How Venture Capitalists Evaluate Potential Venture Opportunities
How Venture Capitalists Evaluate Potential Venture Opportunities
Problem definition
The case is about four interviews to capitalists from leading Silicon Valley firms to learn about the frameworks they use to evaluate potential venture opportunities. Following there’s a comparative summary of such interviews:
Questions
How Do You
Evaluate
Potential
Venture
Opportunities?
How Do You
Evaluate the
Venture’s
Prospective
Business
Model?
Russell Siegelman:
Partner,
Kleiner Perkins Caufield & Byers
(KPCB)
The most important requirement is a large market opportunity in a fast-growing sector. The second factor involves a competitive edge that is long lasting.
The third thing is team. We look for a strong technical founder and a salesoriented entrepreneur.
There are two broad kinds of investment opportunities. In the first bucket, the market or product is somewhat understood. Then, there are completely new markets or business models where we think we may know the bets we’re making, but in truth we have no clue.
Sonja Hoel:
Managing Director,
Menlo Ventures
Fred Wang:
General Partner,
Trinity Ventures
It is all about the market. It includes evaluating market growth, market size, competition, and customer adoption rates.
We track four things and relate them to the success of our investments: market size, the team, unique technology, and whether the product is developed at the time we invest.
There are some pretty obvious things, they are team, market opportunity, and the product/value proposition for the solution. Technology differentiation or business model differentiation is also important to sustain a competitive advantage. One potential point of differentiation between us and some other firms relates to how we think about the CEO.
Another big determinant of success is the sector; if we’re investing in the right sector, even if the execution isn’t as good, the rising market lifted all the companies in the sector.
Robert Simon:
Director,
Alta Partners
Problem definition
The case is about four interviews to capitalists from leading Silicon Valley firms to learn about the frameworks they use to evaluate potential venture opportunities. Following there’s a comparative summary of such interviews:
Questions
How Do You
Evaluate
Potential
Venture
Opportunities?
How Do You
Evaluate the
Venture’s
Prospective
Business
Model?
Russell Siegelman:
Partner,
Kleiner Perkins Caufield & Byers
(KPCB)
The most important requirement is a large market opportunity in a fast-growing sector. The second factor involves a competitive edge that is long lasting.
The third thing is team. We look for a strong technical founder and a salesoriented entrepreneur.
There are two broad kinds of investment opportunities. In the first bucket, the market or product is somewhat understood. Then, there are completely new markets or business models where we think we may know the bets we’re making, but in truth we have no clue.
Sonja Hoel:
Managing Director,
Menlo Ventures
Fred Wang:
General Partner,
Trinity Ventures
It is all about the market. It includes evaluating market growth, market size, competition, and customer adoption rates.
We track four things and relate them to the success of our investments: market size, the team, unique technology, and whether the product is developed at the time we invest.
There are some pretty obvious things, they are team, market opportunity, and the product/value proposition for the solution. Technology differentiation or business model differentiation is also important to sustain a competitive advantage. One potential point of differentiation between us and some other firms relates to how we think about the CEO.
Another big determinant of success is the sector; if we’re investing in the right sector, even if the execution isn’t as good, the rising market lifted all the companies in the sector.
Robert Simon:
Director,
Alta Partners