1EVALUATINGAVENTURECAPITALFIRMTOMEETYOURCOMPANY′SNEEDS.pdfVIP

EVALUAT ING A VENTURE CAPITAL FIRM TO MEET YOUR COMPANYS NEEDS W hat is the best way to approach and work with a venture capital firm? W hat do venture firms look for in evaluating a new company? How should the entrepreneur go about evaluating that firm and any financing it might provide his company? Venture firms are as different as entrepreneurs. There is thus a wide range among these firms in terms of their industry expertise, business experience and, most importantly, their ability to work effectively with you. Your process of selecting a venture firm is, therefore, much more analogous to the selection of key managers in your company than it is to the selection of a bank for a loan. W ith a banker, the appropriate question is How much money will he give me? W ith a venture firm, the right question is How much money will he make me? This is because your venture firm, if used effectively, will be an important element in the continuous decision making process of your company. The venture capitalist can bring a broad perspective of experience to your corporate problems based on multiple other corporate situations in your industry with which he has been involved. This experience enables him to recognize patterns within your company and industry niche which may be invisible to you. For example, he would be aware of external factors beyond your control which are already influencing other market niches in your industry and which your company will either capitalize on or be limited by. W hen you select a venture firm, you are likely to be embarking on a relationship that will last five to ten years or more and which can be a pivotal factor in turning your company into a major enterprise. Because of the rate at which a high growth venture company encounters new challenges, decision making times can be greatly shortened. Therefore, the relationship with your vent