subject: Capital investment – Venture capitalists prefer large established markets [print this page] Many entrepreneurs focus on the bleeding edge, market growth will be offered in the development of their technologies, products or services. This is for several reasons, including:
The perception that the market growth, competition is limited,
The ability to get a foot restraint at the top, the value of your company, and
The reality is the difficulty in developing a long-term competitive advantage in the markets of large sizes.
This Articleexplains why this market is generally too risky for many venture capitalists, and offers five reasons for venture capital prefer large markets at the margin of advantage of rapidly expanding markets established.
Bleeding Edge boom in emerging markets
Often, the larger, established competitors, small businesses or start-up of thinking are different, they had for emerging markets with experimental techniques to address. In general, it is truethat larger competitors are not even jump into a new market segment, and it is assumed that the market has enough volume to assist the necessary investments. Furthermore, these large firms are more cautious in their investment philosophy and can not afford to wait because it lacks the resources and market presence to provide quick and direct its position in the market again. In addition, smaller companies or new companies, if they believe they can create aEntering an emerging market which is the same company to ensure a strong position to gain market share, to support an exit strategy for its major investors in the public sector will begin in each case (), or less likely to have acquired a major competitor to more established.
Most of the time, driving the growth strategy of market penetration a lot of risks. The most important risk is that the underlying, an emerging marketsupport this new technology is not developed in the near future, with little depth. In this situation, and technical experts often say that their target market or a market segment that will be launched next year, the company provides a significant return on investment very quickly. This optimistic view of the world, usually do not believe that the time for new technology infrastructure or development of new technologies, including the provisionCustomers. In most cases this time of year is proving to be five to seven years. This makes it virtually impossible for a small business, financing of risk capital for the development of several generations of products that are necessary before the bleeding-edge target market, transferring large enough allows them to make their business model to Funds support. In several cases, the same technology for small, new companies with a large amount of funds has been activated (eg,$ 50M to $ 100M) and can not receive additional funding from investors, third. Offer in this situation, the funding level is significantly higher than the monetary value of the company or its technologies, products or services to sell to investors of the first large companies who need to pay a few cents for every dollar that comes from investment .
