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 - – challanges to central banks by blockchain based private currencies, increasing household debt because of falling income levels, there is backlash against globalization, supply chains are disrupted by pandemic , customer relationship management is fast transforming because of increasing concerns over data privacy, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing transportation and logistics costs,
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 -
Ability to recruit top talent
– Interviewed Venture is one of the leading recruiters in the industry. Managers in the How Venture Capitalists Evaluate Potential Venture Opportunities are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
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.
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.
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.
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.
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.
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.
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.
Low bargaining power of suppliers
– Suppliers of Interviewed Venture in the sector have low bargaining power. How Venture Capitalists Evaluate Potential Venture Opportunities has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Interviewed Venture to manage not only supply disruptions but also source products at highly competitive prices.
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.
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.
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 -
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.
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.
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 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.
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.
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.
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.
Lack of clear differentiation of Interviewed Venture products
– To increase the profitability and margins on the products, Interviewed Venture needs to provide more differentiated products than what it is currently offering in the marketplace.
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.
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 -
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.
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.
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.
Better consumer reach
– The expansion of the 5G network will help Interviewed Venture to increase its market reach. Interviewed Venture will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
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.
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.
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.
Buying journey improvements
– Interviewed Venture can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. How Venture Capitalists Evaluate Potential Venture Opportunities suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
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.
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.
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.
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.
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 -
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.
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 .
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.