Overview of Sources of Risk Capital
-3    -2      -1     0     1     2     3     4     5     6     7     8    9
       _|____|____|___|___|___|___|___|___|___|___|___|___|___
R&D         Start-up        Early Growth        Rapid Growth          Exit
Text Box: Sources
Sources
Personal/Friends ---------------> ($ Under $250,000)
SBIR STTR -----------------à ($750,000)
Informal investors <---------------------------------------> ($50,000 -$1 million)
Venture Capital            <----------------------------------------------> ($2-5 million and up)
Mezzanine/Bridge capital           <------------------------> ($ 1 million -$20 million)
Public Equity Markets. <---------------------------------->
Cost of Capital
     Extreme     Moderate
               | 50-100%------------- 50% ---------------------- 30% ------------------- < 30%
1996 , a total of 865 initial public offerings in all industries raised $48.9 . $115 billion raised in total.
$800 million in S/W in Q3 1997.
 Morgan Stanley with total proceeds of $206.6 million from 17 deals. The largest deal the firm completed in 1996 was the $2.6 billion IPO of Lucent Technologies ( Morgan Stanley earned $102.9 million in proceeds from the deal.
Goldman Sachs posted $203.5 million in proceeds from 24 deals and slid from the No. 1. Alex Brown was third.
For high-technology investments in 1996, Silicon Valley remained No. 1 in terms of both dollars invested ($2.1 billion) and number of companies (492), according to Price Waterhouse. The Valley accounted for 35.8 percent of high-tech investments in 1996; New England came in second, with 13.4 percent.
1993 when 707 IPOs raised $41.4 billion.
Seed: Generally covers payroll through to first working proto or proof of concept. Risk in this has resulted in specialists doing only this round. Incomplete management etc not really a problem. Not enough can end up with expensive bridge funding
First round generally $2-$5m or 5-10 times the amount raised in the seed round. Incomplete management a problem at this stage. May be more funding stages. This is wherestatistically the founder exits as CEO.
Mezzanine: Last round before IPO -usually an unplanned funding to keep payroll going before an IPO