The difference between a great idea and a good investment can be hard to figure out for most startups.
Our colleagues at Chicago Booth's School of Business and venture capital managers provided some answers from the investors' side of the equation.
Curiously, "hard" metrics for investment were not the first and foremost reference they considered,
Without a doubt, financial metrics such as RONIC - Return on New Invested Capital - are an indispensable part of the "due diligence" before meeting venture capital but they are not by far, what really matters.
The most important factor was -no surprise- the assessment of the capacity for execution -the competency and consistence of the management team in charge of turning the idea into a viable business-.
That is why the Performance Improvement Institute created an MBI program -no typo there: it stands for Management of Business Incubation-. The MBIs specialize in developing new businesses and growing startups. That requires a very different set of skills and competencies than those of a conventional MBA, focused on managing an existing and running corporation.
The MBI program follows the stages of new business development: planning, incubation and acceleration
At each turn, the MBIs must work as the COOs for the startup, helping the entrepreneurs turn their big ideas into reality and sound business. Think of Eric Schmidt working for Google's Sergei Brin and Larry Page.
But the key to sucess is not just adding MBIs, but putting them to work together with entrepreneurs (the strategic project leaders) and investors (sponsors) from the very beginning.
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