Well almost three years ago Silicon Valley Bank did a round table discussion led by Michael Hanewich, the East Coast Head Of Life Sciences/Venture Capital for Silicon Valley Bank.
The panelists were:
- Bryan Roberts, Ph.D. — Partner with Venrock, a leading venture capital firm
- Judith Elsea — Co-Founder and Managing Director of Weathergage Capital, a fund-of-funds and limited partner in venture capital investing
- John Mendlein, Ph.D. — Chairman of Fate Therapeutics, an emerging company backed by venture funding.
In a six part video series they explain exactly what venture capital is, where it comes from, how it gets to entrepreneurs and how an entrepreneur can benefit, not only from the funding but from a long term commitment as well.
Roberts explains the venture capital process early on. Venture capital firms raise funds every 3 or 4 years from limited partners. Limited partners can come in a variety of forms. Wealthy families, foundation partners, insurance companies, funds of funds and other can be partners in VC firms. Now keep in mind we’re talking about Venture Capital here, not an “angel” round which is something totally different.
Partners in a venture capital firm have a “very long horizon” on dollars. They want to make money,but are fine, and perhaps better off, doing it over a long period of time.
Now, granted, this video series was produced three years ago before super exits like Instagram. However, Instagram is the exception, not the rule.
The purpose of the VC dollars is to get a company’s product developed and to market, and eventually to liquidity. Venture capitalists will then make money on their initial investment commonly through the company going public or a merger or acquisition of some sort. In rare instances the venture capitalists can make their money back through the company generating revenue.
Here’s the first video in the series: