MybiggesttakeawaysasananalystintheStudentVentureFund
Whataretheimportantaspectstokeepinmindwhenmakinganinvestmentdecision?
DuringmytimeontheStudentVentureFund(SVF),Ilearnedtonsaboutentrepreneurship,technology,andfinance.Withguidancefromindustryexpertsandfacultymembersinfinance,theSVFisagreatprogramwherestudentscangethands-ontraininginventurecapitalinvesting.Organizedintotransactionteamsofthreetofourassociatesandanalysts,wegetachancetoprepareforacareerinventurecapitalinvestingthroughactivitiesincludingreviewingpotentialinvestments,conductingduediligence,andmore!
WhileIgainedsomefantastictechnicalskillssuchaslearninghowtovaluestart-upsandreadcapitalizationtables,oneofmybiggesttakeawaysthatIwillapplythroughallmyinvestmentdecisionsistheFourT’s.TheFourT’sisamodelusedtoevaluateabusiness–inthecaseofSVF,weusedittoanalyzestart-ups,however,thismodelcanbeusedformostinvestments.Financeprofessionalsoftenbecomeveryfixatedonthenumbers.Thereisanunlimitednumberofprojectionsandmodelsthatcanbemadetovalueacompany;however,itisimportanttonotneglectthequalitativecharacteristicsofaninvestment.WhetherontheSVFdealteamorformyownportfolio,thefollowingmodelisonethatInowusebeforeanyinvestmentdecision:
- Team: The team is one of the most important factors, as they ultimately drive everything – who is the team? What is their experience? Is there a mix of both technical and business backgrounds in management? Who are their advisors? Are they open to feedback/criticism?
- TAM: Also known as Total Addressable Market. At a high level, the TAM refers to the size of the market. Is there a group of people that want this product/service? Will it be successful in today’s current business environment?
- Traction: Has this company made any notable progress? Any deals, partnerships, or moves that catch your eye? Does this traction seem sustainable?
- Technology: Is this technology innovative? Is it defensible/patented? Does this technology do what it claims to do (Pro tip: many companies use buzzwords like artificial intelligence (AI) and machine learning but that may not always be true).
Thismethodcoverssomeoftheoften-neglectedaspectsthatshouldbeconsideredwhenmakinganinvestmentdecision.Beingabletoexecuteitduringinvestmentmeetingsandduediligencecallshasbeenaninvaluableexperience.Ifyouwouldlikethechancetoapplythistechniqueontechstart-upstohelpinvestmentdecisions,IhighlyrecommendjoiningtheStudentVentureFund!
