Venture Capital Deal Sourcing and Screening

Venture Capital Deal Sourcing and Screening

By
Ilya Strebulaev, Theresia Gouw Ranzetta, David Hoyt
2012|Case No.E447| Length 28 pgs.

Most venture capital profits come from a small percentage of investments, despite high expectations for each investment made. As a result, a small improvement in selecting portfolio companies can make a substantial improvement in fund results.

This case describes the venture capital deal sourcing and screening process. It does not describe the due diligence process in detail, but focuses on initial screening—identifying those companies that the venture capitalist will evaluate in more detail. After describing the sourcing and screening process, the case describes a fictional venture capital firm, and provides a number of incoming investment opportunities to be evaluated. Students are asked to play the role of an associate at the firm, and tasked with reviewing these opportunities and determine how each should be handled—should they be rejected, should they contact the entrepreneur for more information, or should they refer the opportunity to one of the firm’s partners.

Learning Objective

The objective of the case is to provide students with potential investments and have them evaluate these opportunities from the perspective of an associate at a venture capital firm. In doing this, students must consider the business potential for each company as well as its fit with the venture firm’s investment objectives. The teaching objective of the note is to provide context for future discussions of the job of a venture capitalist, or the role of the VC in start-up companies.

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