Inside Secrets to Venture Capital book educates about VC funding myths
(Fountain Hills, AZ)While the dot.com mania of last year has faded and crashed the Nasdaq, there are venture capital funds that must be invested and entrepreneurs with companies that must be funded. But do entrepreneurs and venture capitalists even speak the same language? Maybe not nowbut they can.
For three years, Brian E. Hill and Dee Power have surveyed partners in venture capital firms, queried entrepreneurs and interviewed experts, all to unlock the mysteries of the venture capital process. Their conclusions and the result of that research is now available in their new book Inside Secrets To Venture Capital, published by John Wiley & Sons. Entrepreneurs and venture capitalists have diverging, if not contradictory opinions on more than one issue of venture capital funding, says co-author Dee Power. Which may explain some of the frustration level on both sides of the capital equation.
Hill & Power surveyed more than 250 venture capital firms over the last three years (1998-2000). The surveys asked qualitative questions about how the venture capitalists go about finding companies and making investment decisions. It also sought their opinion of business plans they receive and about the trends in the venture capital industry. Entrepreneurs were asked some of the same questions.
Hill and Power found some of the results startling.
* Almost two-thirdsof entrepreneurs surveyed thought the most common way venture capitalists find the deals they actually invest in is by being contacted by an intermediary or finder. And that just isnt so. says Brian Hill, co-author.
* 34 percent of the VCs find most of their deals through referrals from other venture capital firms.
* 30 percent of the venture capitalists list direct contact by the entrepreneurs as their second favorite method of contact.
* 17 percent of VCs say they prefer referrals by intermediaries.
So the myth that its that a referral is necessary to be taken seriously by a VC is wrong or at least somewhat frayed, says Hill. Another misconception is that entrepreneurs think the most critical factor in the venture capitalists decision to invest is return on investment (ROI), says Power. Its not. Quality of management is the number one factor, ROI is significantly behind in third place, adds Power. Entrepreneurs dont understand why VCs decline to invest, how long it should take to close a transaction, how quality of management is defined, or what the most critical mistakes are in their business plans.
Inside Secrets To Venture Capital retails for $34.95 and is published by John Wiley & sons in New York, ISBN: 0471414069
Brian E. Hill and Dee Power both have MBA degrees in Business Administration from Arizona State University. In 1987, the duo established, Profit Dynamics, a research and management consulting firm located in Fountain Hills, Ariz. Profit Dynamics assists companies with business planning, research and strategies for growth as well as providing information to entrepreneurs who are looking for capital. The companys popular web site, www.capital-connection.com, has a wealth of information and links to resources on business plans, venture capital, private investors, loans and more. Hill and Power are working on their second book focused on angel/private investors, putting the finishing touches on a suspense novel about the world of business, Overtime and have written two screen plays, one a ghost story, the other a thriller. They can be contacted at firstname.lastname@example.org