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Background
DBL Partners (DBL) is one of the first and largest venture capital firms (VC), which conducts business evaluation and support. DBL relies on the revenue statements and business impact, which are believed to be interconnected regarding business activities and the market. What is more, DBL Partners has successfully passed Fund I and Fund II phases by shifting from a small VC firm to a global player on the venture capital market.
Currently, the company has entered the Fund III phase and decided to seek international opportunities. Such a portfolio diversification should increase DBL’s impact and share on the VC market. Yet, the company analyzes possible partners for international collaboration and interests in the African market (Cole et al. 1). Nonetheless, the company desires to continue its success with the investment portfolio so that global markets challenge the company’s decision-making process and evaluation techniques.
Problems
The Fund III phase undertakes international market investments, where DBL has selected Off-Grid Electric as a new African partner, which produces and delivers small solar panels to consumers. DBL suggests that the growth of the solar power market in Africa is a substantial benefit for the venture company due to the limited number of VCs in the region (Cole et al. 12). Moreover, the company believes that the African market is only at the development stage so that adequate and accurate partnerships and investments should gain DBL a positive image in the global investment market.
On the contrary, the problem is that the African markets are less explored and stable in comparison to European or U.S. markets. While Off-Grid Electrics holds a large share of the market, it is unknown whether this company has a competitive advantage to make a significant impact on the African solar industry (Cole et al. 13). As DBL is driven by revenues and business impact, these two factors place huge uncertainty on whether the company correctly assessed the African market and Off-Grid’s potential.
Alternatives and Recommendations
DBL has three alternatives to decide whether Off-Grid Electrics and African solar power markets are the right points for the beginning of the Fund III phase. Despite having experience with Tesla, SolarCity, and small firms from the Fund I phase, DBL Partners has never penetrated the market with such high uncertainty rates (Cole et al. 14). In this case, the company should focus on more grounded metrics, which are aligned with revenue and returns rather than with social impact or value-added services. The proposed alternatives are:
- Conduct independent primary and secondary research on the market and Off-Grid Electrics to assess the advantages and opportunities, which Off-Grid has and can have during its market expansion.
- Rely on internal tools and market reports to evaluate the company and decide on further strategic actions and partnerships.
- Reject the international expansion into Africa and focus on more stable and predictable markets, like Europe or Asia.
The recommended alternative is option two due to the higher probability of investment and partnership success. In this case, DBL should use its internal tools to access the Off-Grid Electrics, as the company did with the U.S. partners. Moreover, the analysis of the market and Off-Grid market performance should reveal whether the company has financial capabilities to grow and expand through the African market (Cole et al. 12). Furthermore, DBL develops several evaluation standards and benchmarks to assess the internal performance and value of its partners. In this case, the DBL Partners is fully backed by its prior achievements and experience, which ensure adequate and high-quality decisions.
Another advantage of this option is that the company agrees that the African solar market has substantial potential so that timely investments and venture capital in local companies should be a feasible project. In return, the small number of Off-Grid’s competitors suggests that DBL selected an appropriate partner as a starting point for the African investment portfolio. As a result, the utilization of internal tools and risk-acceptance should guide the company to success and portfolio diversification.
Reflection
In the world, there is growing interest in diversified investing in the PV industry through stocks and bonds of green companies. Their unique appeal is that the gap in the financial capabilities of large and small investors is being eliminated. The recent growth is largely driven by the contributions of small and medium-sized investors, who find it difficult (and risky) to become a shareholder of a particular PV project but have been able to “invest” in PV -generation as a whole. As a result, DBL Partners has substantial opportunity to become large venture capital firm that penetrates the African market and can make an impact on the industry development through accurate and successful investments.
Work Cited
Cole, Shawn, et al. “DBL Partners: Double Bottom Line Venture Capital.” Harvard Business Review, 2016, pp. 1–29. Harvard Business School.
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