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Assessment Venture Capital
When analyzing whether to invest in a certain company or not, venture capital firms have to assess their risk investment. As nobody wants to loose money in a non-profitable company, when writing your business plan and, afterwards, when going into the pitch, you should take into consideration that venture capitalist are continuously thinking about their risk investment assessments.
The venture capital assessments can be grouped into several categories, such as:
- Market risks – so you should be able to answer questions concerning your project’s market, the way in which this market seems to develop and the timeframe of this development. As the market provides mutual risk, you should be really careful when analyzing this segment that is crucial for the development of your business.
- Technical risks – this relates to the projects that require an investment in technology. As the technological market is developing incredibly fast, there are numerous projects looking for venture capital in this area, so investors are rather overwhelmed by demands. So, if you want funding for a technical project, you should be able to provide good answers when asked about the innovation your product will bring and the reason why it is this product in particular that will manage to be imposed as a leader of the market.
- Operational risks – this entails all the risks that come from management, people involved in the business, legal mechanics, logistic considerations and everything else that comes in between. As many investors have been confronted with the failure of a certain project due to bad management or bad team organization, they are now paying a great deal of attention to the person asking funding. In order to avoid misunderstandings while in the pitch, you should consider adding some extra presentations to your business plan in which to present the members of your team, their previous work accomplishments and the specific knowledge they have that makes them unique and irreplaceable in the development of your business. While presenting your team’s capacities, make sure to let investors understand your management skills as well.
- Financial risks – this relate to the amount of money you can bring to the investors and to the period of time you can provide that gaining. As investors require big amounts of profit in a short period of time, don’t be disappointed if your project will be rejected due to this reason because this doesn’t mean that your project is bad or unprofitable, but that the investor you were talking to doesn’t have that much time to wait or the amount of money he can provide for the moment is not sufficient as to provide him safe earnings in the shortest period of time. If this is the only problem with your project, just keep going to pitches and you will eventually find the investor that fits your budget and your timeframe.