UNDERSTANDING
THE BETS
Bet is risk money against
someone else’s on the outcome of an unpredictable event such as a race. These
factors contribute to overall valuation of venture and the subsequent proposed
deals and these various valuation methods contribute to the complexity of
deals. Why it is deals because they are based on cash, risk, and time, is
subject to interpretation to understand the bets. There are several instances
considering in understanding the bets for that reason an entrepreneur must
decide between two deals because he/she must find the best one. While reading
the term sheets on how to understand the bets considering these deals to
identify the underlying assumptions, motivations and beliefs of the individuals
proposing the deals. These are questions serve as a guide on how the players
identify their bets. It can help them of which they will consider way to value
a venture.
What is the bet?
Who is it for?
Who is taking the risk? Who receives the rewards?
Who should be making these bets?
What will happen if the entrepreneurs exceed the venture
capitalists
expectations? What if they fall
short?
What are the incentives for the money managers? What are
the consequences of their success or failure to perform?
How will the money managers behave? What will be their
investing strategy?
Those are
questions that the entrepreneur should consider in understanding the bets;
furthermore it is very risky to every entrepreneur finding the best one because
it was a race that everybody has the chance to become successful.
