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| title | TARGET DECK | FILE TAGS | tags | ||
|---|---|---|---|---|---|
| Financing | Obsidian::H&SS | startups::financing |
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Overview
Financing rounds roughly follow the given naming scheme:
- Early-stage companies:
- Series Pre-Seed
- Series Seed
- Series A
- Mid-stage companies:
- Series B
- Series C
- Late-stage companies:
- Series D
- ...
Financing rounds with numerical suffices (e.g. Series B-1) usually refer to situations where the same investors, on the same terms, invest additional money.
%%ANKI Basic What name is given to the earliest financing round? Back: Series Pre-Seed. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
END%%
%%ANKI Cloze The Series {Seed} round follows the Series {Pre-Seed} round. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
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%%ANKI Cloze The Series {A} round follows the Series {Seed} round. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
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%%ANKI Basic What two financing rounds can follow a Series B round? Back: A "Series B-1" or "Series C". Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
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%%ANKI Basic When does a Series A round transition to a Series A-1 round? Back: When the same investors, on the same terms, invest additional money. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
END%%
%%ANKI Basic When does a Series A round transition to a Series B round? Back: When new investors or new terms are applied to a new investment. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
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%%ANKI Basic When does a Series A-2 round transition to a Series B round? Back: When new investors or new terms are applied to a new investment. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
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%%ANKI Basic When does a Series A-2 round transition to a Series B-1 round? Back: N/A. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
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%%ANKI Basic What financing rounds are considered "early-stage"? Back: Series Pre-Seed, Seed, and A. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
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%%ANKI Basic What financing rounds are considered "mid-stage"? Back: Series B and C. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
END%%
%%ANKI Basic What financing rounds are considered "late-stage"? Back: Series D and after. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
END%%
A party round refers to a financing round with many investors that make relatively small investments.
%%ANKI Cloze A {party round} is a {round of financing with many investors making small investments}. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
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%%ANKI Basic Why are party rounds discouraged? Back: You have many VCs but none committed in any meaningful way. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
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%%ANKI Basic Why aren't VCs usually meaningfully committed in a party round? Back: Their investment is likely much smaller relative to what they'd normally invest. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
END%%
%%ANKI Basic What is the primary motivation behind having a party round? Back: You can potentially have many fancy names associated with your company. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
END%%
Venture Capitalists
A venture capitalist (VC) is an investor who provides capital to companies in exchange for an equity stake on behalf of a firm. A firm comprises of the following roles (in order of seniority):
- Managing director (MD) or general partner (GP). The VCs that make the final investment decisions and sit on the boards of directors of the companies they invest in.
- Principal or director. Junior deal professionals looking to become managing directors.
- Associate. Work for one or more deal partners, usually a managing director.
- Analyst. Individuals with similar responsibilites as the associate, though usually less deal-centric.
%%ANKI Basic What is VC short for? Back: Venture capitalist. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
END%%
%%ANKI Basic What ambiguity does the term "VC" introduce? Back: It may refer to a VC firm or an individual of said firm. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
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%%ANKI Cloze Typically VCs provide {capital} in exchange for {equity}. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
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%%ANKI Basic How is a "venture capitalist" defined? Back: An investor who provides capital to companies, on behalf of a firm, in exchange for equity. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
END%%
%%ANKI Basic What form of capital does a VC typically work in? Back: Cash flow. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
END%%
%%ANKI Basic Within a VC firm, what does MD stand for? Back: Managing director. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
END%%
%%ANKI Basic Within a VC firm, what does GP stand for? Back: General partner. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
END%%
%%ANKI Basic With respect to a VC firm, what does a "managing director" refer to? Back: A senior VC, generally responsible for making final investment decisions. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
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%%ANKI Basic With respect to a VC firm, what does a "general partner" refer to? Back: A senior VC, generally responsible for making final investment decisions. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
END%%
%%ANKI Cloze A {general partner} is also known as a {managing director}. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
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%%ANKI Cloze The {principal/director} role follows the {MD/GP} role in seniority. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
END%%
%%ANKI Basic With respect to a VC firm, what does a "principal" refer to? Back: A VC working their way up to becoming a GP. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
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%%ANKI Basic With respect to a VC firm, what does a "director" refer to? Back: A VC working their way up to becoming an MD. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
END%%
%%ANKI Cloze A {principal} is also known as a {director}. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
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%%ANKI Basic What types of VCs are grouped under term "deal partner"? Back: GPs and principals. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
END%%
%%ANKI Basic What distinguishes VCs from angel investors? Back: The former use a pool of investors' money. The latter uses their own money. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
END%%
%%ANKI Cloze The {associate} role follows the {principal/director} role in seniority. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
END%%
%%ANKI Cloze The {analyst} role follows the {associate} role in seniority. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
END%%
%%ANKI Basic How are analysts and associates typically distinguished? Back: The latter are usually more deal-centric than the former. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
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%%ANKI Basic What role is a recent college graduate likely given at a VC firm? Back: Analyst. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
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%%ANKI Basic With respect to a VC firm, what does an "associate" refer to? Back: An employee usually working directly for one or more deal managers. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
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%%ANKI Basic With respect to a VC firm, what does an "analyst" refer to? Back: An employee working on general functions for the firm. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
END%%
While some VCs invest alone, many invest with other VCs. A collection of investors is called a syndicate. Most syndicates have a lead investor usually responsible for taking the role of negotiating terms on behalf of the entire syndicate.
%%ANKI Cloze A {syndicate} is a {collection of investors}. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
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%%ANKI Basic A syndicate collectively refers to which kind of investors? Back: Anyone that ends up purchasing equity in a financing. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
END%%
%%ANKI Basic A "lead investor" is considered the lead of what? Back: A syndicate. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
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%%ANKI Basic What is the usual responsibility of a lead investor? Back: Negotiating terms on behalf of the syndicate. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
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%%ANKI Basic Why do entrepreneurs want a lead investor? Back: To limit the number of negotiations to just those with the lead. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
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%%ANKI Basic How many lead investors can a syndicate have? Back: There is no limit. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
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Angel Investors
Angels are usually high-net-worth individuals that invest in a company. They must qualify as an accredited investor or have an appropriate exemption to invest. Angel investors that make many small investments to companies are called super angels.
%%ANKI Cloze An {angel} is a shorthand term for an {angel investor}. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
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%%ANKI Cloze Angels must be {accredited}, as defined by the SEC. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
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%%ANKI Basic What distinguishes an angel and VC's funding source? Back: The former use their own money. The latter uses a group of investors' money. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
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%%ANKI Basic What is a super angel? Back: Angel investors that make many small investments to companies. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
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%%ANKI Cloze {Angel}s become {super angel}s become {micro} VCs. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
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%%ANKI Basic VCs have a fiduciary reponsibility to whom? Back: Investors of the VC. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
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%%ANKI Basic At what point does a super angel become a VC? Back: When they accept money from others to raise a fund. Reference: Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.
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Bibliography
- Brad Feld and Jason Mendelson, Venture Deals, 3rd ed., n.d.