June 10, 2013
If you have a great business idea you need money to bring it to fruition. You have hope that your idea is viable, but you don’t have any money to get your business up and running. You need to be able to raise a large chunk of capital to make the business a success. How do you get the money to start a new company?
Your first idea may be to apply for a bank loan. But it shouldn’t come to you as a surprise that banks are not interested in a new company. Your search for capital will likely lead you to venture capital financing. You can raise the money you need from venture capitalists.
To locate a venture capital firm, you can easily search through a venture capital directory or contact your local Chamber of Commerce to see if they have contact information of these companies. You can also talk to your accountant or lawyer to get recommendations. You can participate in industry events or private equity conferences and learn how other businesspeople in your industry secured venture capital.
Venture capitalists often focus on a certain niche or industry. You should find out about the types of projects that a venture capital firm tends work with before making contact. The company’s website should provide that type of information.
Explain to the venture capitalist what you want to do. The way to do this is to create a business plan in advance. This plan will specify exactly what you are going to do to make your company a growing and thriving success. An effective business plan can make the difference between getting financing and losing an opportunity. A well-written business plan is important when seeking venture capital because it indicates that your business has a success strategy in place. Be sure that the essential elements are covered in this document so that investors will understand the goals and plans you have for the business.
When a venture capital firm has agreed to invest in your company, they gain a vested interest in the success of your business. Subsequently, in addition to funding, venture capital involvement might also extend management and operational support, as well as providing marketing expertise. Upon providing venture capital financing, the venture capital firm will likely get a seat on your company’s board of directors to control the direction of the company.
Venture capitalists often have an exit strategy, or a way to cash in on profits, and this will be outlined on the agreement or contract you sign with the venture capital. Hire a lawyer to review the details of any agreement reached. A venture capitalist has the sole purpose of making a huge return on their investment. A lawyer will make sure all the details and fine print are covered.