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Analysis Venture Capital
Many of you probably wonder which the analysis venture capitalists run before choosing a company for funding are. Well, you should know that there are more steps that are strictly followed when analyzing a potential partner due to the fact that only one of ten companies that receive venture capital funds succeed in turning their company into a large business. Here you can find a general approach to the analysis venture capitalists run before signing a deal:
- The Fundamental Analysis – this stands for the appraisal of the venture capital needed. They will analyze your product, the market demands, your company’s history, the operational aspects, your management team and the risk that your company raises.
- The Financial Analysis – as venture capitalists are interested in business that can grow rapidly and bring huge amounts of money, they have to be very careful whether or not your business idea can satisfy that demand. In order to do this, they will analyze the viability of your product, the potential of earnings growth, the likely impact on cash-flow and on the timeframe of capital return, the sensitivity of earning to margins and sales, the financial risk and the desire of managers to cope with these.
- The Portfolio Analysis – in order to make sure that funding your project will not interfere with already existing investment projects. They will also analyze your business from the point of view of the gain it can bring to the portfolio as venture capitalist seek to expand towards a variety of fields in order to ensure a safe balance of the cash-flow. This is an important matter from the management point of view as well, as they need to choose businesses for which they can provide helpful management skills.
- The Divestment Analysis – this is the moment when venture capitalists have to have a clear idea about the method, the timing and the valuation of the company in the case of divestment. They can choose between trade sell, earn out, floatation and take off.
Of course, the analysis process of evaluation run by venture capitalists before deciding to fund a company is a lot more complex, but these highlights can help you form an opinion about the process you will be submitted to when searching for venture capital investments.