7 Pillars of Venture Investment Analysis

Private investors have caught on that global growth needs to be driven by young companies finding new ways of solving problems through innovation and technology.

With the amount of angel and venture investors snapping up high potential companies increasing, like Michael Jordaan and Vinny Lingham who are paving the way and peaking interest in investment in successful local start-ups, investors need to make sure they are injecting funds into the right startups.

Analysing an investment opportunity should always be taken case by case. We recognise that each deal has unique requirements and more than one set of variables make up the equation.

However, there are some key questions that you need to consider when analysing the viability of an investment opportunity and making investment decisions:

finance team in a meeting

1. People

The best asset of a company is its staff compliment. Ask yourself:

  • How strong is the core team?
  • What experience do they have in their industry and area of specialty?
  • Do they have experience in running a company? This skill is vastly different to developing or providing a product or service.
investment analysts looking at financial statements

2. Problem

Is this meeting a need? Find out:

  • What is the problem that the company is offering a solution to?
  • Is the problem big enough for the solution to be of commercial value?
  • Does the team fully understand how their product or service solves the problem?

3. Potential Market

Do people want this? Find out:

  • What is the size and nature of the company’s market?
  • Can they quantify the potential buyers for their product or service?
financial team in a business meeting

4. Phase of Development

  • What stage of development is their technology?
  • Is it defensible?
accountant overviewing finance report

5. Industry Trends

  • How competitive is the sector or industry that the company will operate in?
  • Who are the major competitors in the market?
accountant analysing balance sheet

6. Financial Statements

In what state is the company’s financials in?

  • Do they understand and stay in control of company finances?
  • Can they produce a financial model that clearly shows how the company will make profit as it scales, based on reasonable assumptions?
accountant in a conference call

7. Potential Viable Exit

  • Do they understand who will buy this company in a few years and why?
  • Can they clearly articulate what needs to be done in order to attract such a buyer in the future?

Investing money in a startup venture remains fairly risky and you should only consider doing it with money you can afford to lose.

Through thorough analysis, smart negotiations and good management however, it can be done successfully. Just make sure that you have the right deal-makers in your corner throughout each step of the process to help you master the art of the deal.

If you need help or more information regarding fundraising, get in touch today and follow us on social media: LinkedIn, Facebook, Instagram and Twitter.

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