A proposal for Indicators for Outside investors when are looking where to invest in emerging markets SMEs

A lot of time, without writing an article, i was busy analyzing the new team of President Obama and the Public policies made by George Bush, but now i want to focus in the Venture Capital Industry, and a proposal to the venture capitalist when they are willing to invest in Startups of emerging markets, so here is the Indicators Model:

The Indicators show the connection of 3 key issues for Venture Capitalist, they combine the TEAM, the CONCEPT, and the Market, and how are they connected. But most important how they apply to Emerging Markets and their local reality. Another component for the indicators is the economic and business framework provided by the GOVERNMENT. This gives to the Investors another point of view, not in terms of the forecast made by the entrepreneurs in their business plans or executive summaries, but in terms of their skills, knowledge, creativity and innovation.

Now, i will describe the indicators.

The explanation of each indicator is below the indicator.

A

• Level of Industry-Research collaboration for development of the concept:

– The Research & Development of the entrepreneurs, from the academia to the development of the startup , publication of academic papers and studies

• Study level of the entrepreneurs:

– The successful companies from 1990 have show that the success is related to the level of study of the entrepreneurs, so the Investors should analyze the equilibrium between the study level, undergraduate, graduate, Master & PHD.

• Level of concept delimitation:

– How the entrepreneurs visualize the vision, mission and goals of the company in 5 and 10 years, and how they delimited the MAIN product or service to offer, because a common problem of the entrepreneurs is to offer many products and services when they are starting

• Level of prototype development

– What percentage of the MAIN product is developed

• Level of Risk Management Processes

– The investors should analyze: If the entrepreneurs have a Risk Management Plan, If the entrepreneurs consider the Risk Management as a key success factor for business; If the entrepreneurs have a process to implement Risk management in all the projects.

• Cultural Awareness from entrepreneurs

– What percentage of the MAIN product is developed

B

• Level of Blue Ocean Market:

– Analyze if the product/service has a BIG MARKET (more than US $500 mn) or have an Unexplored market

• State of art of technology to be developed and commercialized:

– How is the technology at international level, and what is required for implement in new markets

• Human Resources availability

– A very important factor, because the Investors should analyze the Educational level of the country (in number of graduates, number of researchers and quality of education: Availability of people to work in the project)

• Cultural apprehension of product/service

– Because each country is different, the Investors should analyze how the customer receive the product in his own context

• Number of established competitors

– Look at the number and size of the competitors if there is BIG MARKET; and analyze other competitors if there is a BLUE OCEAN

• Market growth forecast

– The investors should review the Forecast of the Market size from international organizations as IDC, Gartner, Jupiter and similar

C

• Experience of the team:

– Experience in terms of Market knowledge, Technology knowledge, and capabilities of the Team for developing the STARTUP

• Diversification of the team

– Look the study/experience of each team member and how its complemented

• Foreign language knowledge of the team

– This is a globalized world, so as part of the preparation of the team, The investors should analyze the number of languages speak by the members of the team (this is important for exportation matters)

• Marital Status of the team

– Analyze if they are single, married, etc, Because if there is a combined team, were some members of the crew are young is preferable to be single, so they can focus the 100% of the time to the company

• Leadership skills of the team

– How the members of the team are recognized in communities, groups, by other companies, in the sector; and how they are capable of leader new process to convince “The Best in the place” to join the team

GOVERNMENT

• Legislation:

– Analyze the laws protecting the business in the country

• Patent System:

– How is the patent system established

• Trademark System:

– A very important success factor is the Branding strategy, so the investors should analyze if the Country is in international Trademark agreements

• Tax Incentive for business:

– What are the advantages in economic terms for the company and for the investors

• Cost of life

– Review the cost of life in the country, and specially in the city, because this give a broader knowledge of the economy and the Venture Capital money required

• Cost of doing business

– Review the costs for machinery, human resources, taxes,

• Aligning of business with the Long term plan of the government

– Each government is different, and it have defined a 10,15 or 20 year plan, so the country can focus in some sectors of the economy; so the investors should have to review if the company they are going to fund aligns with this plan.