marketing and financial plans being especially weak. Data support of many claims contained in the plans is inadequate in 80 percent of the plans, this feature showing up as critical in venture capital decision making. The research reveals a strong relation between overall objective assessment of the business plans and whether or not those firms receive early venture capital backing. This finding is also supported by the significant difference in appraisals of approved versus rejected plans by two venture capital organizations studied in depth.
Detailed examination of 44 technology-related investment decisions by two venture capital organizations reveals striking differences in their tastes and consequent investments, beyond both VCs preferring entrepreneurial groups to solo entrepreneurs. One VC firm puts its money into primarily product development efforts by two-year old firms, the other company participates in the further growth financing of companies nearly six years old on average. Although both investment companies proclaim as critical the personal characteristics of the people in whom they invest, only one VC displays investment behavior consistent with its claims, the other evidently principally affected by characteristics of the markets being served by the candidate firms. Both investors shun market situations in which customers appear importantly influenced by price, preferring cases in which the asserted technological advantages of the firms in which they invest might become dominant factors. With each venture capitalist the "funnel effect" is most evident, transforming 1,000 to 2,000 initial inquiries for funds into 100 to 200 that receive careful screening, and eventually into ten to twenty or so actual investments being made. In this selective environment technological entrepreneurs had better carefully map out their strategies for growth, the subject of the next part of this book.
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