Entrepreneurial Finance: Venture Capital, Deal Structure & Valuation

Janet Kiholm Smith and Richard L. Smith

Chapter 3 Venture Capital and Angel Investing - all with Video Answers

Educators

Chapter Questions

Problem 1

Referring to Figure 3.1, review the major developments that have affected the growth in the VC market in the U.S. Explain, for example, the impact of the Investment Company Act, ERISA's prudent investor rule, the growth of institutional investing, and general stock market activity.

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Problem 2

What types of deals are most appropriate for VC and why?

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Problem 3

What are some possible explanations for the variation across countries in the development of VC markets?

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Problem 4

Describe the primary features of the LP structure of VC funds, including the roles of the GP and LPs, the length of the partnership, and the compensation mechanisms for the partners.

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01:54

Problem 5

How do VCs add value to new ventures? When can syndication add value and why?

Sanchit Jain

Numerade Educator

Problem 6

Describe the steps in the VC investment process (Figure 3.8).

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00:43

Problem 7

Explain how VCs distribute capital gains associated with a successful exit of a portfolio company (the waterfall). How is a clawback provision related to the overall distribution of returns to LPs and GPs?

Amrita Bhasin

Numerade Educator

04:09

Problem 8

Explain the economic rationale for key provisions in a limited partnership agreement, such as limitations on additions of general partners and key person provisions.