By the end of this book you’ll know how to talk about companies that excite you, pitch companies to venture capitalists and evaluate businesses through the lens of an investor.

The endowment and pension fund agree to invest. Cynthia and Mercedes then form “CynMerc” Ventures, which will invest in early stage private companies. With this first fund—let’s call it CynMerc I, CynMerc Ventures will spend 3-5 years investing the money and 5 more years (8 to 10 years in total) to get the pension and endowment money back plus a su

As mentioned earlier, cash flow is usually negative for early and growth stage technology companies so as a result these are largely EBITDA-negative businesses. How do we calculate an enterprise value for a business like this? Well, in venture we’ll use sales as a proxy for EBITDA to create the EV/sales multiple. Instead of looking at the EBITDA of

The CAC payback period is simply how long it takes to recover the cost of acquiring a customer. Ideally, we are looking for startups that can recoup this cost in 12 months or less.

A marketplace can be defined as any 3rd party that connects supply (seller) and demand (buyer) while an e-commerce business—by definition—takes transactions online. In both types of businesses, the total flow of transactions, or the gross transaction value, does not go directly to the company. An e-commerce or marketplace business may only take 15

Once the limited partners receive 100 percent of their money back, Cynthia and Mercedes receive 20 percent of any additional profits while the limited partners receive 80 percent. The 20 percent that Cynthia and Mercedes receive is referred to as carried interest.

I think it’s still great to take financial modeling or other courses that will be relevant, but a lot of people think that they need 2-4 years in finance or a 4.0 GPA, but VC is ultimately driven by that passion to find out the companies that are disruptive and find out who the early adopters are.

Now we can understand post-money valuation as the value of a company, immediately after the latest amount of venture capital is invested.

Cost of goods sold (COGS), or cost of sales are any expenses incurred for producing a good or service. This includes raw materials, labor or any manufacturing costs required to make all the products sold.