Venture Capital and the Finance of Innovation, Second Edition

xviii CONTENTS
CHAPTER 3 VC RETURNS 46
3.1 Industry Returns 46
3.1.1 Definitions 46
3.1.2 A Gross-Return Index 48
3.1.3 A Net-Return Index 50
3.2 Fund Returns 53
3.2.1 Definitions 53
3.2.2 Evidence 59
Summary 62
Key Terms 63
References 63
Exercises 63
CHAPTER 4 THE COST OF CAPITAL FOR VC 65
4.1 The Capital Asset Pricing Model 65
4.2 Beta and the Banana Birds 69
4.3 Estimating the Cost of Capital for VC 74
Summary 79
Key Terms 80
References 80
Exercises 80
CHAPTER 5 THE BEST VCs 83
5.1 The Economics of VC 83
5.2 The Best VCs: A Subjective List 86
5.3 VC Value Added and the Monitoring of Portfolio Firms 95
Summary 98
Key Terms 98
References 98
CHAPTER 6 VC AROUND THE WORLD 99
6.1 The Global Distribution of VC Investing 99
6.2 The Cost of Capital for International VC 111
6.2.1 Baseline Model: The Global CAPM 112
6.2.2 Objective and Extensions to the Global CAPM 114
6.2.3 A Global Multifactor Model for Venture Capital 118
Summary 119
Key Terms 119
References 119
Exercises 120