Current media articles have the use of physicians, scientists and experts from pharmaceutical companies and hedge funds, casting often investigated in an unflattering light. Experts can play a valuable role, but is it a case of caveat emptor - and sometimes for the experts and the Organization, the setting. New products, biotech, medical technology companies trying to promote such as a medical expert perceived objectivity could undermine when financial relationships are clearly not in advance. Experts, providing information on hedge funds must be careful not to disclose non-public information about publicly traded companies and run into conflict with the insider trading restrictions.
Capitalists rely often personal and business networks to help collect venture investment information to make smart investments in private companies. Because early-stage venture firm invest in public stocks or independent projects promote work experts with VCs can and VCs work the reputation or objectivity with experts with no risk.
Here is how I and other venture capitalists use external experts:
Personal networks, tend to be by far the most valuable. For example, contact sometimes I one childhood friend, who is now an orthopedic surgeon at the Cleveland Clinic. If think CCV is about investing in a product surgery, I would ask his opinion. Its input is good - and it's free advice from a valuable source.
As other VCs I see for the professional guidance within existing portfolio companies. I am currently a project, relating to a software system for gene sequencing, for example, and I have a chief technical officer at a CCV portfolio company, very knowledgeable in this area is consulted.
Sometimes I pay for advice other VCs to do, and it is often the price value. At one point I saw a diabetes-related startup focusing on glucose intolerance and won a diabetic's expert by Abbott Laboratories, who understand the market, competition and what would be required to make this start successful. Ultimately CCV decided against this investment, partially due to make its input. Advice that helps dissuade from an investment venture capitalists to make every bit as valuable as consulting prods gives it because fail more startups ultimately a successful investment.
When to pay a VC for advice, he too cautious, he selects. In particular, people avoid to have skin in the game because you have published work in the area of interest or maybe even a product is what I am considering funding similar to have invented. Information from these people can be biased and therefore dangerous for a portfolio companies.
John Steuart is Managing Director at Claremont Creek Ventures.
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