Venture Capital and the Finance of Innovation / Edition 2

Hardcover (Print)
Rent
Rent from BN.com
$33.98
(Save 83%)
Est. Return Date: 10/31/2014
Buy Used
Buy Used from BN.com
$125.91
(Save 38%)
Item is in good condition but packaging may have signs of shelf wear/aging or torn packaging.
Condition: Used – Good details
Used and New from Other Sellers
Used and New from Other Sellers
from $16.15
Usually ships in 1-2 business days
(Save 92%)
Other sellers (Hardcover)
  • All (24) from $16.15   
  • New (13) from $37.49   
  • Used (11) from $16.15   

Overview

This useful guide walks venture capitalists through the principles of finance and the financial models that underlie venture capital decisions. It presents a new unified treatment of investment decision making and mark-to-market valuation. The discussions of risk-return and cost-of-capital calculations have been updated with the latest information. The most current industry data is included to demonstrate large changes in venture capital investments since 1999. The coverage of the real-options methodology has also been streamlined and includes new connections to venture capital valuation. In addition, venture capitalists will find revised information on the reality-check valuation model to allow for greater flexibility in growth assumptions.
Read More Show Less

Editorial Reviews

From the Publisher
"Despite the increasing importance of the venture capital industry, until now there was no reference that could provide practitioners with a specialized grounding in finance. With clear explanations and practical models, Metrick's book can fill this gap. I enthusiastically recommend this book to all venture capitalists."
—Ted Schlein, Partner, Kleiner Perkins Caufied & Byers
Read More Show Less

Product Details

  • ISBN-13: 9780470454701
  • Publisher: Wiley
  • Publication date: 9/21/2010
  • Edition description: New Edition
  • Edition number: 2
  • Pages: 576
  • Sales rank: 1,218,029
  • Product dimensions: 6.20 (w) x 9.10 (h) x 0.90 (d)

Meet the Author

Andrew Metrick is a Professor of Finance and the Theodore Nierenberg Professor of Corporate Governance at the Yale School of Management, where he teaches a course in Venture Capital and the Finance of Innovation. He was previously a faculty member in the finance department at the Wharton School of the University of Pennsylvania, and in the economics department of Harvard University. In 2010 he served as the Chief Economist for President Obama's Council of Economic Advisers. Dr. Metrick received a BA in Economics and Mathematics from Yale and a Ph.D. in Economics from Harvard. He has received numerous teaching awards and distinctions, including recognition by BusinessWeek as one of the best teachers at Wharton.

Ayako Yasuda is an Assistant Professor of Management at the Graduate School of Management, University of California, Davis. She was previously a faculty member in the finance department at the Wharton School of the University of Pennsylvania; prior to her Ph.D. she worked at the Investment Banking Division of Goldman, Sachs & Co. Dr. Yasuda received a BA and Ph.D. in Economics from Stanford University. She has won numerous research grants and has been published in the Journal of Finance, Journal of Financial Economics, and the Review of Financial Studies.

Read More Show Less

Table of Contents

Preface to the 2nd Edition-A Reader's Guide.

Acknowledgments.

PART I VC BASICS.

Chapter 1 The VC Industry.

1.1 What is Venture Capital?

1.2 What Do Venture Capitalists Do?

1.3 The History of Venture Capital.

1.4 Patterns of VC Investment in the United States.

1.4.1 Investments by Stage.

1.4.2 Investments by Industry.

1.4.3 Investments by U.S. Region.

Summary.

Key Terms.

References.

Chapter 2 VC Players.

2.1 Firms and Funds.

2.2 The Limited Partners.

2.3 VC Partnership Agreements.

2.3.1 Management Fees.

2.3.2 Carried Interest.

2.3.3 Restrictive Covenants.

Summary.

Key Terms.

References.

Exercises.

Appendices: Key Terms and Conditions for Three VC Funds.

Appendix 2.A: EarlyBird Ventures I.

Appendix 2.B: Talltree Ventures IV.

Appendix 2.C: Owl Ventures IX.

Chapter 3 VC Returns.

3.1 Industry Returns.

3.1.1 Definitions.

3.1.2 A Gross-Return Index.

3.1.3 A Net-Return Index.

3.2 Fund Returns.

3.2.1 Definitions.

3.2.2 Evidence.

Summary.

Key Terms.

References.

Exercises.

Chapter 4 The Cost of Capital for VC.

4.1 The Capital Asset Pricing Model.

4.2 Beta and the Banana Birds.

4.3 Estimating the Cost of Capital for VC.

Summary.

Key Terms.

References.

Exercises.

Chapter 5 The Best VCs.

5.1 The Economics of VC.

5.2 The Best VCs: A Subjective List.

5.3 VC Value Added and the Monitoring of Portfolio Firms.

Summary.

Key Terms.

References.

Chapter 6 VC Around the World.

6.1 The Global Distribution of VC Investing.

6.2 The Cost of Capital for International VC.

6.2.1 Baseline Model: The Global CAPM.

6.2.2 Objective and Extensions to the Global CAPM.

6.2.3 A Global Multifactor Model for Venture Capital.

Summary.

Key Terms.

References.

Exercises.

PART II TOTAL VALUATION.

Chapter 7 The Analysis of VC Investments.

7.1 VC Investments: The Historical Evidence.

7.2 The Investment Process.

Summary.

Key Terms.

References.

Chapter 8 Term Sheets.

8.1 The Basics.

8.1.1 Investors.

8.1.2 Price Per Share.

8.1.3 Pre-Money and Post-Money Valuation.

8.1.4 Capitalization.

8.2 The Charter.

8.2.1 Dividends.

8.2.2 Liquidation Preference.

8.2.3 Voting Rights and Other Protective Provisions.

8.2.4 Mandatory Conversion.

8.2.5 Redemption Rights.

8.3 Investor Rights Agreement.

8.3.1 Registration Rights.

8.3.2 Matters Requiring Investor-Director Approval.

8.3.3 Employee Stock Options.

8.4 Other Items.

8.4.1 Rights and Restrictions.

8.4.2 Founders' Stock.

Summary.

Key Terms.

References.

Exercises.

Chapter 9 Preferred Stock.

9.1 Types of Preferred Stock.

9.2 Antidilution Provisions.

Summary.

Key Terms.

References.

Exercises.

Chapter 10 The VC Method.

10.1 The VC Method: Introduction.

10.1.1 Exit Valuation.

10.1.2 Target Returns.

10.1.3 Expected Retention.

10.1.4 The Investment Recommendation.

10.2 The Standard VC Method.

10.3 The Modified VC Method.

Summary.

Key Terms.

References.

Exercises.

Chapter 11 DCF Analysis of Growth Companies.

11.1 DCF Analysis: Concepts.

11.2 DCF Analysis: Mechanics.

11.3 Graduation Value.

11.4 DCF Analysis: The Reality-Check Model.

11.4.1 Baseline Assumptions for the Reality-Check DCF.

Summary.

Key Terms.

References.

Exercises.

Chapter 12 Comparables Analysis.

12.1 Introduction to Comparables Analysis.

12.2 Choosing Comparable Companies.

12.3 Using Comparable Companies to Estimate the Cost of Capital.

Summary.

Key Terms.

References.

Exercises.

Appendix 12.A: Potential Comparables for Semico.

PART III PARTIAL VALUATION.

Chapter 13 Option Pricing.

13.1 European Options.

13.2 Pricing Options Using a Replicating Portfolio.

13.3 The Black-Scholes Solution.

13.4 American Options.

13.5 Random-Expiration Options.

13.6 Reading Exit Diagrams.

13.7 Carried Interest as an Option.

Summary.

Key Terms.

References.

Exercises.

Appendix 13.A RE Options: Technical Details.

Chapter 14 The Valuation of Preferred Stock.

14.1 Base-Case Option-Pricing Assumptions.

14.2 RP Valuation.

14.3 Excess Liquidation Preferences.

14.4 Dividends.

14.5 CP Valuation.

14.6 CP with Excess Liquidation Preferences or Dividends.

14.7 Combining RP and CP.

14.8 Comparing RP and CP.

Summary.

Key Terms.

References.

Exercises.

Chapter 15 Later-Round Investments.

15.1 Series B.

15.2 A Conversion Shortcut.

15.3 Series C.

15.4 Dividends in Later Rounds.

15.4.1 Accrued Cash Dividends.

15.4.2 PIK Dividends.

15.5 Beyond Series C.

Summary.

Key Terms.

Exercises.

Chapter 16 Participating Convertible Preferred Stock.

16.1 Binary Options.

16.2 The Valuation of PCP.

16.3 The Valuation of PCPC.

16.4 Series B and Beyond.

Summary.

Key Terms.

References.

Exercises.

Chapter 17 Implied Valuation.

17.1 Post-Money Valuation Revisited.

17.2 Measurement of Portfolio Value.

17.3 Down Rounds?

17.4 How to Avoid Valuation Confusion.

Summary.

Key Terms.

Exercises.

Chapter 18 Complex Structures.

18.1 Management Carve-outs.

18.2 Dealing with Partners.

18.3 A Complex Example.

Summary.

Key Terms.

Exercises.

PART IV THE FINANCE OF INNOVATION.

Chapter 19 R&D Finance.

19.1 R&D Around the World.

19.2 Two Touchstones.

19.2.1 Drug Development.

19.2.2 Energy Innovation.

19.3 How Is R&D Financed?

19.4 Where Do We Go from Here?

Summary.

Key Terms.

References.

Chapter 20 Monte Carlo Simulation.

20.1 Event Trees.

20.2 Simulation with Continuous Probability Distributions.

20.3 Simulation with Multiple Sources of Uncertainty.

Summary.

Key Terms.

Exercises.

Chapter 21 Real Options.

21.1 Decision Trees.

21.2 Real Options in R&D.

21.3 The Valuation of Real Options.

21.4 Risk-Neutral Probabilities.

21.5 Drugco, Revisited.

Summary.

Key Terms.

Exercises.

Chapter 22 Binomial Trees.

22.1 The Black-Scholes Equation, Revisited.

22.2 Multiple Strike Prices and Early Exercise.

22.3 Dividends.

Summary.

Key Terms.

References.

Exercises.

Chapter 23 Game Theory.

23.1 What Is Game Theory?

23.2 Simultaneous Games.

23.3 Sequential Games.

23.4 Game Theory and Real Options.

Summary.

Key Terms.

Exercises.

Chapter 24 R&D Valuation.

24.1 Drug Development.

24.2 Energy.

24.3 The Forest and the Trees.

Summary.

References.

Exercises.

Appendix A Sample Term Sheet.

Appendix B The VCFI Spreadsheets.

Appendix C Guide to Crystal Ball®.

Glossary.

Index.

Read More Show Less

Customer Reviews

Average Rating 5
( 1 )
Rating Distribution

5 Star

(1)

4 Star

(0)

3 Star

(0)

2 Star

(0)

1 Star

(0)

Your Rating:

Your Name: Create a Pen Name or

Barnes & Noble.com Review Rules

Our reader reviews allow you to share your comments on titles you liked, or didn't, with others. By submitting an online review, you are representing to Barnes & Noble.com that all information contained in your review is original and accurate in all respects, and that the submission of such content by you and the posting of such content by Barnes & Noble.com does not and will not violate the rights of any third party. Please follow the rules below to help ensure that your review can be posted.

Reviews by Our Customers Under the Age of 13

We highly value and respect everyone's opinion concerning the titles we offer. However, we cannot allow persons under the age of 13 to have accounts at BN.com or to post customer reviews. Please see our Terms of Use for more details.

What to exclude from your review:

Please do not write about reviews, commentary, or information posted on the product page. If you see any errors in the information on the product page, please send us an email.

Reviews should not contain any of the following:

  • - HTML tags, profanity, obscenities, vulgarities, or comments that defame anyone
  • - Time-sensitive information such as tour dates, signings, lectures, etc.
  • - Single-word reviews. Other people will read your review to discover why you liked or didn't like the title. Be descriptive.
  • - Comments focusing on the author or that may ruin the ending for others
  • - Phone numbers, addresses, URLs
  • - Pricing and availability information or alternative ordering information
  • - Advertisements or commercial solicitation

Reminder:

  • - By submitting a review, you grant to Barnes & Noble.com and its sublicensees the royalty-free, perpetual, irrevocable right and license to use the review in accordance with the Barnes & Noble.com Terms of Use.
  • - Barnes & Noble.com reserves the right not to post any review -- particularly those that do not follow the terms and conditions of these Rules. Barnes & Noble.com also reserves the right to remove any review at any time without notice.
  • - See Terms of Use for other conditions and disclaimers.
Search for Products You'd Like to Recommend

Recommend other products that relate to your review. Just search for them below and share!

Create a Pen Name

Your Pen Name is your unique identity on BN.com. It will appear on the reviews you write and other website activities. Your Pen Name cannot be edited, changed or deleted once submitted.

 
Your Pen Name can be any combination of alphanumeric characters (plus - and _), and must be at least two characters long.

Continue Anonymously

    If you find inappropriate content, please report it to Barnes & Noble
    Why is this product inappropriate?
    Comments (optional)