Questions

How do VC analysts evaluate the business model, numbers and financial plan of a venture? What tools, frameworks and methods do you use?

VCs invest in startups with extreme rarity. Unless the business is already churning Revenue and preferably Profit, VCs are simply not interested. We deal with them on a regular basis, and their criterion is extremely tight. Startups can be difficult to pinpoint as to demand, price points and anticipated growth. They are far riskier than banking on mature operations that have patterns for much of these issues already in historical place and simply need capital to make they grow wider and faster. Startups suggest risk, and VCs are risk adverse - as are banks and other institutional lenders. The tools to use in dealing with investors of any kind for a startup tend to be based on market conditions from competitors and general industry research. Trade organizations are often great sources for this kind of data. Size of the market, growth patterns, industry forecasts, margins and profit percentages can frequently be found in these areas. And markets can change quickly and frequently, so monitoring these sources on an ongoing basis is crucial. We are doing two (2) research projects right now, and it is exciting and tedious, all in the same breath. If we can help, let us know.


Answered 5 years ago

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