Find Investors, venture capital. Get help with your business plan. The Capital Connection has an extensive directory of venture capital companies. A free business plan format, and more. Need money? Investors Only Our Directory of Experts Need Help With Your Business Plan? The Capital Connection Home Page
The Entrepreneur's Resource for Finance
Site Overview | Free Stuff | Contact Us | About Us |
Profit Dynamics Venture Capital Survey
Introduction | How Long to Close | How To Contact | With What | Valuation Factors |Probability

Competition | Define Management | Substitutes? | Find The Deals? | Decision to Invest | Why No?

Worst Business Plan Mistakes | Common Plan Mistakes | First Impressions

venture capital survey

Venture Capital SurveyVenture Capital

Free StuffFree Business
Plan Format


Looking For

business plansDirectory of

capitalMore Resources
For Entrepreneurs

business plan reviewsMarketing Experts


business plan consultantsBusiness Plan Consultants

venture capitalOur Catalog
Books, Booklets,
Directories and Guides

private investors

venture capitalPress Coverage
and Media Kit

press release writing

private investors

Refinancing a mortgage

reduce credit card debt

free credit report and scores

Venture Capital Survey

How Do Venture Capitalists Value the Companies?

Superior Management, A Large Market, and Unique Products Create Value

One of the most often asked questions by entrepreneurs relates to how VCs calculate the equity share they demand in exchange for the funds they invest. How do they arrive at 20%, or 50%? We asked Venture Capitalists to rate a number of factors they use to value the investment, with a rating of 5 being the most important, and 1 being the least important.

Quality of management: 4.5
Size of the market: 3.8
Product qualities:(uniqueness, brand strength, patent protection) 3.7
Rate of market growth: 3.5
Competition: 3.5
Barriers to entry: 3.4
Stage of development of the company: 3.2
Industry the company is in: 3.0

Quality of management was emphasized by the VCs to the extent that 7 out of 10 gave it a rating of "5", and nearly 9 out of 10 gave it at a 4 or 5. There were a few mavericks among those surveyed, however: 7% gave management quality an importance rating of only 1 or 2.

No other factor came close in importance. The next most important, size of the market, was given a rating of 5 by only 30% of the respondents, followed by product qualities, which received a 5 from about one out of four respondents.

Note that all of the factors received an average score of 3 or higher. All of these factors were viewed as significant, and entrepreneurs should take care to clearly articulate each of them to investors.

In an earlier Profit Dynamics Inc. VCs overwhelmingly chose "quality of management" as the most important factor in their decision to invest. The lack of a highly qualified management team was the number one reason they declined to invest as well.

small business loan

58 Ways to Find Money for Your Business

how to start a business

Over Time, the Novel

Over Time

Inside Secrets To Venture Capital

Inside Secrets To Venture Capital

Attracting Capital From Angels

Attracting Capital From Angels

how to get a book published Publishing Primer: An Author's Blueprint for Success how to get a book published

Copyright 1998-2012, Profit Dynamics, Inc,.
Dee Power & Brian E. Hill
All Rights Reserved Worldwide