Question

Professional Venture Capital" Please respond to the following:

• Imagine you are a venture capitalist reviewing the business venture you have developed over this course. From this perspective, describe how you (as the venture capitalist) would conduct the due diligence for the business venture. Then, assess what you may learn from this process.
• Of the steps in the venture capital process, indicate which step may be the most crucial to the majority of entrepreneurs. Assess how entrepreneurs can be prepared to handle this step successfully.

Answer 1

A venture capitalist (VC) is a private equity investor that provides capital to companies exhibiting high growth potential in exchange for an equity stake. This could be funding startup ventures or supporting small companies that wish to expand but do not have access to equities markets.

The venture capital (VC) industry uses due diligence to describe what the investor does to evaluate a potential investment opportunity. ... The process involves asking and answering a series of questions to evaluate the businessand legal aspects of the opportunity.

Due diligence is a rigorous process that determines whether or not the venture capital fund or other investor will invest in your company. The process involves asking and answering a series of questions to evaluate the business and legal aspects of the opportunity. Once the process is complete, the investor will use the outcomes of the process to finalize the internal approval process and complete the investment. If the VC acts as a lead investor in a syndicate, then they may also share the outcome of their due diligence with other investors.

There are three stages of due diligence:

1. Screening due diligence
2. Business due diligence
3. Legal due diligence

Stage 1: Screening due diligence

Venture funds review and evaluate hundreds of business opportunities over the life of the fund and use predetermined criteria to identify which opportunities to focus on as possible investments. This allows them to quickly flag the ones that fit and indicate that they will spend more time

Stage 2: Business due diligence

Once the opportunity is determined to “fit” the fund’s investment criteria, the deal is assigned to a junior and senior member of the team who will investigate further to determine the viability of the deal. Each firm may have a specific process, but it tends to involve reviewing the management team, market potential, the product or service (and the need it meets) and the business model.

Stage 3: Legal due diligence

Once the fund has reached the stage of moving toward a favourable decision, their lawyer will complete a legal review. Make sure that your lawyer is prepared to answer their questions. The advisors you choose can reflect favourably on you, including your lawyers, so do your research to find the right ones. Ask for references to determine which firms investors respect and use themselves. If the VC is highly experienced in this area (or has in-house legal counsel), they may take on part of the review to reduce the overall deal expenses.

Because while venture capitalists undertake their due diligence with military precision -asking hundreds of questions and pouring through every intimate detail of your business- what they are looking for essentially comes down to two things: the make-up of your leadership team and the earning potential of your business ...

Venture capital financing is generally done following six main steps, namely:

1. Deal Origination.
2. Screening.
3. Evaluation.
4. Deal Negotiation.
5. Post Investment Activity.
6. Exit Plan.

evaluation is the most crucial step for most of the entrepreneurs because In order to evaluate how risky investing in your company may be, VCs go through a process called “due diligence.” This is where they learn as much as they can about your company, the people, and the market. The more they know, the better they can evaluate their risk.And the more you know, the better you’ll look When you present in front of the firm’s partners, have answers ready. Showing you’re as thorough as your investors are is critical to convincing them you’re worth investing in.