An important place in the activity of venture capital investors is occupied by the process of searching and selecting new promising ideas and projects, the successful implementation of which will bring the greatest profit. Not only the fate of sufficiently large long-term capital investments, but also the scale of further efforts of investors to provide organizational and managerial support for financed projects, including additional costs in case of unplanned difficulties, depends on how correct the choice will be. It is not surprising, therefore, that the most serious attention is being paid to this problem.

Offers to participate in project financing at different stages of its implementation (see the next section) usually come to venture funds from the entrepreneurs themselves. Quite often, such proposals are made by other venture funds interested in sharing the financial risk and conducting a joint examination of the project. To facilitate contacts between entrepreneurs and venture capital investors, specialized databases and information services have proliferated in the last decade.

According to a study carried out in the mid-1980s for the US Congress, American venture funds received, on average, about 470 formal proposals from entrepreneurs starting a new business per year, i.e. actually more than one project per day. Of this number of proposals, no more than one-ninth was selected, and the following pattern was traced: the larger the size of the venture fund, the more proposals it receives from entrepreneurs and the more carefully the selection of projects for financing is carried out. 5

It should be emphasized, however, that in any case the decision-making process took an average of 52 to 60 days, i.e. no more than two months. During this relatively short time, a responsible decision was made, on the basis of which capital investments were made for a period of 3 to 10 or more years without any prior guarantee of their return.

How is the decision making process structured?

If the proposed project is at the very early stage of implementation, the information useful for making a decision is extremely limited and, moreover, there is a high degree of uncertainty. Usually such information is prepared by the entrepreneur himself in the form of a business plan.

The procedure for selecting proposals is built according to an exemplary scheme shown in Fig. 2.6 After registration of received proposals, their rapid assessment is carried out, during which more than half of the projects are immediately discarded. The remainder is briefly tested and prioritized.

Only after that a meeting is held with the entrepreneurs who put forward the most interesting proposals. It is important for investors to find out the level of training, managerial skills, future intentions of the founders of the new company, as well as the actual amount of risky investments.

Having received and analyzed the necessary information, the venture fund makes a counter-proposal to the entrepreneur, in which it puts forward its conditions for participation in financing the proposed project. Then work begins on agreeing on mutually acceptable terms. In addition to this, investors organize the collection of information that comprehensively characterizes future partners.

According to estimates, the procedure for analyzing and selecting promising proposals takes about 30% of the time for risk capital investors.

Of interest is the question of the criteria that investors are guided by when evaluating incoming proposals based on the content analysis of the business plan. Specially conducted studies by American scientists show that when evaluating entrepreneurial innovative projects, the first place is usually taken by a criterion that reflects the level of qualification and practical experience of the management personnel of a company created for a specific project. This conclusion is confirmed by many experts. Moreover, with scaled estimates, the control quality criterion is usually in the area of ​​absolute values ​​of the degree of importance index. Thus, venture capital investors make the successful implementation of the project directly dependent on the organizational and managerial skills of the project initiators.

This approach has a real basis. The success or failure of an innovative, and indeed any other non-trivial project, is largely determined by the correct choice of strategy and tactics for promoting a new product on the market, the ability to select and rally a team of like-minded people, to interest them in the final results of work. Managers of an innovative company must simultaneously combine such polar qualities as firmness and flexibility in the process of achieving goals, willingness to take risks and scrupulous calculation of decisions, perfect knowledge of both the technical and legal side of the matter. It is no coincidence that therefore venture funds usually give preference to those entrepreneurs who already have positive experience in managing similar projects.

Great attention when analyzing a business plan 

but it is also given to such criteria as the future rate and the mass of investors' profits, as well as the presence of an innovation in a market niche with high growth potential. Curiously, according to some published studies, the technical aspects of the proposed innovation do not attract as much interest from investors. This circumstance can be explained by the fact that venture funds fully trust the competence of entrepreneurs in special issues. The key to such competence is often a high share of participation in the financing of risky projects by the founders of the new firm themselves. At the same time, as noted earlier, investors closely follow the trends in the development of science and technology, react to the slightest changes in the economic policy of the state and market conditions.

In general, quantitative data analyzed by specialists show that expected risk factors influence the decision-making process more than factors that characterize expected profit. This is in good agreement with the arrangement of criteria for evaluating incoming proposals by venture funds themselves.