Venture Capital Example – How to Predict the Future of a Business
Before looking at a venture capital example, consider the risks and rewards of the investment. After all, investors want to invest in a business that has a chance of success. So how do you predict the future of a business? You need to know whether the business will succeed or fail, and you should be able to predict the return on investment. Listed below are some tips for success. Before looking at a venture capital example, consider the following questions:
A high-risk venture capital investment is a type of investment with a high likelihood of loss or underperformance. The standard deviation of VC investments is very high, at more than 100 percent annually. This is much higher than the ten percent standard deviation of the S&P-500, and similar to the volatility of small publicly traded NASDAQ stocks. These investments are also highly volatile, with a beta of about one, meaning that they move with the stock market.
VCs avoid investing in companies that aren’t proven. They also avoid betting on technology in unproven segments of the market. The exceptions are concept stocks, which hold tremendous promise but can take years to succeed. One such company is genetic engineering. VCs must identify entrepreneurs with experience in the field, as well as in the industry or segment in which they plan to invest. Moreover, investors need to know how the company will reach FDA approval and sell its product to a major corporation.
While early exits are possible, … READ MORE ...