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March 14, 2013

How to Get Business Financing Through A Venture Capital Firm

Many business owners encounter difficulties obtaining the cash they need for business startup or expansion. They often get frustrated with the strict criteria imposed by banks and other traditional financing sources. Unable to secure funding through these traditional options, they resort to alternative funding sources to help fund their project. One source that provides funding to these financially strapped entrepreneurs is venture capitalist firms.

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A venture capital firm is a company that operates for the sole purpose of investing in business ventures that have the potential to become highly profitable at some time in future. A venture capital firm may focus in providing funding to startup businesses that are seeking capital to get the business off the ground and running smoothly. The firm may also specialize in rescuing existing businesses that are in financial difficulty but show some potential for becoming lucrative again after some cash infusion. Some venture capital firms will provide funding for both startup and established businesses.

To obtain needed funding, you need to contact venture capitalists that specialize in your business sector. To attract venture capitalists and get them to provide the funding you need for business, you need to play your game smartly. To attract venture capital firms, follow these steps.

An important step in attracting a venture capital firm is to do a lot of networking for your business. This is crucial to implant the name and idea of your company in other people’s minds so that you can get some promotion started. Also, collect business cards as a sure-fire way to begin a path that will bring you closer to venture capital firms.

Next, you should build a team of experienced business managers. This is one the things that attract venture capitalists to a business. They want to see an experienced team that has achieved some business success. You need to put together a diverse team and then polish its credentials in order to attract venture capital firms. The combined networks of your team members will further create the buzz that will eventually result to venture capital investment.

Prepare a well-polished business plan that outlines your business goals and strategies for achieving them. Investors will not give you money without seeing a convincing business plan that demonstrates how you will make your business successful. They’re taking on big risk and want some assurance that they will receive significant returns on their investment. Create an informative and impressive business plan to present to venture capital firms.

Venture capitalist firms provide business owners with the funds they need in exchange for business profit or business ownership stake. Through negotiation you and the venture capital firm will agree on the amount or percentage.

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Most of these firms often want a substantial financial return in addition to ownership. Because they are taking on high risk, venture capital firms often take an active interest in the setup, management and day to day operation of the company they invest in. These investors often have experience in the industries where they invest money and their involvement may become very beneficial to your company. Generally, your contract with the venture capital firm will specify the rights and privileges of the venture capital firm in regard to involvement in your company’s activities. As with any business negotiation, always get proper guidance from your lawyer before getting into negotiation with a venture capital firm.

Peter

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