By Tom Ballard, Chief Alliance Officer, PYA
Shawn Carson says the research conducted for his recently completed dissertation on the critical risk factors considered by angel and venture capitalists confirmed some things he expected, but also held a big surprise.
“What I expected was the importance of the ‘Big 4,’ what surprised me were the relationship factors,” the Lecturer in the Haslam College of Business at the University of Tennessee Knoxville and Consultant with Three Roots Capital says.
The ‘Big 4,” as he describes them, are execution – can the management team execute the business plan, market – is there a viable market for the product or service, technology – does it work, and funding – can the start-up secure the necessary capital.
“Those are fairly objective measures that are commonly accepted,” Carson says. Yet, when he asked nine venture capitalists and nine angel investors for their list of all critical factors considered in making investment decisions, they collectively identified 82 unique ones.
Carson lumped those into seven categories like founders and management team, relationship, intellectual property, competitive factors, value proposition, scalability, and exit.
“By far, the number one category of factors was around relationships,” Carson said. “Six of the top 10 were about relationships.”
You might ask, “What are those six?” Survey says, in order, trustworthiness, ethics and honesty, integrity, coachability, character, and passion. Two others were in the top 20 – management ‘skin in the game’ and transparency.
Click below to view a summary of Carson’s research in this PDF document.