(328d) Understanding Venture Capital Funding Decisions and Using Initial Funding to Build a Successful Startup

Many scientists and engineers do not have entrepreneurial experiences, and do not understand what investors look for in startups. The same scientific cruxes that are of interest in academia, often have no relevance to venture capitalists, investors of new businesses - also known as startups. In brevity, chemical engineering startups are no different than those of any other industries. Venture capitals invest in a firm's ability to grow, not profit, so that the firm can capitalize on their newly established market position sometime in the future. By the end of a firm’s second year, venture capitals expect a handful of booked customers to show general viability of its product on the market; This is also an opportunity to conduct consumer research. In general, firms also need to provide concrete plans at this time to become profitable at some point in the future; though, these profit generalizations do not require actualization in the near or moderate future. Any further funding past this series-A round, depends on the firm’s progress over their last two years under the venture capital’s guidance. When a venture capital invests in a firm, they provide a substantial amount of advice and access to a vast business network, in addition to money. This two-year period of the startup is generally regarded as the trial and error stage on behalf of the venture capital. For example, most venture capitals fund dozens of startups for their initial two years, but fund only a couple of startups in their years after; though often at multiples in terms of dollar investments. In this presentation, we will go over how venture capitals decide which firms to fund, what firms should do in their first quarter, and present an outline of a standard 2-year plan.