Venture capitalists invest in companies at an early stage of development when they have little or no operating history. Early-stage companies often post losses and experience huge variations in operating results from quarter to quarter. Developing a promising technology is only half of the equation. New technology companies may need substantial infusions of capital to develop their products and achieve a competitive position against companies with greater financial resources. They must also produce products or services at a price and volume that the marketplace will accept.
Management is critical to any company's success.
Early-stage companies may have a management team whose skills are untested.