Two blue chip companies – Abu Ltd and Ada Ltd are seeking to raise funds from venture capital to boost their production in order to satisfy demand for their solar powered refrigeration and air-conditioning systems, which they developed through a joint venture. They have consulted you for advise.
Required:
Explain FIVE conditions that a venture capitalist will consider in accessing an application for funding. (5 marks)
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- Nature of the company’s products
The products of the company should enable it generate adequate sales and profits that are sustainable for it to be attractive to venture capital investment. - Expertise in production
Technical ability should be demonstrated through efficient production and value driven skills and competencies. - Expertise in management
Management should demonstrate commitment, skills, and experience in promoting the objectives of the organization. - The market and competition
The company’s proposal should demonstrate that it has a competitive strategy to maintain and expand its market share. - Future profits
The prospects of the company in generating future profits are realistically expressed in its business plan and proposal. - Board membership
The company should have a board of directors who will take decisions and consider the interest of the stakeholders. - Risk borne by existing shareholders
Significant part of the company’s funding is from its owners who also bear the major part of the company’s risk. (Any 5 points)