Week 14 Reading Reflection

1.      What was the biggest surprise for you in the reading? In other words, what did you read that stood out the most as different from your expectations? 

I thought the 60% expected Annual Return on Investment for startups sought by venture capitalists, and also expecting a 10-15x overall return on investment is extremely high.  What this means to me is that venture capitalists are really only looking to fund the “diamond in the rough,” or the one deal among thousands that has really big upside potential.  It seems to me that the vast majority of startups would not realistically approach these expected returns.

2.      Identify at least one part of the reading that was confusing to you.

I thought the venture capitalist screening criteria was very confusing.  It appears to me that the vast majority of the financial projections of the proposed business strategy are based on pure speculation.  There doesn’t appear to be any hard evidence upon which the decision to fund is based.  It seems that the venture capitalist either fundamentally understands and believes in the project, or they don’t.

3.      If you were able to ask two questions to the author, what would you ask? Why?

        How often do venture capitalists receive a percentage of ownership in the startups they are funding?

2     What percentage of funded startups actually meet or exceed their financial projections?

I would like the answers to these two questions because this would give me an indication of how lucrative it would be to get into the venture capital business.  If there was a “magic formula” for the criteria and the expected vs. the actual returns.  I would like to raise money for startups and get a small piece of ownership in dozens of startups, hoping that a few would really pop.

4.      Was there anything you think the author was wrong about? Where do you disagree with what she or he said? How?

Nothing that I thought was overtly wrong, however, I thought there was not enough emphasis on the importance of startups bringing in seasoned management to increase their chance of success.  And the granting of equity ownership to attract experienced management.  It would be better to have a smaller piece of a big pie than to have no pie at all.