Venture Capital
Equity Financing

Venture Capital

Venture Capital and Equity Financing

Venture Capital - There are billions of dollars in venture capital available to a wide range of businesses at most stages of development. Currently, venture funds are in a good position to make investments, because the market has given small businesses the opportunity to sell holdings and increase their liquidity. Most firms have millions of dollars to invest and provide money in sums ranging from $250,000 to $10 million or more.Most venture capitalists have set limits, minimums, and maximums they are willing to invest, and some specialize in an industry or certain regions of the country. Other firms invest in any U.S. firm. Biotechnology and high technology are the most popular types of firms for venture capitalists, but service companies and other firms do receive venture money. Retail and consumer companies are of interest only if they have high expansion potential. Look through a list of venture firms for their geographic or industry specialization before making your contact list.

Characteristics - Venture Capital Firms are looking for:

  • Extraordinary growth potential: The industry you are in or are entering must be able to support exponential growth. Venture-funded companies are expected to be able to grow to $50 to $100 million in less than ten years.

  • Management talent: Venture capitalists must be convinced that you and the others in your company are capable of building a multi-million dollar business. You will probably need previous experience building and managing growth in the past or the ability to hire top people.

  • Proprietary products or services:Patents, copyrights, trademarks, and other rights to a product or service will give you a great advantage in your pursuit of venture capital. Venture capitalists are looking for companies with an advantage over existing or potential competitors.

    If you are looking for venture capital you also need to be on the lookout for scams. Never, never give "upfront fees or deposits" to a firm that promises it will give you venture capital. Disreputable people posing as venture capitalists have bilked thousands of people out of thousands of dollars over the years by asking for "good faith" deposits. The excuses they use to collect these funds are lawyers fees, accounting reviews, travel expenses, research fees, phone call expenses, and document review fees.
What you will need to provide to venture capitalists is information. Begin by sending the executive summary of your business plan to venture capitalists you have identified as prospects. Do not send your entire business plan at first. If a venture capitalist wants your business plan, he or she will ask for it.

Venture Capitalist often take bigger risks or accept lower rewards when they are attracted to the non-financial characteristics of an entrepreneur’s proposal.

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