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Witnessing companies grow fast is like watching a rocket blast off: some make it, some blow up on launch and others make it part of the way before someone announces [...]

A survey of some 60 investors has revealed characteristics sought buy investors in management buy-outs (MBOs). The management team is a key factor and the business track record is also important. Investors seek leaders with the ability to motivate, a skill seen as more important than taking decisions. Trust within the management team is important, as is the ability to resolve conflicts. Commitment to goals and appreciation of the needs of investors are also seen as important.

German small and medium sized firms, known as Mittelstand firms, need to be more flexible to enable them to take advantage of opportunities. These companies account for exports to the value of 50 billion German marks, but their corporate philosophy is old fashioned and their development of products expensive. Research into the sector indicates that a lot of changes are having to be made in the sector in order to make them more innovative and professional.

Central and eastern European economies have undergone a major transformation which has brought opportunities as well as difficulties. Some countries have been relatively successful, such as Poland and the Czech Republic. Marketing and sales skills tended not to be developed under the old system, so are lacking. Foreign investors should take local partners and invest heavily in training. Staff turnover may be high since trained employees can find work elsewhere more easily.

Setting up business tends to take more time than anticipated and there are a number of reasons for this. It can take time to attract customers and to build up relationships with distributors and suppliers. Bureaucratic delays may hamper progress. Setting up a team is time consuming as is raising funds. Entrepreneurs also need breaks to recharge energy and they need to spend time with their families. A realistic time frame should take these factors into account.

Venture capitalists assess investment opportunities in a number of ways before deciding whether to fund a new business. They will asses the market and product, levels of competition, the abilities of the management team and their record, and financial issues such as how long a business will take to break even. Entrepreneurs should aim to show that they are competent and have a lucid product strategy. They should be able to emphasize uniqueness as a way of erecting barriers to competition, and their financial data should be credible.

Entrepreneurs aim to add value and enough value has to be added for a profit to be achieved. Venture capitalists tend to seek gross margins of 35% or above, after costs have been taken into account. Opportunities may be limited in terms of how long they last. Control of the technology involved is one way of protecting an opportunity. Entrepreneurs tend to work better if they consult others who can contribute new skills and critical evaluations.

Entrepreneurs need to identify opportunities but itis difficult to generalise about how this can be done since conditions may vary. Established companies behave in different ways from those yet to be established. Opportunities are related to value creation rather than cost reduction. The risk and reward levels of opportunities varies. Attention is focused on high risk and high reward opportunities but other types of opportunity may be succesful.