THE FUTURE OF HIGH TECH STARTUPS Investments by Venture Capitalists in 2000 v. 2001
Dec 31, 2015
The number of companies funded by VC’s:
• 7,094 (with 842 in telecom) in 2000
• 3,928 (with 484 in telecom) in 2001
Total Amount Invested in U.S. down 63%:
• $99.6 billion in 2000– $17.9 billion in telecom
• $36.5 billion in 2001– $5.9 billion in telecom
Average Investment Size:• Approximately $14.0 million in 2000
- $21.3 million in telecom
• Approximately $9.3 million in 2001- $12.2 million in telecom
Small Growth in 4Q over 3Q 2001:
• $7.1 billion invested in 4Q2001• $7.0 billion invested in 3Q2001
• 856 companies funded in 4Q2001• 810 companies funded in 3Q2001
SAMPLE TERMS FOR VENTURE CAPITAL EARLY ROUND INVESTMENTS DURING AND AFTER THE INTERNET BUBBLE
TERM BEFORE AFTER
CLOSING 1-2 month cycle, 3-5 month cycle,
single closing tranches based
on milestones
TERM BEFORE AFTER
Dividends None, or non- Mandatory,
cumulative payable cumulative 8%
when, as and if per year
declared by Board
TERM BEFORE AFTER
Liquidation Original purchase Multiple of
Preferences price plus accrued 2-3x original
dividends, and purchase price
participation with plus
common stock participation
with cap with common
stock
TERM BEFORE AFTER
Redemption None At option of holders,
up to 50% in 5 years
and remaining 50% in
6 years at purchase
price plus accrued
dividends
TERM BEFORE AFTER
Automatic Qualified IPO with Qualified IPO of
Conversion no per share price at least 5x limit purchase price
TERM BEFORE AFTER
Voting Investors must approve: Investors must approve: change Rights change of rights, creation of rights, creation of senior or
of senior securities, pari passu securities; payment of payment of dividends, dividends, liquidation, board liquidation size, merger, consolidation or
acquisition, redemption, debt or other
TERM BEFORE AFTER
Pay to Play None Preferred loses anti-
dilution if don’t
participate in later
down round, or
preferred converts to
common if don’t
participate in later
down round
TERM BEFORE AFTER
Right of Investors have Same
First Refusal right to purchase
shares not purchased
by Company to be
sold by other
shareholders
TERM BEFORE AFTER
Co-Sale None or limited to Right to sell
Rights right to sell with with founder
founder who sells or any other
shares shareholder
(other than
another investor) whosells shares
TERM BEFORE AFTER
Drag-Along None Right to force
Rights shareholders to
approve sale of
company upon Board
and majority
shareholder approval
TERM BEFORE AFTER
Registration Two demand rights Two demand rights
Rights after IPO, piggyback on earlier of 4-5
rights subject to years of closing
cutback, S-3 rights or following IPO,
piggyback rights
subject to cutback,
S-3 rights