About the Author vii Acknowledgements ix Chapter 1 Why Do Start-ups Raise Capital? 1 Chapter 2 Equity and the Art of Milestone-Based Financing 13 Chapter 3 A History Lesson 43 Chapter 4 Business Models 59 Chapter 5 A Day in the Life 85 Chapter 6 Valuation 111 Chapter 7 Inside the Deal 149 Chapter 8 Raising the Next Round 201 Chapter 9 Towards the Exit 245 Chapter 10 Building Value: The Business of Venture Capital 281 Case Study Solutions 293

Praise for BUILDING VALUE “Simon Barnes has written the book that I have spent 30 years looking for. It beautifully balances a clear and understandable framework for venture capital investment with practical examples. This book is exactly what I need to teach students in my entrepreneurial finance classes and to explain equity fundraising to founders seeking capital from my venture capital funds.” —PROFESSOR SCOTT SHANE, A Malachi Mixon III Professor of Entrepreneurial Studies, Weatherhead School of Management, Case Western Reserve University, Managing Director, Comeback Capital and Venture Partner, Rightside Capital Management “This book is a comprehensive and practical guide to the role that the venture capital industry plays in enabling entrepreneurs and start-up companies to raise the necessary funds to grow. Bringing his extensive hands-on experience and clear insights, Simon Barnes provides a well-balanced guide to the VC process, full of very insightful and practical examples. A must-read for anyone seeking to raise money from a VC.” —PROFESSOR SCOTT MOELLER, Director of the M&A Research Centre, Bayes Business School London GET A FIRST-HAND, INSIDE LOOK AT THE VENTURE CAPITAL BUSINESS In Building Value: The Business of Venture Capital, experienced start-up investor Simon Barnes delivers an accessible and insightful roadmap to the sometimes opaque world of venture capital and how entrepreneurs and venture capitalists can deal with one another to arrive at mutually beneficial start-up investment deals. The author explains why venture capital is a people business first and why aligning the interests of funders and entrepreneurs is so important. You’ll learn why successful entrepreneurial finance is sometimes more about behaviour than it is about numbers. Building Value walks you through the business models and mindsets of both venture capitalists and entrepreneurs to optimise the entrepreneurial financing journey and achieve maximum value with a minimum of conflict. It’s perfect for students pursuing degrees in business or finance, as well as entrepreneurs attempting to raise capital for the first time. It’s also a must-read for professional venture capital fund managers seeking to understand the entrepreneurs they back and for professionals running start-up companies in incubator or accelerator programs.