Venture Capital Deal Sourcing And Screening Harvard Case Solution & Analysis

Q1) Venture Capital

Venture capital is a form of equity that is forwarded to emerging and small companies with high potential for growth. Usually, this refers to companies operating in tech industry because this industry is the one with continuous expansion capacity along with the highest potential to expand in the future.

However, it is not restricted to only this industry. With other industries like health, care, education, automotive, etc. making extensive use technology, there have been rapid developments in the respective sectors. More innovative solutions are appearing in various industries like development of better treatment facilities in health care sector, imparting quality education through visual aids, development of driverless cars in automotive sector, etc. creates more opportunities for venture capitalists to gain profits.

One of the greatest advantage of venture capitalism is the level of diversification available to a venture capitalist in his portfolio. This diversification produces a cushioning effect for the investor in the sense that due to diversification of investment he can make up the losses incurred in one part of the portfolio with gains from other part of the portfolio.

However, success of a portfolio depends upon deal sourcing and screening. The screening process determines the initial identification of companies in which the investor is interested, while sourcing refers to placing and finding out investment opportunities. Most venture capitalists are interested in businesses which are seeded, start-up, expanding or mezzanine.

Other factors that venture capitalists are interested in, when evaluating the prospective company includes:

  • Management: Efficiency of the Management of the company
  • Market: Nature of the industry in which the company carries out its operation
  • Competition: Level of competition that company faces
  • Risks: Level of Risks associated with the company

Venture Capital Deal Sourcing And Screening Harvard Case Solution & Analysis

Current Investment Strategy

Fastforward Ventures is an investment firm that revolves around tech industry including developments made in computer hardware and software and telecommunications. The nature of the industry in which the firm is operating is highly volatile. This means that the firm will have to stay on high alert to be able to respond to any changes occurring in the industry.Furthermore, it was the same erratic nature of the industry which caused the firm to diversify its investment and break into new field; which was health care.

Fastforward expanded over the period of the time by investing in information technology which was the main rising industry in 1990-2000s. Following the trend of investing in top industries, it expanded to communications and later to health care sector as these were the top industries.

The erratic nature of the tech industry and its diversification led the investment firm to become cautious in raising further investments.Riding on the back of early successes earned in tech industry led to increase in its investment in that sector. But the bursting of internet bubble in early 2000 caused the firm to expand its investment portfolio through health care..........

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