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Understanding the tactics Venture Capitalists use to make decisions
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I recently read an interesting analysis written by Gompers et al. (2020) which reflects on the decision-making process venture capitalists (VCs) undertake to support entrepreneurs. Since that series of steps is comprised by some carefully selected and austere tactics, a few interesting insights can be derived.
According to the analysis, venture capital (VC) remains a critical source of financing entrepreneurial ideas, and since the interest to seek funding from a VC is high, VCs follow specific tactics to make the appropriate decisions on where to distribute their funds and how to monitor their investments.
It is worth mentioning the strict nature of those tactics, because according to the research the average VC screens 200 companies but makes only four investments in a given year.
VCs in general provide a variety of services to the companies they support, such as connecting investors, operational guidance, post-investment and strategic guidance, hiring management members and employees, and connecting customers.
It is highly important for entrepreneurs to establish and maintain relationships with innovation networks and investors, because during VCs’ sourcing process for potential…
