A Guide to Venture Capital,Third Edition

Venture Capital/Private Equity is medium to long-term finance provided in return for a shareholding in unquoted companies.

For the purposes of this guide ‘Private Equity’ refers to ‘Venture Capital’ and ‘Business Angel’ investments at stages in a company’s development, from the seed to expansion stages, as well as management buy-outs and buy-ins. The terms Venture Capital and Private Equity should therefore be regarded as interchangeable phrases.

The purpose of this booklet is to encourage you to start planning early when seeking finance to accelerate the growth of your business. It will explain how a Venture Capitalist approaches the process of investing equity in a business and what you need to do to improve your chances of raising equity.

It gives guidance on what should be included in your business plan, the most important document you will produce when searching for a private equity investor. The guide also demonstrates the positive advantages that venture capital/private equity will bring to your business.

The main sources of private equity on the island are Venture Capital Funds, Business Angels (private individuals who provide smaller amounts of finance at an earlier stage than many private equity firms are able to invest at), Government Agencies (depending upon the sector your business operates in, the presence of other investors and where the business is in its development cycle) and Corporate Venturers. Corporate Venturers can be product related or service companies that provide funds and/or a partnering relationship between mature and early stage companies which may operate in the same industry sector.

This Guide's principal focus is upon Venture Capital Funds. However, the investment criteria that both Venture Capital Funds and Business Angels apply when assessing potential investee companies is often very similar - therefore the guide will benefit entrepreneurs and their advisers looking for private equity from both these sources. In short, the aim is to help you understand what Venture Capital Funds are looking for in a potential business investment and how to approach them.

CONTENTS:

Foreword by Desmond Fahey,
Chairman of the Irish Venture Capital Association 2
Foreword by Barry Fitzsimons,
Chair of EquityNetwork 3
An Introduction to Venture Capital 4
• What is venture capital/private equity? 5
• How do I make my company attractive to a venture capitalist or an investor in general? 5
• Benefits of venture capital 7
• Questions to ask before approaching a venture capitalist 8
• The Business Plan 10
The Role of the Non-Executive Director 14
Sources of Venture Capital 15
Glossary of Terms 28
Irish Venture Capital Association Council 33
Irish Venture Capital Association – Associate Members 34
EquityNetwork – Steering Committee 38
– Executive 38
Useful Contacts 40