The inherent business potential of a venture matters more than the management team behind it. This is a crucial finding by two researchers who have produced a paper on how venture capitalists choose new projects to back. The Office of Advocacy of the U.S. Small Business Administration has awarded the researchers for excellence in doctoral work.
It is not as though business does not need top management talent. Human resources are vital, but not adequate for financial success. Venture capitalists put business potential upfront before parting with cash. Can retail stock investors apply the same thinking for their portfolios?
Take a cue from a current Presidential campaign: it is time for change. Traditional stock investing is buried in numbers and in history. Here are five new questions to ask of companies before deciding on whether to buy, hold, or sell their stocks:
1. Are growing numbers of people repeatedly buying the product or service offered by the company?
2. How do all operating expenses compare with Gross Margin generation?
3. Are preventive and contingent actions in place to deal with competition and risks?
4. Does the business fulfill an unmet need of a sizeable segment of any market?
5. Why will the demand for this product or service continue if not grow in future?
There must be some thrills in making and losing money within a single trading day. Stock brokers certainly gain when we engage in frenzied trade in stocks. However, venture capitalists prefer to stay the course.
Let us hear your thoughts below:
