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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.
Updated on: 26-Sep-2020
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