Adding Value through Experience and Expertise
All successful venture capital managers have one common trait: They add value to the funds ihey manage. Although lfs possible to stumble into the next Google or Microsoft, most investments need the critical evaluation and support that an experienced manager can bnng. These experienced fund managers have a history of success and failure and have learned from mistakes. The fund itself should have a specific focus, which enables the management team to be specialists in a particular field. This allows the venture capital manager to add value to the fund by cross-pollinating the portfolio or exploiting synergies across investments. Furthermore, it ensures that the manager has a firm grasp on market conditions and can better determine if a company has what it takes to be successful in that particular industry. It is also helpful in nurturing that company through its expansion phase, further allowing the fund manager to add value to its investment and increasing the chances that the fund shows favorable returns.
Finding Your Focus
Imagine the world in five years. Which markets will be hot, and which of today's markets might fade away? Are there disruptive technologies or demographics that might influence particular sectors or geographies?
Successful venture capital firms develop strategies around opportunities that may or may not yet exist. They look t> take advantage of changing market conditions, and most find real success by not following the herd. We saw many unqualified companies making foolish investments in the Internet sector in the late 1990s because they were following the examples of other venture capital investors. In deciding on the focus of the fund, you must develop a business plan, think about the opportunities available, assess the competition, and be nimble with the changing markets.
Learning from the Past
In order to continuously develop successful strategy, venture capital managers must be historians as well as forward-thin king investors. The personal strengths and experiences of individual venture capital managers