Evaluating New Venture

In: Business and Management

Submitted By tigr92
Words 1509
Pages 7
Introduction to Entrepreneurship
Search Funds:
Buying a Business
Finding an Idea
Find a Team
Legal Issues
Business Plans
Funding
Managing and Growing the Venture
HBS Entrepreneurs
Services for Students
Evaluating New Venture Opportunities Conversations with Venture Capitalists

What makes for the ideal entrepreneurial opportunity?

To learn about the frameworks firms use when evaluating potential venture opportunities, Mike Roberts, executive director of the Arthur Rock Center for Entrepreneurship, and HBS senior research associate Lauren Barley recently interviewed four venture capitalists from leading firms in Silicon Valley. The following are excerpts from their responses.

Russell Siegelman (MBA '89)
Partner, Kleiner Perkins Caufield & Byers

The most important requirement is a large market opportunity in a fast-growing sector. We like a company to have a $100 million to $300 million revenue stream within five years. This means that the market potential has to be at least $500 million-or more, eventually-and that the company needs to achieve at least a 25 percent market share.

The second factor involves a competitive edge that is long lasting. It is usually an engineering challenge that is tough enough to give the company an edge, resulting in several years lead or longer, if we're lucky. We look for a tough problem that hasn't been solved before. The solution can't be so straightforward that someone can look at the blackboard and say, "I know how to do it."

The third thing is team. We look for engineering vision and execution, sales, and entrepreneurship in a team. Typically, it's at least two people; sometimes it's three. In the early stages, I tend to invest behind an entrepreneur, not behind a professional manager as the CEO. Entrepreneurs have to have a clear sense of the opportunity and how to build the business. But the best ones…...

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