Verified Document

Capital Case What Venture Capitalists Agree The Essay

Related Topics:

¶ … Capital Case What venture capitalists agree?

The venture capital industry is riddled with both mystery and intrigue. Often, many venture capitalists are captivating by markets and technologies completely original in regards to product offerings. However, by pursuing these risky endeavors, many newly formulated companies and technologies crumble shortly after inception. To mitigate these risks, venture capitalists formulate measures to reduce the risk associated with investing in start up projects. Because success often hinges of personal fortitude and experience, venture capital investment criteria often vary between organizations.

Within the case, many core concepts regarding venture capital funding remained constant. One of these concepts was proper timing. All venture capitalists agreed that timing is a critical function in regards to overall returns. The nature of venture capitalism is inherently risky. As a result, venture capitalists must be compensated in accordance with the underlying risk associated with the venture. Depending on the timing of the initial investment, returns can either be exceptional or mediocre at best. All the venture capitalists agreed that funding should begin at the emerging stages of the industry. By pinpointing the emerging stage of the industry, venture capital funds can be appropriately used to cultivate a brand and sales revenue.

Sales Revenue is meaningless without a substantial customer base however. All venture capitalist surveyed within the article agree that a strong customer base is essential to strong financial performance. Customers...

More importantly, repeat customers have been proven to be more profitable than newly acquired customers. Due to this fact, it is important for new venture firms to establish a strong customer base from inception until the initial public offering. First, by having an established customer base, a potential IPO becomes more likely and profitable with respect to potential investors. By having a strong history of sales, earnings growth, and customer growth, companies can continue to be profitable while demand for an IPO manifests itself. A perfect example of this is found with FACEBOOK. As of now Facebook is a private company with rumors of a potential IPO sometime within the next two years. Demand for shares of Facebook is high partly because of its substantial customer base and global presence. Without this following, the business model and overall profitability of Facebook would be significantly diminished. What wasn't mentioned explicitly within the article was the importance of identifying the correct customer segment. Identifying the correct customer segment is actually more important than building the overall customer base. This is because in order for a startup venture to survive, it must first sale its product to the correct customer. By not identifying the correct customer, the company may not be satisfying the needs of that potential segment properly. This could hinder over profitability by not correctly identifying a value proposition to the correct target market.
Finally, value proposition was universally important among venture capitalists surveyed. More specifically, satisfaction…

Cite this Document:
Copy Bibliography Citation

Related Documents

Venture Capital
Words: 6732 Length: 20 Document Type: Term Paper

Capital If there is one universal attribute that applies to all investors, it is the undying thirst for higher returns. Venture capital (VC) is founded on this fundamental premise, as it has great potential to provide returns far in excess of conventional methods of investments. What makes VC so important is that it is often the only source of funds to new entrepreneurs, as banks and financial institutions provide finance

Financial Contracting for New Venture: Investments in
Words: 1706 Length: 5 Document Type: Essay

Financial Contracting for New Venture: Investments in a new venture usually involve financial contracts between the entrepreneur and external investors. These external investors include venture capitalists, angel financiers, banks, private financing companies, and credits unions among others. Notably, financial contracts can have positive and negative effects on the new venture. For instance, an angel financier can add a clause on the financial contract that will not permit the entrepreneur to borrow

Atleast 1 Page Each for
Words: 2030 Length: 7 Document Type: Business Plan

Why? Because his stock tips and investments strategies worked. People made money off his (free) advice. So, when he incorporated Scion Capital, LLC, he had a number of enthusiastic investors willing to give him millions of dollars with few strings attached. In fact, he had enough leverage over his investors to dictate terms to them. One particular term he made his investors sign off on was a long-term commitment

Kuerig Coffee Systems and the Single-Serve Coffee Market
Words: 1874 Length: 4 Document Type: Case Study

Coffee Roasting Companies Coffee Roaster Companies The single-serve coffee market is the fastest growing of the coffee industry. The case is dated 2004 and in the interim eight years, the industry has changed dramatically -- customers now favors single-serve flavored coffees, the single-serve coffee brewers have acquired a cool cache, and no pre-brewed, pre-prepared, pre-packaged stigma remains. This paper is based on a review of the Harvard Business Review Case Study: Keurig. How

Due Diligence
Words: 1728 Length: 6 Document Type: Term Paper

diligence Checklist An appropriately constructed due diligence checklist, according to the article entitled "Due Diligence: The Critical Stage in Mergers and Acquisitions," attempts to answer such vexing questions for a venture capitalist as if indeed the product in question "is what he or she thinks it is." In other words, is the venture capitalist in question really and truly buying the company or an interest in the product that is

Why Did the Dot Com Industry Crashed After the Boom
Words: 11033 Length: 40 Document Type: Term Paper

Com industry crash after the boom This is a paper examining some of the factors that caused the dot-com crash Many believe the root cause of the dot-com crash was over valuation of stock prices relative to the actual underlying value of the companies themselves. Stocks of Internet companies traded at Price-Earning ratios of higher then 30, buoyed by a speculative bubble. When reality set in for investors many realized that

Sign Up for Unlimited Study Help

Our semester plans gives you unlimited, unrestricted access to our entire library of resources —writing tools, guides, example essays, tutorials, class notes, and more.

Get Started Now