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 - – wage bills are increasing, increasing commodity prices, increasing transportation and logistics costs, competitive advantages are harder to sustain because of technology dispersion, increasing government debt because of Covid-19 spendings, central banks are concerned over increasing inflation, geopolitical disruptions,
technology disruption, increasing inequality as vast percentage of new income is going to the top 1%, 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 -
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.
Cross disciplinary teams
– Horizontal connected teams at the Interviewed Venture are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
High brand equity
– Interviewed Venture has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Interviewed Venture to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
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.
Operational resilience
– The operational resilience strategy in the How Venture Capitalists Evaluate Potential Venture Opportunities Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Innovation driven organization
– Interviewed Venture is one of the most innovative firm in sector. Manager in How Venture Capitalists Evaluate Potential Venture Opportunities Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
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.
Successful track record of launching new products
– Interviewed Venture has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Interviewed Venture has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
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.
Analytics focus
– Interviewed Venture is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Michael J. Roberts, Lauren Barley can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
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.
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.
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 -
Workers concerns about automation
– As automation is fast increasing in the segment, Interviewed Venture needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study How Venture Capitalists Evaluate Potential Venture Opportunities, it seems that the employees of Interviewed Venture don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
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.
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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the How Venture Capitalists Evaluate Potential Venture Opportunities HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Interviewed Venture has relatively successful track record of launching new products.
Slow to strategic competitive environment developments
– As How Venture Capitalists Evaluate Potential Venture Opportunities HBR case study mentions - Interviewed Venture takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
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.
High operating costs
– Compare to the competitors, firm in the HBR case study How Venture Capitalists Evaluate Potential Venture Opportunities has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Interviewed Venture 's lucrative customers.
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.
Skills based hiring
– The stress on hiring functional specialists at Interviewed Venture has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
High cash cycle compare to competitors
Interviewed Venture has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
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 -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Interviewed Venture can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Interviewed Venture in the consumer business. Now Interviewed Venture can target international markets with far fewer capital restrictions requirements than the existing system.
Building a culture of innovation
– managers at Interviewed Venture can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Innovation & Entrepreneurship segment.
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.
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.
Creating value in data economy
– The success of analytics program of Interviewed Venture has opened avenues for new revenue streams for the organization in the industry. This can help Interviewed Venture to build a more holistic ecosystem as suggested in the How Venture Capitalists Evaluate Potential Venture Opportunities case study. Interviewed Venture can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Innovation & Entrepreneurship industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Interviewed Venture can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Interviewed Venture can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
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.
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Interviewed Venture can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Interviewed Venture to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
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.
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 -
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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Interviewed Venture with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
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 .
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.
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.
High dependence on third party suppliers
– Interviewed Venture high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Stagnating economy with rate increase
– Interviewed Venture can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Interviewed Venture in the Innovation & Entrepreneurship sector and impact the bottomline of the organization.
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.
Technology acceleration in Forth Industrial Revolution
– Interviewed Venture has witnessed rapid integration of technology during Covid-19 in the Innovation & Entrepreneurship industry. As one of the leading players in the industry, Interviewed Venture needs to keep up with the evolution of technology in the Innovation & Entrepreneurship sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
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.
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.
