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Venture Capital Investing: The Complete Handbook for Investing in Small Private Businesses for Outstanding Profits

By David Gladstone
Published by Prentice Hall

 

Investing in small businesses entails high risks. Most investors are aware of it, but ignorant of risk minimizing factors. In his book, Venture Capital Investing: The Complete Handbook for Investing in Small Private Business for Outstanding Profits,” Gladstone opines that the success or failure of a company is dependant on employee management.  The role of employees is critical, for although an entrepreneur can plan businesses and add vision, without a good team to back his/her strategies, may achieve nothing in the end. Gladstone supports good human resource management for organizational efficiency.

 

The key to success has been explained in several theoretical studies. Academic principles come up with new business cultural concepts. According to Gladstone however, how a company fairs in the market is ultimately dependant on how its business is organized. This can be determined by studying the organizational structure of a company before making investments.

 

Structural maps state the job responsibilities of various departments of an organization. When a company succeeds, it is easily assumable which departments have performed what to result in success.

 

To support his views, Gladstone uses the example of a start-up entrepreneur who declined drawing business structures in an attempt to encourage his employees perform as a team. Gladstone confesses that he found it a promising idea at first, but eventually witnessed its downfall too. The reason, as Gladstone analyzed and states in his book, was the omission of little, yet critical jobs, owing to structural inefficiency. According to Gladstone, a corporation lacking a hierarchical structure is susceptible to major developmental problems, if not absolute failure.

 

Criticism against organizational hierarchy, as Gladstone notes, is many. But Gladstone feels that such vehement opposition is mainly due to the nature, not purpose, of company hierarchical charts. A single entrepreneur heading several lesser employees is outdated and ineffective. Instead, a structure with evenly spread out responsibilities controlled by an efficient mid-management in small businesses funding, is more productive.

 

Gladstone provides the following essential guidelines to investing in businesses:

 

  • Listing down the names of company directors and heads, followed by interviewing them before investing.
  • Interviewing fellow investors (ideally those with 5% ownership) who invested large quantities in the company; asking them why they did so.
  • Preparing a list of stockholders. Research on individual investment and share in business.
  • Conducting a detailed research on the company’s management, their collective experience, qualification, compensation, etc.
  • Determining the hierarchical structure, role of CEO.
  • Understanding mid-management capabilities towards executing business strategies.
  • Knowing whether the level of employee compensation is at par with industry standards.

From management analysis to financial goals, market projections and production to sales, employee evaluation to gauging organizational efficiency, Gladstone’s book is a complete guide to understanding key organizational elements for the purpose of investments.

 

“Venture Capital Investing” is a treasure trove of information, with legible and easily comprehendible writing. The author of more than 20 books and with remarkable economic and investment expertise, Gladstone provides investors with everything they need to know before offering capital to fledgling businesses.