Private Money Partnering

Evaluating Opportunities

Chapter I Evaluating Debbie Or Dan Has-A-Deal

How Venture Capital Lenders Evaluate Opportunities
Important Factors to Consider

How Venture Capital Lenders Evaluate Opportunities

In one sense, evaluating Debbie or Dan Has-A-Deal is like a venture capital firm evaluating the people factors of a business operation that is looking for venture capital. A venture capitalist evaluates both the strength of the project and ability of the entrepreneur to make it happen.

If you have money and want to see it grow faster than it is currently, you are probably approached fairly often to invest your money. You may feel differently about your funds if you earned them, or if you married them, or if you received an inheritance. That may affect the type of risk-taker you are, whether you’re conservative or more aggressive.

Venture Capital Lenders Look At:

♦ The type of business
♦ Amount of experience in the business
♦ How much the business is worth
♦ What are the expectations of the business
♦ Whether the enterprise has a lock on a new product or a new concept making
them stand out in the marketplace

In addition, a venture capitalist will look at these risk-related criteria:

Market Risk

Is it a new, different, or proven market area?

Financial Risk

How much money is needed, and will more be needed down the road because the project hasn't been thought through?

Management Risk

What are the personal strengths and weaknesses of Debbie or Dan? Is additional management help needed? Do objectives and expectations of the partners complement each other or match?

Technology Risk

Does what they’re trying to sell make sense? Is it a new home product or used, a townhouse, cluster concept, apartment area, lifestyle?

Under what conditions would you become someone’s personal banker on a project? If you’re the bank, you need to review bank guidelines, or the “4 C’s of Lending”:

Credit

Character

Collateral

Capacity

Why should you think any differently than a bank?

Evaluating The Opportunities - Chapter I (continued)