8/19/2019 Venture Capital - Abstract

1/2

8/19/2019 Venture Capital - Abstract

2/2

Venture capitalists were asked to estimate the main source of the business proposals they

received. The two ma'or sources for access to investment opportunities were the entrepreneursthemselves and the informal networks.

Step !: "nvest#ent Decision:

esearch has shown that for each pro'ect that is accepted, venture capitalists re'ect most of the proposals in the screening process. The investment evaluation phase is an important and very

time consuming activity. It includes a complete eamination of the venture (due diligence),which then receives funding based on very specific conditions. Venture capitalist spends almost

fifty per cent of hisher time screening and evaluating. The problems in selecting new

entrepreneurial firms are related to the difficulties in estimating their potential and the high risk of failure. !any of these pro'ects entail only limited information about the products or services.

There might only be limited knowledge about the market and future costumers. *onse"uently,

there is a high level of uncertainty about the level of success. &n often%stated problem is the

information asymmetry between entrepreneurs and the venture capitalists.

Next problem is to determine the current value of the rm. The valuationprocess is an exercise aimed at arriving at anacceptable price for the deal.