{"id":718,"date":"2008-03-16T11:36:30","date_gmt":"2008-03-16T18:36:30","guid":{"rendered":"http:\/\/www.daviddalka.com\/createvalue\/2008\/03\/16\/tom-churchwell-venture-capital-speech-at-university-of-chicago-gsb\/"},"modified":"2015-04-22T08:10:04","modified_gmt":"2015-04-22T13:10:04","slug":"tom-churchwell-venture-capital-speech-at-university-of-chicago-gsb","status":"publish","type":"post","link":"https:\/\/www.daviddalka.com\/createvalue\/2008\/03\/16\/tom-churchwell-venture-capital-speech-at-university-of-chicago-gsb\/","title":{"rendered":"Tom Churchwell Venture Capital Speech at University of Chicago GSB"},"content":{"rendered":"

The following are high level notes of Tom Churchwell\u2019s speech discussing venture capital at The University of Chicago Graduate School of Business (Chicago GSB). This talk took place in Chicago on January 22, 2008. I\u2019m posting it today in celebration of this<\/a> week<\/a>\u2019s Midwest Venture Summit<\/a>.<\/p>\n

Typical Fund Structure
\n– Management Fee 2.5% of committed capital
\n– Carried Interest \u2013 after losses offset by profits
\n– 80% Net Profit \u2013 Investors
\n– 20% Net Profit \u2013 General Partner
\n– 50-70% desired return\u2026
\n– Vesting occurs over 5 years<\/p>\n

– Experienced, successful entrepreneurs abound throughout the country
\n– Start-up companies have access to abundant early-stage venture capital
\n– Skilled attorneys, accountants, consultants are readily available
\n– The majority of start-ups can result in successful IPO\u2019s within 2-3 years
\n– Increasingly hedge funds are an alternative financing source
\n– Angel capital is more available in Chicago than it used to be<\/p>\n

– The space a VC plays in is extremely important – industry sector, growth<\/p>\n

– Tom has changed management 3 times on average in the 60 companies he\u2019s invested in<\/p>\n

– Buckets of entrepreneurship seed entrepreneurs, beta stage, scaling skills<\/p>\n

– Discipline = Success<\/p>\n

Criteria:
\n– Proprietary product or service
\n– Sustainable competitive advantage
\n– Viable business model
\n– Large markets
\n– Experienced management team
\n– Appropriate use of funds
\n– Target 10-15x growth 5-7 years
\n– Objective: Sale of IPO in 5-7 years<\/p>\n

Management:
\n– The most critical resource
\n– More important than all other elements
\n– Stage appropriate, later stages may require different management
\n– Must have a significant stake in success
\n– Tom says \u201cManagement experience is management experience, big company experience is just as good as small company experience in his view.\u201d (Note: I actually find a *mixture* of both sizes in your experience to be of high value)
\n\u201cWe don\u2019t make money on IPO\u2019s, we make money selling to the Baxter\u2019s, Motorola\u2019s etc.\u201d<\/p>\n

\u201cNothing succeeds like revenue, it\u2019s the cheapest form of capital.\u201d <\/strong><\/p>\n

In 60+ company investments, I can only say that once it was the technology that made the company fail. It\u2019s about getting the product in the marketplace.<\/p>\n

What makes you say yes?
\nPassion. A product I have to get on the marketplace that solves a real problem. Management discipline which means they can step back and say realistically this is how long it will take, this is the team you will need, etc.<\/p>\n

Revenue is an outcome, it\u2019s not a driver. What is going to cause the business to scale? It\u2019s business model testing. I don\u2019t care about year 5, I care about what will get us more proof of concept and closer to a success.<\/p>\n

The first screening process is where did this plan come from, if another VC sent it to us, we pay attention more. I ask, “Do I want to have a beer with this guy? You shouldn\u2019t be there if you can\u2019t say yes. ”<\/p>\n

60% of the time we at least get our money back.<\/p>\n

Scientific Board of Directors (compensated with a point of equity +\/- a bit)
\n– Should be at least equivalent in stature to the scientific founders
\n– Like the Board of Directors, should have complementary skills
\n– Used properly, play a vital strategic role
\n– Typically meet semi-annually<\/p>\n

Tom never signs an NDA.<\/p>\n

The Business Plan
\n– Executive Summary is most important
\n– Shorter is better
\n– Assume the full appreciation of the technology will come in the due diligence
\n– Avoid jargon
\n– Avoid the hockey stick
\n– Focus on the revenue model
\n– Have a realistic exit strategy
\n– IPO\u2019s are rare \u2013 most VCs are quite happy with a nice M&A exit
\n– Nobody reads the full business plan – I care about the executive summary
\n– Cashflow is more important than revenue during this phase<\/p>\n","protected":false},"excerpt":{"rendered":"

The following are high level notes of Tom Churchwell\u2019s speech discussing venture capital at The University of Chicago Graduate School of Business (Chicago GSB). This talk took place in Chicago on January 22, 2008. I\u2019m posting it today in celebration of this week\u2019s Midwest Venture Summit. Typical Fund Structure – Management Fee 2.5% of committed […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[31,23,32],"tags":[],"class_list":["post-718","post","type-post","status-publish","format-standard","hentry","category-chicago","category-chicago-gsb","category-venture-capital"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.daviddalka.com\/createvalue\/wp-json\/wp\/v2\/posts\/718","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.daviddalka.com\/createvalue\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.daviddalka.com\/createvalue\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.daviddalka.com\/createvalue\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.daviddalka.com\/createvalue\/wp-json\/wp\/v2\/comments?post=718"}],"version-history":[{"count":0,"href":"https:\/\/www.daviddalka.com\/createvalue\/wp-json\/wp\/v2\/posts\/718\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.daviddalka.com\/createvalue\/wp-json\/wp\/v2\/media?parent=718"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.daviddalka.com\/createvalue\/wp-json\/wp\/v2\/categories?post=718"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.daviddalka.com\/createvalue\/wp-json\/wp\/v2\/tags?post=718"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}