Investment Model: An Overview

Abstract

Risk management is at the heart of the entrepreneurial process. Getting Funded develops a venture capital investment model, the core of which is efficient risk mitigation. Effective risk management is a core competency of successful investors and entrepreneurs. The deal-killer risks, incentive-alignment risks, and path-dependent risks should be addressed very early, and the critical operational risks should be addressed as early as possible. The remaining operational risks should be addressed as they occur. Investors invest in high-ability entrepreneurs with high-growth, high-margin businesses. Six potential areas are explored for investors to add value in a startup. The characteristics of high-ability entrepreneurs are explained. The investor criteria are examined. Entrepreneurial ability alone is not enough for an investor to accept an investment proposal, although it can be the main reason for an investor to reject a proposal. Common flaws with business plans and entrepreneur presentations can be easily fixed by the entrepreneur to improve the odds of “getting funded.” An entrepreneur should not approach the investor for funding until the startup is investor ready.