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 provide the funding to those projects that they deem promising after meticulous reviews. At the end only an average of 5 to 10% of all projects get funded.
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.
The management and the leadership abilities of the people in charge of the project or business is one of the most important factors for venture capitalists.
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.
For a venture capitalist the management skills, experience and vision of an entrepreneur are key factors for providing funding. They analyze the personality of the management and their ability to successfully handle the project.
Venture capitalists provide the funding to those projects that they deem promising after meticulous reviews. At the end only an average of 5 to 10% of all projects get funded.
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.
The management and the leadership abilities of the people in charge of the project or business is one of the most important factors for venture capitalists.
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.
For a venture capitalist the management skills, experience and vision of an entrepreneur are key factors for providing funding. They analyze the personality of the management and their ability to successfully handle the project.
About the Author:
Wade Henderson - recognized Professional - 15 yrs in the Business Finance Field - strong reputation for getting the deal done. IMMFinancial.com public financing project funding Get a totally unique version of this article from our article submission service
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