Venture Capital

Gold Mines and Tar Pits

There are only two classes of investors in new and young private companies: value-added investors and all the rest. One of the keys to raising risk capital is to seek investors who will truly add value to the venture well beyond the money. Research and practice show that investors may add or detract value in a young company. Therefore, carefully screening potential investors to determine how they might fill some gaps in the founders' know-how and networks can yield significant results. Adding key management, new customers or suppliers, or referring additional investment are basic ways to add value. Venture capitalists may also provide valuable help in such tasks as negotiating original equipment manufacturer (OEM) agreements or licensing or royalty agreements, making key contacts with banks and leasing companies, finding key people to build the team, helping to revise or to craft a strategy.

Why gold mines and tar pits? 

Gold mines in the sense that venture capitalists helps startup companies by providing capital and not only capital but also ideas, plans, strategies, techniques, etc.  just to ensure that the business will survive and reach its peak. On the other hand, it is so-called tar pits in such way that venture capitalists give only investments for the business to continue its operation.

What Is Venture Capital?

The word venture suggests that this type of capital involves a degree of risks and even something of a gamble. It is in which something is risked in the hope of profit. Venture capital is a financial capital provided to early stage, high-potential, high risk, growth startup companies. Money provided by investors to startup firms and small businesses with perceived long-term growth potential. This is a very important source of funding for startups that do not have access to capital markets. It typically entails high risk for the investor, but it has the potential for above-average returns.

Classic Venture Capital Investing Process

1.  Fund conception and investing strategy. Venture capitalist will find target investment opportunities to deal on.
2. Raise capital for investment. 
3. Deal origination. The venture capital investor creates deals or investment opportunities that he would consider for investing.
4. Screening. Carry out screening of all projects on the basis of some broad criteria (size of investment, geographical location, and stage of financing.
5. Deal structuring. Venture capitalist and the venture company negotiate the terms of the deals, that is, the amount, form, and practice of the investment.
6. Post investment activities. Venture capitalist generally assumes the role of a partner and collaborator. If a financial or managerial crisis occurs, the venture capitalist may intervene, and even install a new management team.
7. Exit. Once the money is raised, the value creation process moves from generating deals to crafting and executing harvest strategies and back to raising another fund.

The Venture Capital Industry

This supplies capital and other resources to entrepreneurs in business with high growth potential in hopes of achieving a high rate of return on invested funds.

Paradox For Entrepreneurship

" The greater the organization, orderliness, discipline, and control, the less you will control your ultimate destiny."

          This means that entrepreneurs must be flexible enough and has the ability to make a great strategies and plans for the business in order for it to be successful. Overcontrol and an obsession with orderliness are impediments to the entrepreneurial approach. Entrepreneurship is highly dynamic, fluid, ambiguous, and chaotic character that an entrepreneur must be capable enough in adjusting every changes and challenges they may face on.

Paradox For Entrepreneurship

" The greater the organization, orderliness, discipline, and control, the less you will control your ultimate destiny."

          This means that entrepreneurs must be flexible enough and has the ability to make a great strategies and plans for the business in order for it to be successful. Overcontrol and an obsession with orderliness are impediments to the entrepreneurial approach. Entrepreneurship is highly dynamic, fluid, ambiguous, and chaotic character that an entrepreneur must be capable enough in adjusting every changes and challenges they may face on.

Paradox For Entrepreneurship

" The greater the organization, orderliness, discipline, and control, the less you will control your ultimate destiny."

          This means that entrepreneurs must be flexible enough and has the ability to make a great strategies and plans for the business in order for it to be successful. Overcontrol and an obsession with orderliness are impediments to the entrepreneurial approach. Entrepreneurship is highly dynamic, fluid, ambiguous, and chaotic character that an entrepreneur must be capable enough in adjusting every changes and challenges they may face on.

Want To Be An Entrepreneur?

All individuals can be an entrepreneur. It has no exemption. But one should have the skills, values, talents, abilities, and mind-sets.

The most important skill any entrepreneur needs is self-motivation. An entrepreneur must have the ability to wake up in the morning and begin working. They must be motivated in achieving business goals. Every entrepreneur needs to be confident in their selves, their product, and to their business. Ethics and morals are the foundation of every good entrepreneur. Early on you must decide what you and your business will stand for and what lines you will refuse to cross. Another skill is time management. An entrepreneur must know how to manage his/her time and need to realize that every minute is valuable.

One must be optimistic, trustworthy, honest, and the like. Optimism is truly an asset, and it will help you get through the tough times that many entrepreneurs experience as they find a business model that works for them. It is very important that an entrepreneur must be honest in his/her work for him to get the trust of the people around him. A person can prove their trustworthiness by fulfilling an assigned responsibility and not to let down expectations.

Determinants of Success and Failure in New Business

Success or failure, these two are the only endpoint of a venture especially to start-up companies who are likely to do strategies just to survive. But failure is a tail of success. To succeed, one first has to experience failure.

Determinants of success and failure are:

Success

1. Teamwork -    "One team, one goal", working together to achieve business goals. Teamwork can build a good relationship within the team.
2. Leadership - one should have a good leader to manage the operations of a business, not just the operations but also the management itself.
3. Specialization - more likely a segregation of duties. An employee is assigned to a work depending on its skills and specialization in order for him to show a good performance in his work.
4. Big opportunity - at the heart of the process is the opportunity. It is discuss in the Timmons Model that a good idea is not necessarily a good business opportunity. It is, wherein, a good idea is being put into with the opportunity considering the market demand. Opportunity is really important for time to do with the idea or plan.
5. Resources - resources is really important for the business to survive. You first need to have all the resources in place, especially the money, to succeed with a venture. With these great resources, its easy then for the venture to attract investors to invest in the business.

Failure

1. Unrealistic goal - goals that are impossible to achieve can lead a venture to fail. With this unrealistic goal, the management will not function well and as a result, there will be a poor performance of the management as well as its business operations.
2. Underestimating start-up costs - some of the costs needed in startups are predictable but there are some that is not easy to anticipate and this situation can result a shortage of cash.
3. Depending too much on others - relying too much on a handful key workers can be a big mistake, and one that could even cause the business to fail.
4. Hiring wrong people - the problem of hiring the wrong people can keep coming back to haunt the business again and again. Bad workers could ultimately hurt, rather than help the business to succeed.
5. Less Communication - communication is very important in business. Without communication, information within a business will not be spread correctly and this could foster distrust or hostility from employees.

Feasibility Study could also be a determinant for success and failure of a new business. In such way,we will know if its feasible or not to build the certain project we want.

The people itself working in a certain business has the best and worst chances for success. In a way that, they are the one who work hard and doing their best just to bring their business into success.

Describing Entrepreneurship

Meaning

        Entrepreneurship is a way wherein a person or individual think, plan, act, and manage a venture. This may exist in new business organization to improve its management and operations in order for it to mature and become stable in business world.

Metaphor

        This can be explain through metaphors. The metaphors indicating the special characteristics and features of entrepreneurship; expressions to emphasize the ideas of creativity and activeness; machinery or physical object-type; actively nature-related metaphors; sports and games; metaphors indicating adventurers, warriors and battlers; and other metaphors that can describe entrepreneurship.

        In my understanding, entrepreneurship can be compared to a bitter melon (ampalaya). Bitter to the taste as where its name derived from and you will absolutely say "NO" when you first taste it. But as we all know, bitter melon contains good nutrients that are essential in our body needs especially to those people who have low red blood cells and have high blood pressure. Relating to entrepreneurship, managing start-up companies is so risky that may lead to business failure, but with the skilled entrepreneurs, there are chances to attain success using their creativity, imaginations, motivation, integrity, teamwork, and vision into their companies. Indeed its bitter at first but sweet when pursued.

Paradox

        "The less number of employees a business have, the more productive it can be."

        Obviously, all business institutions manage the numbers of employees they have. Too many employees make your business run too slow in the sense that employees will become dependent to other employee. Entrepreneurs think of the right number of employees his/her business need. With this sufficient number of employees, each can work efficiently with their work assignments and can avoid such issue(being dependent). For example, a group activity. It is better to have 3-5 members each group than to have 8-10 members or more. Less members  is easy to organize and everyone can do their works effectively and the essence of unity will exist. However 8 up is hard to manage. Others will just sit there and just do chatting with other members, not thinking of helping those busy ones. Therefore, less employee could create a greater output.