Venture Capitalists Evaluation

Venture Capitalists Evaluation
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Introduction
An interview was conducted on four venture capitalists from the popular firms in Silicon Valley. The purpose of the interview was to unearth the frameworks that the capitalists use in assessing potential venture chances. The area of query that the venture capitalists had to tackle each at a time was on evaluation of potential venture opportunities, evaluation of venture’s probable business model, the due diligence conducted, the process resulting to funding decisions, the financial analysis performed, the role of risk in evaluation and potential a route of exit (Roberts, 2004).
Evaluation of Potential Venture Opportunities
While performing an evaluation on potential venture opportunities, the most crucial requirement is an opportunity of a large market in a sector that is developing fast. The market potential requires a minimum of five hundred million dollars and above, while the company requires achieving a minimum of twenty five percent market share. Secondly, there is need for a competitive edge that enhances competition, which could be a networking effect such as eBay or an operation format lock-in like Microsoft. The venture capitalists look for a touch problem that has not been solved in the past. Moreover, the venture capitalists avoid scientific breakthroughs because they are not good at evaluating science projects. The third factor is team where a strong technical founder becomes the best choice and an entrepreneur who is sales-oriented.
Evaluation of Venture’s Probable Business Model
There are two extensive kinds of investment opportunities. The first involves understanding the market or the product. The business plan is expected to reflect the business model that has been anticipated. The rightful timing of the investment plus the pace the cash goes in creates a distinction in the financial income.
The due diligen...