your “scrubbing” (if any), Inv#1 ($, %), Inv#2 ($, %), future rounds (of our $ but also other investors), Revenue guidance), and any other numbers
In your Memo Analysis: “Integrate (weave in) throughout your data/outcomes from your Venture Rating Model, VC-1 Model, VC-1 Dilution & Cap Table. Make sure you explain WHY for: your “scrubbing” (if any), Inv#1 ($, %), Inv#2 ($, %), future rounds (of our $ but also other investors), Revenue guidance), and any other numbers
Our proposed initial investment amount:
Company Overview:
Industry Data- Forecast info? (1 – 2 sentences)
Customer Problem/Pain Point
Product/Service Solution
TAM Market Size
Team Member names & brief analysis
Other relevant information
Financial forecast Table for 1 – 5 years. High level Revenue, COGs, GM, EBITDA/Operating Income. “units sold” also helpful for year)
Item
Year ?
Year ?
Year ?
Year ?
Year ?
Revenue
COGS
GM
Fixed (S&GA)
EBITDA/OI
“Units” sold
Analysis:
What are the 3 – 4 items you really like about this company that makes it “investable”?
Team, Traction, Scale potential, Other
What are your 2 – 3 biggest hesitations/risks that you see in investing?
Why is this company a fit for our fund?
Number 1 Recommended Company as “Highly Investable” (1/2 page)
Why? Give solid reasoning and analysis.
Appendix (start on a new page)
TOOL KIT:
Venture Rating Model For each of the 3 companies: (No assumptions needed for the two you did not select. YES for assumptions for the 1 company you selected)
VC-1 Method, VC-2 Dilution, & Seed-A-B-C Cap Table Analysis for your all 3 companies – full details/assumptions for your 1 investable pick
Table that includes at 15 – 20 companies you reviewed using the below framework
Company Name (website link embedded)
Industry
Pitch
Why should we invest? 1 sentence
Amount Raising, Vehicle, Terms
So your actual submission will include: 1 PDF of the Memo and 3 separate Tool Kits (Excel) with your three companies.