Venture capitalists unlike banks are looking to provide funding to small businesses that look promising. Their main goal is to be able to resell their stocks after 5 or 7 years assuming the business has become successful. Bankers would request collateral from new entrepreneurs. Venture capitalists on the other hand, focus rather on the people who will manage the project.
Venture capitalists analyze projects meticulously before choosing those they are interested in. At the end, they choose to finance on average 5 to 10 out of a hundred projects.
A study done on 70 venture capitalists focused on analyzing the reasons behind the decision making process that these investors undergo in order to fund a project.
Products and Market. It covers aspects relating to the nature of the product and market, the estimated market size, growth and the seasonal nature of the activity.
The other factor is relative to the ability of the business to be strategic and competitive. Venture capitalists analyze the level of competition, their relation with their suppliers and distributors, and whether they can stop new business from starting.
Team leadership. It defines the leadership skills and experience of leadership and management team.
Competence in management. This criterion relates to the organizational and administrative skills, capabilities in marketing, sales and production.
Financial projections. It concerns such as the time to reach the threshold of profitability and the rate of return.
Funding. Criterion that defines the relationship between the timing and targets for funds. Venture capitalists must be careful in managing their portfolio and to the commitments made to investors about the type of investment they make.
All of these elements are important for a venture capitalist in order to choose what project to fund. Business can choose to get funding from different sources, banks, angel investors, or venture capitalists. The last two are most likely to give priority to these factors.
Although bankers may be more attracted by a business financial history, venture capitalists regard other factors highly. Managerial skills, the personality and the leadership of the entrepreneurs are for venture capitalists equally important.
About the Author:
Wade Henderson - recognized Professional - 15 yrs in the Business Finance Field - strong reputation for getting the deal done. IMMFinancial.com venture investors venture investment Grab a totally unique version of this article from the Uber Article Directory
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