Facing Investment Challenges
Sometimes, an investment does not go as hoped. One of the most crucial decisions a venture capital manager makes is whether to reinvest in a business that has come upon difficult times. Chances are the business has not yet lived up to expectations and is burning through its capital. The job of the fund manager is to assess whether the management team will still be able to turn the business around and whether a capital infusion will actually help the investment eventually see a realization.
If the decision is made to reinvest, the money may be invested differently from the initial investment. If we invested equity the first time, we might offer some form of debt, such as a line of credit, the second time. This change allows the money source to be cut off at any point. This flexibility cushions the danger of reinvesting in a nsky business.
Target Return Goals
Our firm's return principle is to avoid investments that may decrease our historic rate of return. In order to evaluate potential return on investment, we use a dynamic two-person investment analysis team. This team scrutinizes the management, the market, the competition, the product or service, and the exit potential. Active due diligence assures the investment team that a deal will be beneficial to the fund.
Several red flag situations may curb our interest in the deal. If we begin to doubt the management team, we will not risk investing in a potentially damaging situation. If we don't think we will generate at lease three times return, it is not worth our investment. Our target return goals can certainly make or break deals.
Raising a Venture Capital Fund
The A. rt and Science of Raising a Fund
The process of
developing a new fund is both an art and a science. While specific steps must
be taken in the findraismg process, there is no set strategy for determining
what the new fund should look like. The success or