CorporateViews - Entrepreneurship

How to pick good companies from the average ones in the stock market?

One common way is to find companies with attractive valuations using
financial measurements such as PE ratio, Revenue/Profit growth, etc.

Another method is to look at the business model of the company and
determine its intrinsic value as what Warren Buffet usually does.

While trying to determine this intrinsic value, it is paramount that we should
also consider the strengths and capabilities of the company's managment
team, for which a strong management team will be able to steer the
company to greater heights in both good times and bad times.

Management Team

Traditionally, the basic management team of a startup will consists of the
founders and maybe some of their relatives/friends.

As the business model will be highly subjected to changes so as to adapt to
the rapidly changing market conditions, it is important to assemble a strong
management team who is capable of improvising and executing the
company's business strategies.

To strengthen the scope and depth of the management team, it may be
necessary to invite suitable technical professionals or experienced industrial
veterans to join in the team.

Board of Advisors

Sometimes, it might be difficult for a startup to employ highly regarded
individuals to work for the company due to limited resources and risk
adversity of the shortlisted candidates.

Hence, one way to tap into the expertise of such individuals is to invite them
to join the company via a non-executive role such as serving as an advisor.
This allows the company to gain valuable knowledge and experience at a
minimal cost while increasing credibility of the startup in the eyes of the
public and potential investors.

Board of Directors

The founders usually make up the first directors of the company.

If fund raising is needed, it may be a good idea to use the Board of Directors
as a Network Effects tool to help expedite the fund raising campaign.

To do this, the founders will have to try to secure funds from a highly
established angel investor or venture capitalist (VC) as its first Board Director
irregardless of the level of investment. With this investor on board, it will be
much more easier for the startup to secure subsequent additional fundings
with the enhanced credibility.