Business

In my recent blog series, Entrepreneurial Law - Developing a Good Business Model, I addressed how an entrepreneur needs to work through three prongs in order to develop a sustainable business model developed for growth: Market Opportunity; Management Team; and Capital Structure.

Private equity investors asses the same prongs when determining whether to make an investment in an emerging company, but I find that investors tend to set the prongs in their own priority ranking.  I think all three must be in place, but investors always seem to have one prong that they really focus on. 

Some of this is cultural based on geographic region.  Take New York, Midwest and West Coast investors for example.  I do a lot of work with private equity groups in each region and consistently find investors in each region to rank the prongs in levels of their own importance.  Here is what I find:

New York (financial center of the world):
1.    Capital Structure
2.    Management Team
3.    Market Opportunity

West Coast (land of emerging technology businesses and venture capital):
1.    Market Opportunity
2.    Capital Structure
3.    Management Team

Indiana (my home; land of hard work and community)
1.    Management Team
2.    Market Opportunity
3.    Capital Structure

Consider this if you are looking for private investors in your business.  This affects how you may address certain investors and where you look for investments.

See also:

Entrepreneurial Law – Developing a Good Business Model – Part I
Entrepreneurial Law – Developing a Good Business Model – Part II
Entrepreneurial Law – Developing a Good Business Model – Part III
Entrepreneurial Law – Developing a Good Business Model – Part IV
Entrepreneurial Law – Developing a Good Business Model – Part V