For a variety of reasons, it must invest in a company at the early stages, which of course increases the risk. This includes salaries for the partners in the fund, for consultants, and others. If a management company has ten companies in its portfolio, its active involvement in the companies must be considered. It is well known that the involvement of the investor in start-up management is a crucial component in the young company's success. Handling 20 companies becomes less worthwhile, mostly due to the need to greatly increased manpower and costs.
Some fund managers say they spend one day a week at a start-up in which their fund has invested.
Eilan won't say it in so many words, but he is implying that start-up companies do not always get the attention necessary in order to succeed. According to Eilan's analysis, the portfolio size and the fund's ability to manage it affect the character of the investment. Eilan says that this dilemma enables investors, who are not venture capital funds, to invest in start-up companies. Even if Eilan is right, and a change is taking place in the high tech investment market, he still says that the most successful companies issued during the past year were backed by venture capital. Michael will not admit it, but it can be assumed for this reason that, in spite of its pondering, DataSphere will turn to venture capital investors.