My biggest takeaways as an analyst in the Student Venture Fund
What are the important aspects to keep in mind when making an investment decision?
During my time on the Student Venture Fund (SVF), I learned tons about entrepreneurship, technology, and finance. With guidance from industry experts and faculty members in finance, the SVF is a great program where students can get hands-on training in venture capital investing. Organized into transaction teams of three to four associates and analysts, we get a chance to prepare for a career in venture capital investing through activities including reviewing potential investments, conducting due diligence, and more!
While I gained some fantastic technical skills such as learning how to value start-ups and read capitalization tables, one of my biggest takeaways that I will apply through all my investment decisions is the Four T’s. The Four T’s is a model used to evaluate a business – in the case of SVF, we used it to analyze start-ups, however, this model can be used for most investments. Finance professionals often become very fixated on the numbers. There is an unlimited number of projections and models that can be made to value a company; however, it is important to not neglect the qualitative characteristics of an investment. Whether on the SVF deal team or for my own portfolio, the following model is one that I now use before any investment decision:
- Team: The team is one of the most important factors, as they ultimately drive everything – who is the team? What is their experience? Is there a mix of both technical and business backgrounds in management? Who are their advisors? Are they open to feedback/criticism?
- TAM: Also known as Total Addressable Market. At a high level, the TAM refers to the size of the market. Is there a group of people that want this product/service? Will it be successful in today’s current business environment?
- Traction: Has this company made any notable progress? Any deals, partnerships, or moves that catch your eye? Does this traction seem sustainable?
- Technology: Is this technology innovative? Is it defensible/patented? Does this technology do what it claims to do (Pro tip: many companies use buzzwords like artificial intelligence (AI) and machine learning but that may not always be true).
This method covers some of the often-neglected aspects that should be considered when making an investment decision. Being able to execute it during investment meetings and due diligence calls has been an invaluable experience. If you would like the chance to apply this technique on tech start-ups to help investment decisions, I highly recommend joining the Student Venture Fund!