ONSET Ventures: Written Case Submission In 1984, ONSET Ventures was established as a seed stage venture fund by Terry Opdendyk and David Kelley. With $5 million in capital, this “feeder” fund was created with the help of three later-stage venture capital firms, and investments from 31 CEOs as well as various entrepreneurs. The goal of this initial fund was to make seed stage investments that would later be backed by the larger, later-stage VC firms. During this time, Opdendyk embarked on a study of 300 separate investments from various VC firms. From this analysis, ONSET developed an investment model that allowed the firm to prosper.
ONSET’s model contains six factors that help the firm locate and invest in attractive opportunities.
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However, until that time, the firm is dependent upon the next set of investors to survive. This particular element in the model demonstrates ONSET’s niche focus in the VC market. Rather than trying to become a large VC that invests in later rounds of financing, ONSET focuses strictly on financing the initial incubation process. I agree with this particular element of ONSET’s model. By focusing only on the seed financing segment of the VC market, ONSET limits its risk as capital from outside VC firms alleviates the financial burden to successfully launch a company from start to finish.
The final two factors in the model are: there must be a want for the product, and only special people make a business special. A want must be present due to the fact that a company simply satisfying a need has a much lower chance of being successful. There must be a pain that the new company can remedy to ultimately drive the types of returns that ONSET is looking for. Additionally, it takes talented people to build a great company. A successful start-up is one that combines a great idea with the right talent. I could not agree more with these last two elements of the model.
In addition to the core model, ONSET also has “rules of thumb” to meet the firm’s return targets. First and foremost, the firm will not lead a start-up in an industry where they don’t have the ability to reinvent the business model. Strict adherence to the firm’s operational strengths has helped