How Do Venture Capitalists Make Decisions?

The other day I came across one of my favorite newsletters from The Stanford Business Graduate School, and in particular the subject line “Do Funders Care More About Your Team, Your Idea, or Your Passion?” intrigued me to read on.

In a study co-authored by Stanford finance professor Ilya A. Strebulaev, “How Do Venture Capitalists Make Decisions?” The findings seem to indicate that Venture Capitalists who are considering investing in entrepreneurial ventures, are most interested in entrepreneurs who are passionate, capable, experienced, and part of a strong team.

The survey included 885 Venture Capital professionals at 681 firms, and asked the VCs to identify the factors that drove their investment selection decisions and ranked them according to importance. The abilities of a founder and his/her management team are the most important factors driving investment decisions, and even more important than the product or technology itself.

The average investor evaluates 200 companies a year and invests in just four. Each deal takes an average of 83 days to put together, which includes 118 hours of due diligence and Strebulaev says that “Venture Capitalists gauge an entrepreneur’s passion level by their commitment of time, effort, and money to their idea. “

The study was structured in a way that enabled researchers to better understand how different types of venture capital investors approach their decisions. They found that information technology investors tend to be interested in an entrepreneur’s management team, while health sector investors are more interested in products and market forces.

If indeed you have the time, I strongly recommend downloading the complete study HERE.

As usual, please email me your thoughts and comments. I guarantee you a response!

Reflections and Outlook

During the months of December 2016 and January 2017, I had the opportunity to present  “REFLECTIONS FOR THIS PAST YEAR AND OUTLOOK FOR THE COMING NEW YEAR” to over 100 people in 13 different networking groups.

In the workshop we asked each other what were our professional accomplishments as well as our professional disappointments in the prior year.

We also asked one another to reflect on the one thing to stop doing, and the one thing to start doing in the coming year to become a more effective leader in each of our own companies.

Lastly, we asked ourselves to list our three Professional Performance Objectives and Milestones for the coming year with our anticipated Specific Outcomes and Results with the Dates to be Completed by.

The ultimate goal of this interactive workshop was to create a “roadmap/top down business plan” which each individual could review as they saw fit, in order to make the new year as successful as it could possibly be.

On a personal level, it was a great learning opportunity for me, and I truly appreciated everyone’s candor, honesty and willingness to share their experiences in a group setting.

I also wanted to thank Dave Bresler, Steve Percudani, Paul Berkman, Matt Plociak and the NYC Creative Masterminds Group for enabling these workshops to take place in so many different settings.

Please visit Reflections and Outlook and feel free to download the document, and use it with your colleagues and/or employees. It’s still not too late to complete your own 2017 Roadmap for Success!

As always, I look forward to your comments and feedback