Venture capital is a type of equity funding, meaning that an investment is made in a company for the purpose of receiving shares in said company, along with other collateral (usually an insurance policy). Selling shares of one’s company also means sharing ownership and ultimate control over the business. The more shares that are sold, the less control the original owner has over the company. This type of funding may be attractive for new companies with limited credit and operating history that may have difficulty raising capital in public markets or from debt funding, such as bank loans.
If relinquishing control over your company doesn’t seem very attractive, you should consider another form of business funding. On the other hand, depending on the stage of your business’ development, and your end goals, venture capital could be the right solution for you.
After a period of significant growth, many small business owners are not equipped with the expertise to take their businesses to the next level-either maximizing growth or selling it for profit. A venture capitalist can bring managerial and technical expertise to aid businesses that are ready to take the next step. In a nutshell, venture capital is a useful tool for entrepreneurs hoping to build a company to flip for a quick profit. If your goal is to build a lasting business (that remains under your control), alternative funding options should be considered.
If venture capital sounds like a viable solution to your funding needs, just remember, venture capitalists reject 98 percent of all proposals presented to them. The market is highly competitive, and if your proposal is approved, the lengthy process-usually 6 to 18 months-has just begun. In order to obtain equity funding, you must present a sound proposal to outline the strategy and vision for your company.
Areas of interest for potential investors include the following:
- Strength of management
- Strength of brand
- Business strategy
- Target market
- Big name clients
- Intellectual property
- Barriers to entry
© J. Mariah Brown – the owner and editor-in-chief of Writings by Design, LLC. To learn more about how Writings by Design can help your business formulate a fool-proof funding request, please visit us at http://www.writingsbydesign.com, or email your question to firstname.lastname@example.org.