What are the factors considered by venture capitalist before investing?

The factors considered by venture capitalist before investing are as follows −

  • Management Team − Investors look for management team that have skills, knowledge, and their record of accomplishment. Commitment towards the goal is the key.
  • Viability of the project − Capital firm will look at product market, end user, competitors and growth of industry/sector before investing in a project.
  • Business plan
  • Cost and returns − Project cost, financing scheme, source of finance are also studied in details. Investment for a project will be depends on cash outflows. Internal rate of return (IRR) tells about risk associated with the project and the time to recover their investments.
  • Technology − Investing decisions depends on current technology of firm and their agreement to use new technology.
  • Market conditions − Market size, market research, prospects, policies, strategies, competitors will be considered before taking investment decision.
  • Other factors − Raw material, labour, government policies, location etc. will be considered before investing. These are indirect factors.