The financial principles every venture capitalist needs to master of all the skills that make a successful venture capitalist, finance may not be high on your list. But it should. Why? Because a grasp of the essentials of finance can make the difference between investing with discipline or with blind hope. Think only of the disastrous performance of the VC industry in the post-2000 years for a cautionary example of what happens when investment discipline breaks down. In Andrew Metrick's "Venture Capital and the Finance of Innovation", future and current venture capitalists will find a useful guide to the principles of finance and the financial models that underlie venture capital decisions. Assuming no knowledge beyond concepts covered in first-year MBA courses, this book will familiarize you with issues such as: the relationship between risk and return in venture capital; historical statistics on the performance of venture capital investments; total Valuation the data and methods used to value a high-growth company; partial valuation how to analyze the special features of VC transactions such as convertible preferred stock, participating preferred stock, payment-in-kind dividends, and liquidation preferences; a framework for modeling investment in "research and development"; the relationship between strategy and finance; cutting-edge techniques such as Monte-Carlo analysis, real options, binomial trees, and game theory. Comprehensive yet accessible and supplemented by free online spreadsheet models that provide quick-and-dirty "reality checks" for many types of transactions, "Venture Capital and the Finance of Innovation" arms you with the financial models and tools you need to become a successful venture capitalist. "This book is an excellent bridge between finance theory and venture capital practice.