Monitoring

Abstract

Once the investee firm has been funded, venture capitalists focus on the following key considerations: maintaining the operational efficiency of the business, developing the business according to the pre-agreed upon business plan, achieving operational and financial milestones, and performing operational reviews and audits. The achievement of operating efficiencies anticipated in the business plan is reflected in the strength of operating margins (at EBITDA and EBIT levels) and cash flows. Monitoring these financial parameters ensures that the business is unlikely to experience any financial surprises that may require the business to restructure, make changes to the management team, or inject additional capital. The agreed upon business plan effectively forms an “operational bible” for key stakeholders in the business, including entrepreneurs, venture capitalists, and management. The business plan outlines key operational milestones that need to be met at every facet of business development if the business is to achieve its long-term goals.