Venture capitalists are a great way for startups, small businesses, and entrepreneurs to find and obtain the funding they need to start up or grow a business.  For example, venture capitalists can provide the funding needed for entrepreneurs to start a new business venture based off of a new idea. They can also provide important funding that allows small businesses to obtain the capital they need to achieve substantial growth and expand into new markets.

In general, most venture capitalists are looking for business ventures that have the opportunity to achieve substantial growth and can produce a high return on investment. If you are considering working with a venture capitalist to obtain funding for your startup or new small business the following are some aspects
and factors that a venture capitalist will assess when determining whether to provide funding for your business. As an entrepreneur or business owner, you should review these aspects and determine how they pertain to your business so that you can present you business in the best possible way to potential venture capitalists.

Risk Factors Venture Capitalists Will Assess

Business Founder or Management Team Capability
The management team of a small business is typically the individual or individuals who started the company or generated the idea for the business.  This person or team plays a key role in managing day to day operations. Venture capitalists will assess the management teams’ professional experience, personal traits such as reliability, trustworthiness, and credibility, and entrepreneurial abilities. This should help the venture capitalist to determine whether the management can steer the startup through risky and complicated situations.

Competitive Advantage
The competitive advantage of a new business or startup will correspond to the possession of rare core competencies, which can create value for customers.  A company’s competitive advantage is higher if competitors cannot easily imitate these core competencies.  A venture capitalist will typically look for businesses or entrepreneurs who are easily able to articulate their competitive advantage.

Market Potential
Market potential is defined as the total sales that a business or startup can eventually hope to achieve. 
This will depend on three parameters including:
Market Need: This is the problem that the startup or business intends to solve.  The higher the need, the higher the probability is that a business will generate sales.
Market Size: This describes the quantity of sales opportunities available for the specific solution a business plans to offer. A bigger market size will allow the startup to generate higher revenue.

Market Penetrability: This is a measurement of how easy it is for a business to make sales and generate revenue.  It refers to the marketing efforts that a business will need to exert before penetrating the market and achieving sales.
Venture capitalists will review and consider the market potential of any business or startup as a key way of determining whether or not to invest in the company.  Therefore, it is important that business owners or entrepreneurs can express this to venture capitalists in clear terms.

Barriers to Entry
In this sense, barriers to entry is used to describe the specific barriers or circumstances that a business will set up to prevent competitors from reaching its target market and capturing its market share.  Venture capitalists will want to see the specific barriers to entry that entrepreneurs hope to establish in order to determine the potential for success.

Exit Strategy 
Before investing in a new startup, most venture capitalists will want to see the plan that will allow them to eventually “cash in” on the company and liquidate their shares. This is typically done through an IPO or through acquisition by a larger company.

2012 - MGS Venture Management, SC - www.mgsvm.com

In many situations, mergers and acquisitions can be fruitful and successful to all parties involved.  For example, most mergers and acquisitions aim to improve the profits and productivity of both companies involved.  However, in order to ensure the success of any merger or acquisition, there are some important considerations that should be made.  One of the most often overlooked aspects during any merger or acquisition is the impact of the merger or acquisition on the employees, management, and shareholders of the company.  This impact should be considered in order to ensure a successful merger or acquisition. 

The Potential Impact of Mergers and Acquisitions 
The primary goals of most mergers and acquisitions should be to improve profits and productivity of a company.  Additionally, mergers and acquisitions should also reduce expenses of a firm allowing it to achieve success.  However, the success of mergers and acquisitions depends on a variety of factors, and therefore, these deals are not always successful.  Some of the primary parties who can be impacted by mergers and acquisitions and who can ultimately influence the success or failure of a merger or acquisition include the employees or labor force, management, and shareholders of a company.

Mergers and Acquisitions & Employees 
Often mergers and acquisitions will influence employees the most.  For example, these deals will usually result in layoffs and downsizing as companies aim to become more efficient.  It is important that the employees who are not laid off during mergers and acquisitions understand the importance of the roles that they play within the company in order to maintain employee morale and commitment even as close friends and co-workers are laid off.

Mergers and Acquisitions & Management 
The impact of mergers and acquisitions on management can be subtle but is potentially harmful to a company’s ability to succeed after a merger or acquisition.  One of the primary problems that may occur includes a clash of egos between top level management.  Additionally, the differences in policies, strategies, or corporate cultures can result in complications and disagreements.  These things will take the focus away from handling business.  Therefore, it is important to plan for these changes and implement policies in advance to deal with conflict.

Mergers and Acquisitions & Shareholders 
Both the shareholders of the acquiring firm and the shareholders of the target firm will be impacted by a merger or acquisition.  Shareholders of the acquired firm typically benefit the most from a merger or acquisition.  This is because they receive compensation for their shares of the company, which is often slightly higher than the actual price the shares are worth.

The shareholders of the acquiring firm are also impacted by a merger or acquisition.  The degree to which they are impacted will depend on the amount they are benefited as compared to the amount they are harmed.  One common negative for shareholders can come from the debt load, which often accompanies the merger or acquisition of a company.

More About Planning a Merger or Acquisition for your Business 
If you are considering joining into a merger or acquisition, it is important to consider the impact of the deal on all parties involved.  This will help ensure a successful merger or acquisition and reduce the negative impact on your company and all parties involved.odays business environment

MGS Venture Management, SC - www.mgsvm.com


    Agosto 2012
    Julio 2012


    Venture Capital