VC DEAL SCREENING AND SOURCING
Deal Screening Criteria
Venture capitalists look for several factors before they can invest their money in any new venture. One of these characteristics is quality management. Startups may make little or no sales in its initial stages, its management is an essential determinant of how it will perform in the future. The size of the market the business will serve is another factor in gauging the venture (Minola et al., 2017). Businesses intended to serve big markets are more attractive than those serving small ventures. The product should be great with an excellent competitive edge, which will enable it to compete favorably in the market.
The criteria used by venture capitalists are different from those used by angel investors in different ways. Angel investors tend to work with management to improve the business. They walk with the management every step to ensure maximum returns from the business. Angels also depend on professional groups such as accountants, lawyers, and consultancies to connect them with a pool of entrepreneurs who May need funding. Angel investors do not give attention to suggestions coming directly from their entrepreneurs if they have not passed through a trusted organization that they trust (Minola et al., 2017). As a result, they consider only those ventures that are worth investing in.
Methods used by VC
Venture capitalists are strict before they can invest a single coin in any venture. First of all, they want to know the market size that the product that is provided by the organization can access. The size of the market reveals the potential for the profitability of the venture. Secondly, they wish to assess the venture (Mishra et al., 2017). The probability of legal issues regarding the operations of the business popping up is a big concern. The appropriateness of the product in today’s market or future dates is also considered to ensure that it does not become obsolete. The amount of money in the pool and whether it is enough to maintain the business until it starts making enough profits to sustain itself. The rewards of a reasonable investment can be spoiled by funding the wrong venture (Mishra et al., 2017). The questions that venture capitalist seeks to answer to know whether to explore the product in greater length include whether the management is up to the task, whether the product has what it takes and the size of the market opportunity.
First Forward ventures
First, the forward venture was founded in 1993 by a group of financial experts with extensive venture capital and operations experience. Since its foundation, the company has invested in more than fifty companies and controls over $500 million (Stanford Graduate school, 2012). Today the company is well experienced due to its interaction with up to 50 companies that are performing well financially. Since it comprises various experts with a good experience, it is likely to do a more accurate financial analysis than many of its competitors.
In 2012 the firm had expanded to comprise six partners ad four associates. It focused mainly on early-stage firms, particularly those that have already proved that the product they were offering had the potential to grow to occupy more significant markets. As a result, most of its investments were directed towards social media applications, mobile computing, health care services, and clean technology. In 2012 it was common for then to invest in series A, but they also invested in series B companies (Stanford Graduate school, 2012). In venture capitalists, First forward ventures can be seen as market dominants and pacesetters. The fact that they have made a massive success in the past 27 years they have been in operation is not deniable.
Accomplishing screening task
If I were in the position held by Andrea Morton, I would perform several tests to help accomplish the screening task. The initial stage would be to identify whether there is a fit between the company seeking funding and the venture capitalist company I am working for. Secondly, the development stage the company seeking funding is and, finally, the size of the investment size required to give profitable returns. The first company I will recommend it get funding is Email 2 from a lawyer since it has a clean record in software development Stanford (Graduate school, 2012). I would recommend to Mathew Kwan since he has a good background in software engineering and an interest in mobile apps.
The seclude company I would recommend is from email three. Gold beach has been in operation in only a few months, but it is proofed to be performing well. Its founders are having a background in the furniture business, and therefore they can enjoy a pool of reliable suppliers. They can offer high-quality products at affordable prices. I would remind the company to Madeline Wayne since she has an interest in graphics design. The company I would drop is the company from email 1. The information provided indicated that they are in round A but do not reveal exactly which products they deal with and the extent of their sales (Stanford Graduate school, 2012). I would provide the information to partners via email, ensuring I have provided all the necessary details and why I find them suitable to handle specific projects.
Important qualities for Associates
Good associates need to have some qualities that will make them understand various investments option and select the best ones. One of the qualities includes intellectual capacity. They should be well updated with current information and the latest technology to identify opportunities (Hoenig & Henkel, 2015). Secondly, he should have dynamic thinking in that they should view things from different angles and what may happen if this happens. A right associate should have a network of abilities. He should have worked in different places and a wide variety of educational backgrounds. This means that he will be able to view things differently. Also, his background will enable him to analyze a wide variety of potential investments (Hoenig & Henkel, 2015). Finally, an associate should have the willingness to get involved in activities. He should be part of the team that he has invested in to ensure that they do what should be done to achieve business goals.
References
Minola, T. et al. (2017). Screening model for the support of governmental venture capital. The Journal of Technology Transfer, 42(1), 59-77.
Mishra, S. et al. (2017). Venture Capital Investment Choice: Multicriteria Decision Matrix. The Journal of Private Equity, 20(2), 52-68.
Stanford Graduate school (2012). Venture Capital Deal Sourcing and Screening. Graduate school of business
Hoenig, D., & Henkel, J. (2015). Quality signals? The role of patents, alliances, and team experience in venture capital financing. Research Policy, 44(5), 1049-1064.