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By Evan Carmichael
- Venture capitalists are in business to make money. They have to have the ability to select companies that will make more money than their rivals.
- There are 2 types of companies. The first is a lifestyle business. These types of companies are centered around the lifestyle of the entrepreneurs. The owners will use the business to drive expensive cars and purchase big houses. These are not businesses that attract venture capital.
- The second type of company is a gazelle. These companies are run by entrepreneurs who want to build world-class organizations.
- There are three ways for a venture capitalist to exit from your business: acquisition, public offering or management buyout. Half of the decision to invest in your company is derived from if the venture capitalist can see a clear exit.
An example of a gazelle is Hewlett-Packard. Mr. Hewlett and Mr. Packard wanted to build a world class company. They recognized that they did not have the necessary skills so they hired professional management and became mentors and the elderly statesmen for the company. They were able to exit from the company and it became a huge success.
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