Do you understand venture capital….no, really, do you?
I came across a link that I think outlines the basics of how venture capital works. The slideshow shows key elements of the financing process. What I find particularly important and useful is the explanation of why VC firms need and, frankly, deserve preferred stock in companies in which they invest - I love the fact the author uses the term “mischief” to describe the alternative of giving VC’s common stock.
I also think the author has the right idea in emphasizing that both investors and entrepreneurs have something to gain from transparency in the financing process - if everyone understands the terms, a true “meeting-of-the-minds” occurs and each side is happy with the deal.
