ACC 557 Week 8 DQ1
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Date Created: 11/11/15
ACC 557 Week 8 DQ1 quotVenture Capitalquot Please respond to the following Based on your research conducted in the eActivity evaluate the business decision to use a venture capitalist to raise funds indicating whether or not you believe the company will benefit from this decision in the long run Provide support for your position Assess the challenges for businesses using the resources of a venture capitalist given that significant returns on the investment are likely to be impacted by the firm Indicate how a business can manage these expectations Provide support for your rationale A venture capitalist is a person who invests in a business venture providing a capital for startup or expansion Ward 2012 Joshua Kushner is a 27 year old venture capitalist such a young business man who runs a venture business called Thrive Capital that is based in Manhattan Mr Kushner son of the real estate magnate Charles Kushner and brother of Jared Kushner owner of The New York Observer has spent the last three years investing in social and ecommerce Internet startups He was an early backer of Fabcom a ash sales site that recently raised 105 million Hot Potato which was sold to Facebook and GroupMe a messaging service acquired by Skype last year Rusli 2012 Joshua Kushner has raised 150 million for its latest fund as it seeks to raise its profile and become more competitive against larger firms The firm spent about 10 weeks raising the fund receiving commitments from new and existing limited partners a group that includes Princeton University Hall Capital Partners and the Wellcome Trust Rusli 2012 In a short time I believe that a company who has been acquired by a venture capitalist may benefit because there is a fund for cash operating However it would be a challenge to stay profitable because venture capitalist are only concerned to the Return of Investments ROI in a very short time In a long run especially in the ecommerce there would be an uncertain future in the business of being profitable however a business person will have to take the risks Though Mr Kushner says he recognizes the weakness in the IPO market he remains bullish on the technology sector and the disruptive power of the Internet And while Thrive has largely been defined by its consumer Internet plays he said he was willing to invest in a broad array of start ups in the United States Latin America or elsewhere Rusli 2012 Venture capitalist like Joshua Kushner becomes the investors of these online businesses meaning he also becomes an owner without not knowing the operation of the company One of the challenges would be for a venture capitalist is the familiarity of operation and management of a business Also the internal operations will be affected For examples As soon as venture capitalists become involved the founder s role shifts from critical company building functions to preparing reports attending endless meetings writing memos and hand holding impatient andor meddlesome investors An infusion of capital often shifts the founding team s focus away from selling to spending money in an effort to placate venture capitalists who often confuse bulkingup staff and assets with real growth Venture capital brings with it tremendous pressure to create a liquidity event but this frequently results in bad decisions being made to launch products too early or enter into the wrong markets The venture capitalist s kneejerk response to every problem faced by a portfolio company is to fire the founders and evade any personal responsibility for bad decisions Reference Rusli Evelyn M September 6 2012 quotThrive Capital Raises 150 Million Fund Bolstering Profile quot Retrieved from httpdealbooknytimescom20120906thrivecapitalraises 15 0 millionfundbolsteringprofile Ward Susan 2012 quotVenture Capitalistquot Retrieved from httpsbinfocanadaaboutcomcsfinancinggventcaphtm
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