Venture Capital Investing

DAVID GLADSTONE founded Gladstone Capital and serves as its CEO and Chairman. He previously served as Chairman of American Capital Strategies, the largest public-traded leveraged buyout fund, and was past Chairman of Allied Capital, the largest public-traded mezzanine debt fund. With Laura Gladstone he wrote the classic book on obtaining financing for small- and medium-sized businesses, Venture Capital Handbook: An Entrepreneur's Guide to Raising Venture Capital. David Gladstone holds an MBA from Harvard Business School. LAURA GLADSTONE is a Principal of Gladstone Capital. Before joining the firm, she worked in equity research at ING Barings and Salomon Smith Barney, and she was a Syndication Lender at HSBC. She has also served as Marketing Director for Allied Capital Corporation.

• Introduction. 1. Keys to Successful Investing. What Are the Basic Items to Look for in a Business Proposition? It's Not an Investment, It's a Partnership. Prepare a Written Summary before You Begin to Invest. What Does A Summary Look Like? Some Words about Franchising. Summary—Quick Standards of Venture Capital Investing. 2. Analysis of Management. The Study of Entrepreneurs. Characteristics of Entrepreneurs. How We See Entrepreneurs. Interviewing Entrepreneurs. Assessment of Entrepreneurs. What Venture Capitalists Look for in Entrepreneurs. Characteristics of Small Business Managers versus Entrepreneurs. Conclusions on Entrepreneurs. Developing Background Information. Final Judgment. 3. Reviewing Personnel and Compensation. How Is the Company Organized? How Are People Compensated? What Employment Contracts Exist? What Is the Workforce Structure? What Personnel Records Are Maintained? Major Strengths and Weaknesses. 4. Analysis of Marketing and Sales. Who Are the People Who Market and Sell? What Are They Selling? Who Buys the Product or Service? What Is Said to the Customer? What Is the Marketplace for the Product or Service? How Is Price Determined? What Internal Reports Are Made? What External Information Is Available? Basic Information. What Are the Strengths and Weaknesses? 5. Investigating Production. The Facility. Equipment. Production Capacity. Production Employees. Regulatory Agencies. Subcontracting Work. Inventory. Quality Control. Production Costs. Production Levels. Back to Capacity. Strengths and Weaknesses of the Production Process. Purchasing Process. Receiving. Shipping. Customer Service. Research and Development. Basic Information. Conclusions about Production. 6. Analysis of the Financial Statements and Projections. Personnel. Analysis of the Numbers. Budgeting and Control. Past Financings. Use of Proceeds. Projections. Basic Information. Conclusions on the Financial Area. 7. Reference Information. Corporate Identification. Corporate Structure. Management Questions. Professional References. Credit Information. Conclusions on Reference Information. 8. Negotiating the Deal and Commitment Letter. Pricing the Deal. Commitment Letters. An Investment Memorandum. Conclusions about the Commitment Letter. 9. The Legal Closing. First Type of Closing: Loan with Options. Second Type of Closing: Legal Documents for the Purchase of Stock. Lawyers as Investors or Business Owners. Experienced Lawyers Are Best. Procedures for Reviewing Documents. Legal Fees Keep Going Up. How Lawyers Run up Your Legal Bill. The Closing: A Moment of Truth. What to Remember About Lawyers. Documentation. 10. Monitoring the Investment. Involvement. Major Policy Decisions. Monthly Reports. Board Meetings/Investor Meetings. Other Discussion Items. Maintaining Good Records. Warning Signs. Why Entrepreneurs Have Financial Problems. Why Entrepreneurs Have People Problems. What to Do with Problems. Secret of a Successful Relationship. Degree of Involvement by the Venture Capitalist. Venture Capitalist Objectives. 11. The Exit. Exit One: Going Public. Exit Two: Sale to a Strategic or Financial Buyer. Exit Three: Sale Back to the Company. Exit Four: Sale to Another Investor. Exit Five: Reorganizing the Company. Exit Six: Liquidation. When You Are in a Workout. Save Your Investment. 12. Finding Good Investments. Developing an Investment objective. Originating Investment Opportunities. Proactivity. Handling Investment Opportunities. Using Brokers. Final Word. Appendix A: Questions Used in Venture Capital Investigations. Appendix B: Actual Documents. Appendix C: List of Traits for Analysis of People. Appendix D: Evaluation of an Entrepreneur by an Industrial Psychologist. Index.