The Mind of a Venture Capitalist

In a world of zillion opportunities, success begins when the venture meets resources. The ideas which offer the capability to generate jobs and revenue is the one which is preferred. The strength of this idea lies in the demand that would fuel a market irrespective of adversities. Every idea originators may not have the capability to take the idea as a product to the market. Infrastructural and financial supports are required coupled with business intelligence. This gap between the resource and the idea is bridged by venture capitalist. It’s interesting to note that the decision making about selecting a venture to be resource are based on certain triggers. Few of such triggers as envisioned by Suvir Sujan, co founder of Nexus Venture Partners, have been discussed below:

Viable product or service with a future demand: This is the fundamental trigger for a venture capitalist. A product or a service which is set to have a large scale demand holds good. The entry barrier should be sealed with either patent or other requirements such as a high degree of financial investment or geo-demographical reasons. Finally to make the venture attractive, it affects the most when the product/service is backed with a ready customer of repute.
Fast profitability: Venture capitalists plan and work towards 5x or more profit out of the project. Its important to get this profitability in a shorter business cycle. Suvir shares that the goal of the venture capitalist is to start the business and exit in shorter cycle with the targeted profitability. Perpetuity remains the entrepreneur’s prerogative.
Going-concern: The venture capitalists are not likely to be interested in companies that will not move beyond the break-even point. According to Suvir, companies in different geo-demographic areas may find the break-even easy to achieve and sustain with low revenue and profits. This would not be an ideal situation for a venture capitalist.
Social Venture: The capitalist hat is essential to see the venture reaches its result. Hence, a project on Water Treatment by Nexus was made profitable to ensure its fruitfulness to the society.
Avoid cannibalism: There can be a series of projects which can be run by the same venture capitalist. The conflict of interests is avoided, as the projects are managed by different partners in the venture capitalist firm. A complete secrecy is maintained so that every firm stands an equal opportunity to succeed.
Big picture view: At times the entrepreneur may envision the project for a smaller demography. Whereas, a comparatively larger market share identified by the venture capitalist firm. At this situation, venture capitalist may proactively guide the entrepreneur towards the greater share. Suvir shared that in one of their profitable venture they had experienced the entrepreneur to plan for the local market. Whereas, the product offered a greater impact if launched globally. Hence they sent the entrepreneur to research on global markets before launching the company. This impacted the launch program to plan for a greater success which is cherished by all.
Identify the DNA of success in the entrepreneur: This credential is guided by the innate nature of the individual to remain focussed on the idea. As Suvir puts it, there should be no difference between the way the entrepreneur feel about his work and idea, at a Sunday night or a Monday morning. The capabilities to convince are crucial in an entrepreneur. It stands as a certificate for selling the idea to the larger market.
Legal and administrative trigger: The terms sheet requires meeting local legal guidance. Though there are seminal differences of terminologies, the soul of the contract remains the same.
Exit Strategy: The exit strategy remains quintessential for a venture capitalist. The entrepreneur’s may get the support from the business intelligence by the venture capitalist during the birth and growth of the firm. The business cycle further graduates into a situation where the venture capitalist may have earned the target profit and would require to focus on other growing projects. This is essentially aligned between the star and cash cow stage of the firm. The parameters selected for exit might depend on the nature of the business. The process gets triggered as these parameters are met. Eventually, they separate from the firm to foster other budding projects.

The critical factor that classifies a venture capitalists mind is the capability to identify an opportunity, yet stand humble when a proposal once rejected by them becomes a success with some other firm. Every idea may stand enticing. The entrepreneur may possess the potential to make the difference. Yet not every promising venture succeeds. There are influential codes to success which remain privy to few. Decoding this success factor even when the promise from the venture is elusive necessitates the mind of the venture capitalist.