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  Leveraging Business Models for Investment Due Diligence in the Venture Capital


   Nottingham Business School

  ,  Applications accepted all year round  Self-Funded PhD Students Only

About the Project

In the first communication, please attach a copy of your CV and a research proposal.

Objective:

This research aims to develop and validate a comprehensive framework that integrates business model analysis into the investment due diligence process of venture capital firms. By focusing on the predictive value of business model components, the study seeks to enhance the accuracy of investment decisions, reduce risks, and uncover potential for growth and innovation beyond traditional financial metrics.

Rationale:

In the contemporary business landscape, due diligence within venture capital (VC) is a critical process that goes beyond financial scrutiny, encompassing legal and operational assessments of potential investments. The transformation of the marketplace, accelerated by technological innovation and the rise of digital and platform-based business models, demands a re-evaluation of traditional due diligence practices. To remain competitive and harness the full potential of start-up's, VCs must incorporate a more profound understanding of how these companies create, deliver, and capture value—a perspective deeply rooted in the analysis of business models.

A compelling business model offers a blueprint for company operations, market positioning, and revenue generation. It provides insights into how a company differentiates itself, scales its operations, and adapts to changes in the market environment. For venture capitalists, a thorough examination of a start-up's business model can reveal the underlying mechanisms that drive sustainable growth and long-term success.

The existing literature underscores the significance of aligning business model analysis with due diligence efforts. For example, a study on orchestrating new markets with cloud services found that start-ups with clear business models had a higher success rate, with an 84% survival rate over four years (source: Orchestrating New Markets Using Cloud Services). Similarly, an alternative due diligence case study highlighted the success of using the horizon methodology, lean start-up principles, and competitive analysis alongside traditional due diligence to facilitate a successful acquisition (source: CBIT Partner Master Deck). These findings suggest that business model analysis is not only a theoretical exercise but a practical tool that can substantially impact investment outcomes.

Possible Methodologies:

The research may employ a mixed-methods approach, combining qualitative case studies of successful and unsuccessful venture capital investments with quantitative analysis to identify correlations between business model characteristics and investment outcomes. The study will also involve the development of a business model evaluation tool tailored for the venture capital due diligence process, followed by testing and validation with industry practitioners.

Significance:

This research aims to bridge the gap between the strategic understanding of business models and the empirical evaluation of their effectiveness in the VC due diligence process. By examining the components that indicate a start-up's potential for growth, such as value proposition, customer segmentation, revenue streams, and cost structure, VCs can gain a comprehensive view of the venture's viability and scalability.

The framework developed through this research will serve as a guide for VCs to systematically analyse and interpret business models. It will enable investors to anticipate market trends, adapt to industry shifts, and identify start-ups that are not just financially viable but also strategically positioned for future challenges and opportunities.

Possible Contribution:

By contributing to the body of knowledge on VC investment strategies, this research will inform both academic discourse and industry practice. It will provide a nuanced understanding of how business models can be leveraged to predict start-up performance, offering a novel approach to investment due diligence that could reshape the venture capital landscape.

Possible Research Questions:

How can business model analysis complement traditional due diligence in venture capital investment decision-making?

What components of a business model are most indicative of a start-up's potential for sustainable growth and success?

How can venture capital firms implement a business model-focused due diligence framework effectively and efficiently?

This brief outlines a pioneering research endeavour that bridges the gap between strategic management and venture finance, offering both theoretical advancements and practical tools for enhancing investment due diligence. This is an opportunity to make a tangible impact on the venture capital field, providing substantial contributions to both academic knowledge and industry practice.

Project Benefits:

Participants in this research will gain unparalleled exposure to the venture capital ecosystem, including direct interaction with leading practitioners and entrepreneurs. This experience will not only advance their academic careers but also position them as thought leaders in venture finance and strategic management.

Nottingham Business School is triple crown accredited with EQUIS, AACSB and AMBA – the highest international benchmarks for business education. It has also been ranked by the Financial Times for its Executive Education programmes in 2023 and 2024. NBS is one of only 47 global business schools recognised as a PRME Champion, and held up as an exemplar by the United Nations of Principles of Responsible Management Education (PRME). 

Its purpose is to provide research and education that combines academic excellence with positive impact on people, business and society. As a world leader in experiential learning and personalisation, joining NBS as a researcher is an opportunity to achieve your potential.

Applications for October 2024 intake closes on 1st August 2024 and applications for Jan 2025 intake closes on 1st October 2024.

*** for all applicants ***

Understand Our Centre:

The PhD will be conducted under the Centre for Business and Industry Transformation (CBIT). Applicants MUST familiarize themselves with CBIT via:

Entrepreneurial Mindset Required:

Our projects are highly practical and require an entrepreneurial approach with a growth mindset. You will need to think innovatively and navigate complex challenges. Do NOT apply if this may be too demanding.

Proposal:

We expect applicants to have significant working experience and existing datasets. Submit a PhD proposal including:

  • A clear outline of the data you will collect
  • Specific details of how you will access these datasets

Additional Documents:

Along with your proposal, please include the following:

  • A copy of your CV
  • A 2-page document pitching yourself as an investable PhD candidate.

Submission Instructions:

  1. Email all required documents (Proposal, CV, 2-pager pitch) to .
  2. Failure to submit all requested documents will result in no reply.
Business & Management (5) Finance (14)

Funding Notes

This is a self-funded PhD project for UK and International applicants.


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