April 8, 2013
Business owners may need funding when running their business. Many businesses encounter many difficulties securing traditional business funding through bank loans. Unable to obtain traditional funding, business owners may seek alternative funding sources for obtaining business capital. That’s where venture capitalists come to the rescue.
Venture capitalists are private investors who provide business owners funding in exchange for a percentage ownership in the business. In addition to ownership, these venture capitalists often require the businesses they invest in to give them a substantial financial return.
Obtaining venture capital is an important turning point for a start-up business. Venture capitalists do not just give money to the cash-strapped entrepreneur, but also provide counseling in operating the company because they have vested interest in the success of the company. However, they receive numerous investment opportunities and are very selective in the type of company they work with.
You should follow these steps in applying for applying for venture capital financing. Contact business people who have received venture capital financing and compile a list of venture capital companies. Venture capitalists prefer referrals from associates rather than cold calls.
Choose venture capitalists that focus on your industry and company profile. These investors specialize in specific industries.
Create a concise and interesting pitch for the immediate encounter. The pitch should be a proposal that can be explained in just a few seconds.
Polish your business plan. You must have a sound, captivating business plan that clearly demonstrates your strategies for success in order to get venture capitalists to consider investing in your company. Your business plan should goes into details on how your business will generate income, the marketing analysis, financial projections and the management’s qualifications. Outline the steps you plan to take to make the business highly profitable.
Therefore, get the interest of the venture capital firm by creating a solid business plan that demonstrates why your business is viable and potentially profitable for them.
Do not ask for an immediate decision. If the venture capital firm likes your proposal, you will get a meeting with them and eventually negotiate the terms. Before negotiation starts, be sure to consult with your attorney to determine what’s best for you. A knowledgeable and experienced attorney will be able to provide proper guidance throughout the negotiation process. Keep in mind that venture capitalists often want a partial stake in your company for the investment that they make.
Be prepared to give up a certain percentage of your company. You have to determine prior to the meeting how much you can give up. The percentage will be dependent upon the amount of capital provided. You and venture capital firm will negotiate the terms for the funding so that you and the venture capital firm are satisfied.
Once a venture capitalist invests in your company they will want to work closely with you to see that the company becomes profitable. During an interview, they will determine whether you are the kind of person they could work with. Therefore, you should demonstrate a willingness to take part in an exchange of ideas, and take any recommendations they make pertaining to your business.