Question

1. What is the difference between a VC and an Angel investor?

2. How are their investment approached different?

3. According to Bussgang, what is the only number that matters to an entrepreneur in valuation and what is its equation?

4. Why does Bussgang call VC an “ADD” job and why is this important for the entrepreneur to understand when attempting to raise capital?

5. Identify the top 4 issues you would be concerned about when you are raising capital from a VC. Please state the issues clearly and explain your rationale for each. Please include references.

Answer 1

1.

Angel investors	Venture capitalist
Angel investors have their own funds and the use it to invest in business they like Venture capitalist perform the act where they Manage the pooled money e of others	Venture capitalist perform the act where they Manage the pooled money of others
They are usually found to invest in startups or early stage businesses hence their risk is also higher	They prefer to invest in more established businesses
They are usually found to mentor or coach or advice the new entrepreneurs, the owners of the businesses & they are usually not found controlling the business	Often get a seat on the board and are found to get control in the management and business.
Angel investor usually work on their own on individual basis.	Venture capitalists are usually a group of person having financial expertise or organizations rather than an individual.

2)

Angel investors invest their own money their amount might be lower than a venture capital.

Example if for a project angel investor might invest upto $15000 and $ 90000 of their own money it may be high or low.When they are in group amount might vary upto $650000-$700000.They prefer early stage investment hence amount is lower

However Venture Capitalist are usually groups or organization their amount is higher example on average venture capitalist may invest upto 6million in a company as they prefer to invest in established organization they are ready to invest higher amounts.

4)

TOP 4 ISSUES FACED BY ENTREPRENEUR

1. DILUTION OF OWNERSHIP AND CONTROL (As VC might get a position on board and might insist on putting a representative leading to conflicts)

2. VENTURE CAPITALIST MIGHT MAKE EARLY REDEMPTION

3. TIME CONSUMING AS APPROACHING VC CAN BE TEDIOUS(eg regualar consultation, meetings,containsts on availabilty of investot)

4. PROBLEMS RELATED TO UNDERVALUATION & Pricing (as IPO, promotion everything is done by VC ,demands for capital,dividend,creating financial pressure)

Thank you I have answered PART 1,2,5 of the question.