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August 27, 2010

Do You know how VCs Make Money?

If you are after venture capital, you need to know how to make VC firms interested in your venture. The most effective way to do it is to prove that you can deliver exactly what they want and that is a satisfying return on investment.

Venture capital is not like a business loan or debt capital. Venture capital firms do not invest their own money. They are always looking for opportunities to invest the money of their clients. They will not usually invest in a company for the duration of the company’s life but usually on a shorter span like three or five years. During this time, they will not only help the venture with money but will try to provide other resources that could help it grow. In order to be able to support the firm they funded most venture capitalists will invest in an industry or sector they are familiar with and for that reason, finding a suitable investment firm might be tricky. You can overcome this problem by using a custom database like the one you can create here.

Once you are funded, you will have access to several important connections and renowned experts in the industry, which can advise you. That means that besides money you will be given a lot of support.

How do they make money if they invest so much in you and your company, you may ask. They make money on the exit. An exit is when the investors leave the company after is has made a name for itself and is making good profits. An exit strategy can be liquidation or an IPO. A liquidation is the case only if the company is not doing so well but in a good case, the investor will make money by selling its shares to other investors, the stock market or to other companies.

What you have to do is to prove that your company can grow and can make huge profits. If you can deliver your promise, they will find a way to make money. First, you have to find the right investor that is willing to analyze your venture. Click here to use the best database of venture capital firms available on the market and get funded before your competition.


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