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Funding Criteria
We use a number
of criteria when evaluating a potential investment. These include:
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The
composition of the management team
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The
viability of the business model
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The
commercial potential of the target
market
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Whether
the company has developed or acquired
proprietary intellectual property
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The
degree of sustainable
competitive advantage
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A
credible and defined path to
profitability
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A winning
exit strategy within a reasonable
time-frame.
Management
A highly qualified management team is a baseline requirement for
building a successful business. This is especially true during the
early, critical stages, when a mis-step can derail funding or
lose
a strategic customer.
Early-stage companies often have technological depth but lack
experience in building a technology business. If your team is
incomplete or lacking some of this experience, we will connect you to
our network of business professionals who can supply -- on a project or
full-time basis -- the operational and
management experience you need. We can also help supplement your team
via industry alliances, advisory boards and partnerships that create
synergies and market opportunities. Our associates also provide
direct, "hands-on" mentoring and support to our portfolio
companies.
Market
Readiness
We don't belive in technology for its own sake. We invest in
early-stage companies that have a compelling solution for a business
challenge faced by a large number of organizations in a fast
growing marketplace. This scenario provide the best opportuntieis for
securing a significant market presence and a rapid path to
profitability. This ensures the best possible valuation and return on
investment.
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Niche
dominance. You
company
must have a credible plan for winning a significant market share in a
well defined niche market. Grand
visions of
multi-billion dollar markets are not attractive unless you can
convincingly show how you will achieve them.
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Barriers to
Entry. In order to maintain a
competitive advantage, a
prospective business should possess industry expertise, proprietary
technology, superior products, or other advantages that represent
"barriers to entry" for competitors. Examples include a "blocking
patent," a high-value domain name (e.g., buy.com);
and, "first-to-scale"
advantage (your company is the first to achieve significant
scale
within a new niche).
Investment Liquidity
We look for
a
compelling exit strategy that
provides liquidity and maximum shareholder value. Given
our early-stage investment focus, we don't expect to exit a
portfolio company within a short timeframe. But, we do expect to see
this occur within 3-5 years after funding. Exit
strategies typically include public offering of securities, sale to a
strategic partner, management buyouts, stock sales to other
shareholders, etc. The exit strategy must also account for the
conditions under which the exis strategy is purtsued. This includes
such favos as which parties must agree, the financial conditions and
business prospects under which the exit strategy will be
consummated, etc.
Growth Potential
We prefer
companies with globally applicable
business concepts, products, services and technologies,
because they offer the greatest
opportunities for rapid
growth. We also expect to see a well-though out business plan that
demonstrates how this growth will be achieved. We are not
fans of what is sometimes
called, "The Chinese Glove Syndrome." This is an argument that goes,
"China has more than one billion citizens, so if we sell
only 1%
of them a pair of gloves for $20/pair, we'll generate $200 million in
revenue!" Real businesses have realistic expectations.
Profitability
Event at
the earliest stages, a company should
have a clear path to profitbility. As part of our due diligence
process,
we will analyze criteria such as working capital requirements,
economies of scale, market trends, and
historical data to determine if the
business will be able to reach a profitable state within a reasonable
timeframe.
Do you think
you have what it takes? Check out our Business
Viability Checklist
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