Alternative Investments, Culture and Ethics, Decision Making

Venture Capital and Avoiding Human Bias

Here are some thoughts on Venture Capital or early-stage investing. As readers of my blogs know, Alteris LLC has had professional Venture Capital firms as clients. We have acted as business valuators, but also in the role of “operating partners” to some of these firms. This situation has allowed us to observe best-practices in these early-stage investment firms. Venture Capital and other types of investing is a competitive and often brutal activity. In a typical VC fund, a small number of investments typically account for a large portion of returns. The simple fact is that the majority of investments do…

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Alternative Investments, Culture and Ethics, Decision Making

Three Deadly Sins of Startups

If you have been around the venture capital industry for a while, you will know the “three deadly sins” VCs look to avoid in a potential new early-stage investment. Standard questions VCs ask entrepreneurs often focus on these. You hear this over and over from investment partners at these firms. I’ve worked extensively with an international venture network, and sure enough – it is a focus. Here are the three: 1) The founder (me!) must be the boss, always and forever 2) Too many products, no focus 3) Not enough capital Smart founders know these are hot issues for VC…

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Decision Making

Survivor Bias is Everywhere

Survivorship Bias is one of the most deceptive and common traps in decision making. It’s normal to examine the life stories of very successful people.  Not only is it interesting by itself, but maybe we think that there is something to learn about success from them. If they are successful, maybe we can imitate them? The concept of survivorship bias is easy to understand but maybe not intuitive.  Still, when a person does understand, it seems to be almost everywhere. That’s because it is. There are so many examples. It’s very common in advertising. Weight loss programs and diets feature…

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Decision Making, Exit Planning

Can Your Strategy Survive a Meeting with Reality?

Everyone wants to avoid making major strategic mistakes. The problem is that the world is complex and most decision-making models and strategies are based on simple tools and processes. It is difficult to foresee and plan for all the factors that might impact a positive outcome. Therefore, you need to find the weak points in your strategies before the strategy is implemented. This can only be accomplished by applying a rigorous process to your strategic decision making and following it ruthlessly. Seeing where a strategy can go wrong ahead of time means you can take actions to prevent those bad…

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Buying & Selling a Company, Decision Making

Due Diligence Quick and Easy

Due Diligence is the phase in Mergers & Acquisitions that refers to the investigation of a company by a seller after the Letter of Intent is issued. It needs to be completed before the actual sale of the company is completed and the Sale Agreement is signed. The trend is that the time for Due Diligence by a buyer is getting shorter and shorter. In the old days, the due diligence phase could last up to 90 days, sometimes more. Now it usually is under 60 days.  Sometimes even shorter. What causes the most time in due diligence? What is…

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Alternative Investments, Culture and Ethics, Decision Making

Why the Rich Keep Getting Richer

Have you ever noticed how an ordinary person or company has one “lucky” random opportunity and then becomes increasingly successful over time, starting with that one opportunity? The success continues for the lucky one as their former peers continue to plod along without much to show. No one could have forecasted the lucky success at the beginning. The recipient of that lucky break is often mediocre. That mediocrity may never disappear but the success continues. As things compound to the extreme, great wealth and prestige may accumulate as a result. What is happening is that the first random success compounds…

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Decision Making

How Are Small Businesses Financed?

It is hard to categorize Small Business as to being one type or another.  Small businesses and their owners are a very diverse group. For example, this is true for the number of employees in a business.  Number of employees is an indicator of size. Depending on how employees are counted and the definition of such, the number of employees can range from zero up to 499. The financing needs of a business can be vastly different based on size and other factors. These other factors can include the maturity of the business (startups, later stage), capital requirements (does the…

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