Case Study Description of How Venture Capitalists Evaluate Potential Venture Opportunities
Four venture capitalists from leading Silicon Valley firms are interviewed about the frameworks they use to evaluate potential venture opportunities. Questions include: How do you evaluate the venture's prospective business model? What due diligence do you conduct? What is the process through which funding decisions are made? What financial analyses do you perform? What role does risk play in your evaluation? and How do you think about a potential exit route? Russell Siegelman, partner at Kleiner Perkins Caufield & Byers; Sonja Hoel, managing director at Menlo Ventures; Fred Wang, general partner at Trinity Ventures; and Robert Simon, director at Alta Partners, are interviewed.
Swot Analysis of "How Venture Capitalists Evaluate Potential Venture Opportunities" written by Michael J. Roberts, Lauren Barley includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Interviewed Venture facing as an external strategic factors. Some of the topics covered in How Venture Capitalists Evaluate Potential Venture Opportunities case study are - Strategic Management Strategies, Entrepreneurial finance, Financial analysis, Hiring, Risk management and Innovation & Entrepreneurship.
Some of the macro environment factors that can be used to understand the How Venture Capitalists Evaluate Potential Venture Opportunities casestudy better are - – geopolitical disruptions, digital marketing is dominated by two big players Facebook and Google, increasing household debt because of falling income levels, there is backlash against globalization, there is increasing trade war between United States & China, increasing transportation and logistics costs, wage bills are increasing,
competitive advantages are harder to sustain because of technology dispersion, talent flight as more people leaving formal jobs, etc
Introduction to SWOT Analysis of How Venture Capitalists Evaluate Potential Venture Opportunities
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in How Venture Capitalists Evaluate Potential Venture Opportunities case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Interviewed Venture, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Interviewed Venture operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of How Venture Capitalists Evaluate Potential Venture Opportunities can be done for the following purposes –
1. Strategic planning using facts provided in How Venture Capitalists Evaluate Potential Venture Opportunities case study
2. Improving business portfolio management of Interviewed Venture
3. Assessing feasibility of the new initiative in Innovation & Entrepreneurship field.
4. Making a Innovation & Entrepreneurship topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Interviewed Venture
Strengths How Venture Capitalists Evaluate Potential Venture Opportunities | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Interviewed Venture in How Venture Capitalists Evaluate Potential Venture Opportunities Harvard Business Review case study are -
High switching costs
– The high switching costs that Interviewed Venture has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Organizational Resilience of Interviewed Venture
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Interviewed Venture does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Diverse revenue streams
– Interviewed Venture is present in almost all the verticals within the industry. This has provided firm in How Venture Capitalists Evaluate Potential Venture Opportunities case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Highly skilled collaborators
– Interviewed Venture has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in How Venture Capitalists Evaluate Potential Venture Opportunities HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Digital Transformation in Innovation & Entrepreneurship segment
- digital transformation varies from industry to industry. For Interviewed Venture digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Interviewed Venture has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Strong track record of project management
– Interviewed Venture is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Effective Research and Development (R&D)
– Interviewed Venture has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study How Venture Capitalists Evaluate Potential Venture Opportunities - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Superior customer experience
– The customer experience strategy of Interviewed Venture in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Training and development
– Interviewed Venture has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in How Venture Capitalists Evaluate Potential Venture Opportunities Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Ability to lead change in Innovation & Entrepreneurship field
– Interviewed Venture is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Interviewed Venture in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Sustainable margins compare to other players in Innovation & Entrepreneurship industry
– How Venture Capitalists Evaluate Potential Venture Opportunities firm has clearly differentiated products in the market place. This has enabled Interviewed Venture to fetch slight price premium compare to the competitors in the Innovation & Entrepreneurship industry. The sustainable margins have also helped Interviewed Venture to invest into research and development (R&D) and innovation.
Learning organization
- Interviewed Venture is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Interviewed Venture is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in How Venture Capitalists Evaluate Potential Venture Opportunities Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Weaknesses How Venture Capitalists Evaluate Potential Venture Opportunities | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of How Venture Capitalists Evaluate Potential Venture Opportunities are -
Low market penetration in new markets
– Outside its home market of Interviewed Venture, firm in the HBR case study How Venture Capitalists Evaluate Potential Venture Opportunities needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Interest costs
– Compare to the competition, Interviewed Venture has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Aligning sales with marketing
– It come across in the case study How Venture Capitalists Evaluate Potential Venture Opportunities that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case How Venture Capitalists Evaluate Potential Venture Opportunities can leverage the sales team experience to cultivate customer relationships as Interviewed Venture is planning to shift buying processes online.
Need for greater diversity
– Interviewed Venture has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study How Venture Capitalists Evaluate Potential Venture Opportunities, in the dynamic environment Interviewed Venture has struggled to respond to the nimble upstart competition. Interviewed Venture has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Products dominated business model
– Even though Interviewed Venture has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - How Venture Capitalists Evaluate Potential Venture Opportunities should strive to include more intangible value offerings along with its core products and services.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study How Venture Capitalists Evaluate Potential Venture Opportunities, is just above the industry average. Interviewed Venture needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Slow decision making process
– As mentioned earlier in the report, Interviewed Venture has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Interviewed Venture even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Interviewed Venture supply chain. Even after few cautionary changes mentioned in the HBR case study - How Venture Capitalists Evaluate Potential Venture Opportunities, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Interviewed Venture vulnerable to further global disruptions in South East Asia.
High bargaining power of channel partners
– Because of the regulatory requirements, Michael J. Roberts, Lauren Barley suggests that, Interviewed Venture is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Interviewed Venture is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study How Venture Capitalists Evaluate Potential Venture Opportunities can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Opportunities How Venture Capitalists Evaluate Potential Venture Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study How Venture Capitalists Evaluate Potential Venture Opportunities are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Interviewed Venture to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Interviewed Venture to hire the very best people irrespective of their geographical location.
Learning at scale
– Online learning technologies has now opened space for Interviewed Venture to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Interviewed Venture is facing challenges because of the dominance of functional experts in the organization. How Venture Capitalists Evaluate Potential Venture Opportunities case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Leveraging digital technologies
– Interviewed Venture can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Interviewed Venture in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Innovation & Entrepreneurship segment, and it will provide faster access to the consumers.
Loyalty marketing
– Interviewed Venture has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Manufacturing automation
– Interviewed Venture can use the latest technology developments to improve its manufacturing and designing process in Innovation & Entrepreneurship segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Interviewed Venture can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Interviewed Venture can use these opportunities to build new business models that can help the communities that Interviewed Venture operates in. Secondly it can use opportunities from government spending in Innovation & Entrepreneurship sector.
Developing new processes and practices
– Interviewed Venture can develop new processes and procedures in Innovation & Entrepreneurship industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Using analytics as competitive advantage
– Interviewed Venture has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study How Venture Capitalists Evaluate Potential Venture Opportunities - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Interviewed Venture to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Interviewed Venture can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, How Venture Capitalists Evaluate Potential Venture Opportunities, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Innovation & Entrepreneurship industry, but it has also influenced the consumer preferences. Interviewed Venture can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Threats How Venture Capitalists Evaluate Potential Venture Opportunities External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study How Venture Capitalists Evaluate Potential Venture Opportunities are -
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Interviewed Venture business can come under increasing regulations regarding data privacy, data security, etc.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Interviewed Venture can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study How Venture Capitalists Evaluate Potential Venture Opportunities .
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Interviewed Venture in the Innovation & Entrepreneurship industry. The Innovation & Entrepreneurship industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Interviewed Venture needs to understand the core reasons impacting the Innovation & Entrepreneurship industry. This will help it in building a better workplace.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Interviewed Venture will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Consumer confidence and its impact on Interviewed Venture demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Environmental challenges
– Interviewed Venture needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Interviewed Venture can take advantage of this fund but it will also bring new competitors in the Innovation & Entrepreneurship industry.
Regulatory challenges
– Interviewed Venture needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Innovation & Entrepreneurship industry regulations.
Easy access to finance
– Easy access to finance in Innovation & Entrepreneurship field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Interviewed Venture can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing wage structure of Interviewed Venture
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Interviewed Venture.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Interviewed Venture.
Weighted SWOT Analysis of How Venture Capitalists Evaluate Potential Venture Opportunities Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study How Venture Capitalists Evaluate Potential Venture Opportunities needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study How Venture Capitalists Evaluate Potential Venture Opportunities is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study How Venture Capitalists Evaluate Potential Venture Opportunities is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of How Venture Capitalists Evaluate Potential Venture Opportunities is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Interviewed Venture needs to make to build a sustainable competitive advantage.