An investment professional from Bessemer Venture Partners recently visited the Nicholas Center for Corporate Finance and Investment Banking to discuss a wide range of topics with our students. Bessemer (https://www.bvp.com/) is the one of the premier Silicon Valley venture capital funds with $4.5 billion of assets under management. Bessemer’s track record includes 121 IPOs, funding many public companies (e.g., Yelp, LinkedIn) and companies that have been acquired by other technology leaders (e.g., Twitch prior to its acquisition by Amazon).
During our discussion at the Nicholas Center, we focused on frontier technologies, which includes machine learning, commercializing space and blockchain.
Our topics of discussion included:
- A quick background on the venture capital industry in general
- Current portfolio companies using frontier technology such as Rocket Lab
- How a sophisticated venture capital fund thinks about the valuation of early stage companies with new business models
- The importance of understanding the underlying technology at adetailed level prior to an investment
- We walked through an example of a seed investment (including pre-money and post-money valuation, employee incentive plans, etc.) and the outlook that a lead investor has on subsequent funding rounds when it makes the first investment
- We talked about the importance of scenario planning when modeling a new venture – e.g., developing a best case scenario (perhaps with a probability of 10%), a base case with a probability of 40% and two downside cases with a probability of 25% each
- Valuation is one component, but often only a small component of why an entrepreneur would work with a given venture capital fund. Often, the track record of the fund and the specific capabilities of the VC team is more important to an entrepreneur than valuation
- Finally, we discussed investing timeframes (e.g., how long a typical VC fund looks to hold its investment) and expected IRRs
We had a great time during the discussion and a number of our students and alumni have an interest in either venture capital (although it is an extremely difficult field to break into) and / or entrepreneurship in general.