Day 9 Process of Making a VC Deal (A Memorable Day Before Memorial Weekend)

Today is my ninth day at CoreNetwork Fund, the end of my second week. Time has gone by fast, but I am glad that I am learning new things everyday and experiencing something I founding interesting. I started this morning with reading Pitchbook and the Economist.

On Economist, the headline was all about Trump and North Korea but what was interesting related to finance was that a lot of stocks dropped because of this political uncertainty. On Pitchbook, there was an article about Uber’s development timeline (showing the VC investments). Apparently Uber still hasn’t had its IPO (initial public offering, which will then make Uber’s stocks publicly traded). This news surprised me a bit because I thought as such a popular and big business, it should’ve had it a long time ago, but I should also be aware that Uber has only been around for 8 or 9 years. The article predicts Uber to receive its IPO in the early 2019.

If anyone is interested, the following timeline actually did a good job documenting the past VC investment rounds:

At 11 A.M., Erik and I had a meeting to go over my questions of previous chapters in the reading or anything I did that I could not understand. Since I have been doing reading, research, and some company work, I was able to pick up pieces of information of VC along the way. However, I want to see an overview of the process of making a VC deal, so I could connect every bits that I had been doing together to make sense. Rather than going online to learn it from Youtube, with my geographic advantage, I asked a professional who was only 10 steps away from me--and of course, it was my sponsor, Erik.

To summarize the 2-3 months process of making a VC deal, I have concluded the key points into a 10-steps process:

1) The startup tries to find a lead investor (who invest the most, usually 20%-50% of the entire round).

2) The lead investor & startup negotiate a term sheet (which reminded the chapter in my book yesterday).

3) The startup creates a deck (a powerpoint that introduces the company), which I read one last week.

4) Lead investor will help revise the deck from an investor’s perspective (so that the deck is in a form that will attract more investors).

5) The lead investor uses its connection to distribute the deck and find more investors for the startup (remember the triangle structure I drew in Day 7’s blog? So the lead is looking for smaller investors to fill up the rest of the proportion. Often times, they reach out to firms that had investing relationship with them in the past, which was why I was using Astronomer’s Series A spreadsheet to draw information for the one I am working on for EnosiX).

6) All investors sign the term sheet as a commitment

7) “Paper” everything, meaning to come up with all the legal documents for the deal’s agreement.

8) All investors read and amend the legal documents until everyone come to a common agreement.

9) All investors wire investment money to the VC firm.

10) The VC firm transfer all the money to the startup marks the end of a round of fundraising.

These are the 10 step summary I concluded from the meeting with Eric. Understanding them not only helped me reached my second of knowing the process of a VC deal but also they were so helpful to understand and reflect the value of what I have been doing for this internship. There are different stages VC firms invest in, but these steps are more or less the same for every round until an IPO will be offered to the startup company.

Besides learning about the process of a VC deal, I also updated the spreadsheet and checked the area of highlight was correct. Afterwards, I watched some tutorials and explored how the Bloomberg terminal service a bit, which was amazing. Then, it was about 5 P.M., and I was super happy when Erik told me that I don’t need to come here on Monday because of Memorial Day.

Something else I wanted to blog about today was related to my new experience of the working culture. After everyone arrived the office this morning, I brought out my surprise chocolate chip banana bread for Nels (because he finished his 6-month internship and was leaving today). Nels is quiet most of the time (but so was the office) but he has been very nice as a co-worker, so I decided to make some baked goods for everyone. Without a call, we all somehow got together in the kitchen (6 of us, everyone in the company). I cut the bread for everyone and we had a very casual and nice talk with everyone. I got a chance to meet and talk to people I did not usually have interactions. Suddenly, the office gave me a feeling of warmth, something I struggled to find during my first week here. I thought I would have to just endure it and accept it as a truth of all financial firms (that everyone is super busy all the time and it’s a norm to have a quiet office). However, my banana bread helped twist the plot and allowed me to realize that people working in financial firms can be friends and there could be a nice bonded working culture (something I value a lot in teamwork and job).

Nels and the chocolate banana bread

The other intern told me that was his first time seeing everyone together chatting and enjoy food, too. When we all went out for lunch today (which was a surprise), I learned a lot more about the individuals I have been working with, and it was really nice. I think my internship experience has been great so far! I look forward to learn more during my last week here!

A closer look at the magical chocolate banana bread