The venture capital firm and its interest usually depends upon the stage of the new firm's development. However, some firms prefer a later stage of new business development, perhaps when the new company is in its second or third round growth state and needs more capital either to carry out expansion plans or to tide it over until a merger or public offering carries it to the next stage of corporate growth. A company's business plan serves as the primary analytical tool for the venture capitalist. In analyzing the plan, a venture capital firm would most likely focus on three features. The product or service.
Investors seek product or service innovations that give the company a strong competitive advantage.
No matter how good the product or how innovative the service, the quality and experience of the management is a key factor in the success of the business. The astute investor is well aware of this and looks for solid evidence of such skill. The industry's growth. Investors also want to be sure that the product or service is in a growth field. A significant or revolutionary product improvement, by itself, may not have appeal in a declining product or service category.