Venture Capital investments in C-Corporations

Posted on 26. Jan, 2009 by in Basics

In most circumstances, a company must be a C-Corporation when taking investments from venture capital firms. There are a few reasons for this: VC Limited Partners (LPs) contractually obligate the VC General Partners (GPs) to avoid any pass through tax liabilities that may result in an investment into a portfolio company that wasn’t a C-Corp. [...]

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What is Venture Capital? Part 2

Posted on 05. Nov, 2008 by in Basics

Yesterday, I wrote about the Partners of Venture Capital as part of my “What is Venture Capital?” articles. Today, we’ll add a bit more detail using some very helpful articles written by Fred Wilson. For me, an understanding of how the money flows helped immensely: Venture Capitalists raise a fund from Limited Partners The VCs [...]

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What is Venture Capital?

Posted on 04. Nov, 2008 by in Basics

Let’s start with some definitions. Definitions Venture Capital: Investment into early stage companies by full-time professionals.  The majority of the money invested is not their own (99% typically comes from Limited Partners). Limited Partners:  LPs are the money.  Limited Partners are typically corporations (private pension plans), endowments, foundations, or state pension plans.  Wealthy families also [...]

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Option Pool Creation

Posted on 17. Aug, 2008 by in Basics, Graphical Examples

One of the more subtle points of valuation is option pool creation. The first method is an option pool created from the pre-money side, but calculated on a post-money basis. The second is an option pool created from the post-money side, and calculated on a post-money basis. This is where a graphical example helps dramatically. [...]

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