Startups

Corporate Serutiries SPries

START-UP.COMPANIES

Planning, Financing, and Operating the Successful Business

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Planned and Edited

Richard D. Harroch, Esq.

Orrick, Hm-nghn & Sufcliffe Gn Francisco, GljSrnia

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Law Journal Seminars-Press 111 Eighth Avenue, Suite 900 New York, New York 10011

00592

CHAPTER 7

The Venture Financing Process

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BY

Alan E. S h a n Brobedc, Phleger 1L: Harrison Palo Alto and L. John Doerr Kleiner Perkins Caufield bE B yers. San Francisco

. Chapter Contents

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Overview Developiag n Company Financing Strategy [I] The Key Components [2] Detumining ReQ-ents , [3] Evdnation of Fmmeing Alternatives [b] ~&tio~ship Business P h to [5J Valuation The Business Plan [I] O~(henieri: Thelunctions of a Business P h .

. [5J The Pmdnct

i&j&anent

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[a} The Market b] Compe'tition [c] projected Market Penetration Manufactnring O p ~ t i ~ n s [a} Corporate Org&tion

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START-UP COMPAND3

[9] Financial Statements and Projectfons ' [lo] Appendices Dealing With Venhue Capitalists [I] Oveniew and Objectives [ ] Iiil Contacts Z nta [ ] Presentstton 3 [4] Due Diligence [a Negotiations and Closing Farm: Investment Analysis Summary Farm: T m Sheet for Venture CapiCat InvHment

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5 7.01 Overview

Plartaing the tinancing strategy is an mential early step in the p r o w of orgarwing any start-up company. While companies will differ dramatically in their capital needs, amities to attract f m c i n g and preferred manner of capitdimtion, the maepreneur should accept that the developil ment and implementation of a cohmnt strategy for raising capital wl be a requ&ementconpinuously rcpcattd thmughout tbe life of bis company. While this chapter wiU focus primarily on the venture fwcing procss for early stage start-up companies, the discussion will also a d d m albmative sources of c a p i d Venture capital f m c i n g is not...