The Business of Venture Capital: Insights from Leading Practitioners on the Art of Raising a Fund, Deal Structuring, Value Creation, and Exit Strategies (Wiley Finance) by Ramsinghani Mahendra

Author:Ramsinghani, Mahendra [Ramsinghani, Mahendra]
Language: eng
Format: mobi
Publisher: Wiley
Published: 2011-10-24T16:00:00+00:00

According to Geoff Smart, VC practitioners typically conduct interviews based on the following categories:

Work sample: This is the most heavily used means of interviewing: typically, venture capitalists spend over 60 hours per deal in work samples with management.

In these direct interactions, venture capitalists quiz the management team on various issues related to the business. They are called work samples because they allow the venture capitalist to view samples of how the managers think and work firsthand. The time that venture capitalists spent in work samples was positively related to the accuracy of the human capital valuation in early-stage deals but negatively related to accuracy in later-stage deals. Why the difference? In early-stage deals, these discussions are more probing and often personal. In later-stage deals, formal presentations by managers coached by investment bankers can be as misleading as they are informative. The evidence suggests that work samples are not sufficient for achieving accurate human capital valuations.

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