Entrepreneurial Finance and Venture Capital

5.

The Venture Capital Industry

5.1.

Overview of Venture Capital

5.1.1.

Definition and Role in the Innovation Economy

5.1.2.

History and Evolution of VC

5.1.3.

Venture Capital vs. Private Equity

5.1.4.

Impact on Startup Ecosystems

5.2.

The Structure of a Venture Capital Fund

5.2.1.

General Partners

5.2.1.1.

Roles and Responsibilities

5.2.1.2.

Compensation Structure

5.2.2.

Limited Partners

5.2.2.1.

5.2.2.2.

Return Expectations

5.2.3.

The Fund Partnership Agreement

5.2.3.1.

Key Terms and Provisions

5.2.3.2.

Governance Structure

5.3.

The VC Fund Lifecycle

5.3.1.

5.3.1.1.

Sourcing LP Commitments

5.3.1.2.

5.3.2.

Investing Period

5.3.2.1.

Investment Pace

5.3.2.2.

Portfolio Construction

5.3.3.

Harvesting/Exiting

5.3.3.1.

Exit Strategies

5.3.3.2.

Distributions to LPs

5.3.4.

Fund Dissolution

5.3.4.1.

Winding Down Operations

5.3.4.2.

Final Reporting

5.4.

Economics of a VC Fund

5.4.1.

Management Fees

5.4.1.1.

5.4.1.2.

Impact on Fund Returns

5.4.2.

Carried Interest

5.4.2.1.

Calculation of Carry

5.4.2.2.

Distribution Waterfall

5.4.3.

5.4.3.1.

Preferred Return Thresholds

5.4.4.

Fund Performance Metrics

5.4.4.1.

Internal Rate of Return

5.4.4.2.

Total Value to Paid-In

5.4.4.3.

Distributions to Paid-In

5.4.4.4.

Residual Value to Paid-In

5.5.

Types of Venture Capital Firms

5.5.1.

5.5.2.

Traditional VCs

5.5.3.

Corporate Venture Capital

5.5.4.

Government-Backed Funds

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4. Sources of Early-Stage Capital

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6. The Venture Capital Investment Process