The researchers found that deal flow, deal selection, and VC value-add are all important contributors to value creation. Among these, deal selection was considered the most important. VCs view the quality of the management team as more important than the business model, product, or market, both in selecting deals and in deal success. Managerial ability, industry experience, and passion were prized qualities for management team selection.
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Future of Venture Capital Deal Sourcing.
The Small Business Investment Act (SBIC) in 1958 boosted the VC industry by providing tax breaks to investors. In 1978, the Revenue Act was amended to reduce the capital gains tax from 49% to 28%. In 1979, a change in the Employee Retirement Income Security Act (ERISA) allowed pension funds to invest up to 10% of their assets in small or new businesses. The capital gains tax was reduced to 20% in 1981. These developments catalyzed growth in VC and the 1980s turned into a boom period for venture capital, with funding levels reaching $4.9 billion in 1987.
If they treat charitable donations as a form of capital that seeks social, not financial, returns, organizations can then tap traditional sources of funding: venture capital firms, banks, mutual funds, bonds, and so on. And with access to these sources, they can make use of all the tools for transferring risk and return, allowing them to free up capital and grow.
The role of a venture capital principal involves leading investment transactions and sourcing new deals. Principals may be junior partners or senior associates, depending on the firm's structure. Their responsibilities include performing due diligence, negotiating with founders, and presenting investment opportunities to the partners. Principals are expected to have a strong understanding of the specific industry sector they focus on and develop a solid network of contacts.
Key Considerations for VC Fund Modeling.
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