Ross McDonald | Banker | Strategist | CFO

VC-venture success

Not all venture capital backed businesses are successful. OK, so that's not exactly a surprising or controversial statement. But how important are factors such as (a) prior experience of entrepreneur, (b) prior success of entrepreneur, (c) experience of venture capital firm in the likely success of VC-backed business? And how important is prior experience or prior success by entrepreneurs in the investment selection criteria by VCs?

It seems widely intuitive that prior entrepreneurial success, experienced VC-backers and even prior entrepreneurial failures could improve the chance of success of a new business. Indeed there could easily be a virtual-circle in effect - with financiers, customers and suppliers of a business providing favorable treatment to an entrepreneur that has a successful track record. Many people express opinions on such matters. But empirical evidence is uncommon.

A recent Harvard Business School working paper, "Performance Persistence in Entrepreneurship", reviewed all the funding, founders, vc-advisors and resulting success (IPO) of all US VC-backed businesses between 1975 and 2003. Their statistical conclusions confirm some common intuitition and highlight a few surprises ...

VC poker ?

Seems that VCs, with no exits in sight and starved of fresh investor capital, have found a new hobby - poker. No kidding, the CVCA will shortly host a poker tournament for its members. OK, so it's just entertainment but organised by such a national industry association has the potential to be perceived poorly. Loss-suffering investors and job-fearing entrepreneurs might perhaps wonder why talented VCs don't have their sleeves rolled-up helping portfolio companies survive nevermind excel in these economically troubled times. As for encouraging VCs to gamble, the mind boggles ...

Zero US VC IPOs

Yesterday, the San Francisco Chronicle ran an article that noted that zero U.S. venture-backed companies completed IPOs in the third quarter of 2008. First time for 30 years ...

Executive MBA: Financing an Early-Stage Venture

Last week, I was guest speaker to an Executive MBA 'Managing New Ventures' class at a Canadian business school. An enjoyable, interactive class session hosted by sales/marketing superstar - and ultramarathon runner - Ean Jackson. The topic of discussion was Financing an Early-Stage Business. Given that the students were presenting their new business ideas the following day to a VC-panel then the topic of investor pitches, investor priorities and indeed investor due diligence were all hot discussion topics ...

Cleantechnology VC Investments

Clean technology, otherwise known as Green technology, continues to gather momentum. Investments by US venture capital firms into clean technology firms have increased, both in absolute dollar terms and also as a percentage of total VC investments (representing 1.1% and 7.4% in 2003 and 2007 respectively). What is clear is that cleantech sector is here to stay ...