Introduction to VC - Venture Forward (2024)

The U.S. venture industry provides the capital to create some of the most innovative and successful companies. However, venture capital is more than money. A venture capital professional’s most precious asset is time. According to a 2016 study, How do Venture Capitalists Make Decisions?[1], for every company in which a venture firm eventually invests, the firm considers roughly 100 potential opportunities. The same study, which included results from a survey of 889 venture capital professionals at 681 firms, showed that the median venture firm closes about four deals per year.

Team, business model, product, market, valuation, fit, ability to add value, and industry are all important factors venture investors consider when evaluating investments into startups. Venture capital investors are seeking entrepreneurs who are addressing global markets, have superb scalability, demonstrate success within a reasonable timeframe, and are truly innovative.

A venture capital investor’s competitive advantage is the expertise and guidance they provide to the entrepreneurs in their portfolio. Once the investment into a company has been made, venture capital partners actively engage with a company, providing strategic and operational guidance, connecting entrepreneurs with investors and customers, taking a board seat at the company, and hiring employees.

With a startup, daily interaction with the management team is common. This active engagement with a fledgling startup is critical to the company’s success and often limits the number of startups into which any single fund can invest. Many one- and two-person companies have received funding, but no one- or two-person company has ever gone public! Along the way, the company must recruit talent and scale up.

Any venture capital investor who has had a “home-run” investment will tell you that the companies capable of breaking through the gravity were able to evolve the original business plan due to careful input from an experienced hand.