Angel investors
Whose money do angel investors invest?
Their own money (wealthy individuals or families)
What is the Primary focus in the seed/ Angel stage of the vc ?
Focus primarily on refining the business model, building the prototype of the product, bringing it to market, beginning to build an entrepreneurial team.
Where does a LBO take its money from?
10–40% equity, 60–90% debt
What is an angel network, and why do angels join one?
A group that matches angels with entrepreneurs. It lets them diversify across more startups and share the due diligence.
what is a crash crunch?
A rapid expansion of the firm may result in a “cash crunch", where the firm’s revenue and profits grow rapidly, but its free cash flow lags
What usually happens to a public company after an LBO?
It is taken private (removed from the stock exchange)
Why can't an angel use Disounted Cash Flows (DCF) to value a startup?
Startups have negative cash flows for years, so discounting future cash flows doesn't give a meaningful value
Explain venture syndication and give 2 reasons why VCs do it
Several VCs invest together in one deal.
Reasons (any 2): reciprocity, signaling quality, adding expertise, better outcomes (survival, more IPOs).
How many years does an LBO fund usually wait before selling the company?
5 to 7 years
True or false: angel investors are a type of VC. Explain
False. Angels invest their own money as individuals; VCs are professionals investing other people's money (LPs') through a fund.
Explain the fund life cycle with the different stages.
1) vintage year= the first year of a venture capital fund, typically the year in which the first capital is invested
2) Fundraising = GPs meet with LPs to build a case for funding
3) Sourcing & due diligence = Look at the business model, the product or technology and the management team
4) Investment of capital = Term sheet: written agreement specifying the deal structure.
5) Monitoring and managing
6) Exit and harvesting profits
A fund buys a firm for €100M with €20M equity and €80M debt. €30M of debt is repaid, and the firm sells for €130M. What multiple does the fund make?
Debt left €50M, equity €80M, so 4× its money