TLDR:
- Execution is a critical element in evaluating venture capital deals.
- Assessment includes revenue potential, quality, and durability.
The article discusses the importance of execution in evaluating venture capital deals, focusing on how companies plan to make money profitably and build competitive advantages. The Chief Investment Officer of Alumni Ventures, Mark D. Edwards, emphasizes the significance of assessing current business traction and long-term economic potential. The analysis includes evaluating the magnitude, quality, and durability of future revenue to determine a company’s value creation over time.
Specifically, the evaluation process examines customer demand, revenue momentum, business model, and competitive moats to assess an investment’s attractiveness. Customer demand and momentum are crucial in determining the size of the addressable market and growth potential. Additionally, the quality of revenue, including strong unit economics and scalability, is considered. Competitive moats, such as technical complexity, IP, and network effects, are evaluated for their defensibility in creating sustainable business franchises.
A case study is provided to illustrate how the evaluation of execution contributed to identifying a successful investment. Challenges in evaluating pre-revenue companies, such as confidence levels in proof points and guessing market size in a nascent market, are also discussed. Alumni Ventures offers accredited individuals access to professional-grade venture capital, emphasizing its track record and active role in the venture capital landscape.
