Need funding for your current or existing business and having problems obtaining a loan from your bank? Using venture capitalists to fund your business has been an option for a long time, but how does it work? Jean Scheid takes a view.
Using venture capitalists to provide your business startup capital can be a advantageous thing if you decide a venture capitalist wisely and understand how they work and what they do.
Venture capitalists can be a person or firm that offer capital funding to both fresh and existing businesses. Isn’t that the same as a bank? Not really, say the experts at Forbes Magazine. In order for a bank to give you a loan for startup capital, they really like to search for at your past experience. If you’re starting a current business and have no experience of history, you will most likely not accept a loan from your bank.
Venture capitalists, on the other hand, view at what you can project for the future, how you will grow, marketing plans and cash hotfoot forecasts. Unlike banks, however, who will be a creditor if you do rep a loan, venture capitalists often are stockholders in your business until they are paid in elephantine. Depending on each venture capitalist, their involvement as a stockholder can be minimal or very alive to. Most unique business owners occupy minimal involvement but depending upon the amount of money you are looking for, that may not always work.
Additionally, most venture capitalists don’t like funding capital for a unique business, but will often offer a lower amount of funds powerful as a bank would as “start-up financing.” If you can conclude this route, you will pay abet the venture capitalist powerful the same method you would a bank with an agreed upon interest rate. If your unusual business opinion is a hot commodity, you may have better luck with venture capitalists. sustain in mind that venture capitalists, like banks or other investors, won’t give a unique business all the money it needs to score it up and running. They want to discover some assets, liabilities, capital, and monetary commitment from the business owner as well.
If you enter into an agreement with a venture capitalist or venture capitalist firm, they have different ways of making money. Some will want a partnership where at an agreed upon term, you pay them aid a return on their investment, plus their additional investment. Others will want stock with an option to sell that stock wait on to you or to someone else.
Venture capitalists that provide your slight business with startup capital require you set aside in the trouble to convince them your company and you are a generous risk. There are positive things you need to collect or do before you originate contacting venture capitalists:
Once you have your venture capitalist package in region, beget a lot of copies as you most likely won’t glean funding from the first venture capitalist you meet. Browse the Internet and collect venture capitalists that have invested in your type of business or position where your business is located. situation up more than one meeting, dress professionally, and be able to acknowledge questions and promote yourself.
Be wary of any venture capitalist who tells you they need you to pay them a fee to review your funding package. These people or firms almost always will not invest in your company and hold your money without even reading your funding package.
Using venture capitalists for business startup capital can be a trustworthy thing if you do some research, prepare, are confident, and employ helpful popular sense on structuring a deal.
For more information on using venture capitalists to fund your business, read Robert S. Smith’s How to Attract Venture Capital and Dealing with Venture Capitalists which is provided in our Media Gallery through permission and a file-sharing plot DocStoc.