After years of thinking about it, you have formed a company. Things are going well. In fact, they are going so well that this could be really big. You are going to need serious cash, which makes venture capital funding an interesting proposition.
Venture capital typically consists of a pool of money in a fund. Wealthy companies, individuals and pensions often put money into the fund. Their goal? To swing for the fences.
What does this mean? They are looking for companies that will go public and produce huge returns on their investments. Imagine getting in on the ground floor for Microsoft and you have the idea.
Although venture capitalists are agressive investors, they are not idiots. They understand risk. To minimize against it, they will invest in ten to 15 companies instead of just one. Your goal is to be one of those companies.
Before you rush off to get venture capital funding, it is critical you understand what you are getting into. It can be easy to get big eyes about the money, but come to really regret it later when you realize the true cost.
The first thing to realize is the clock starts running when you cash the check. A VC firms wants action. That means selling or taking the company public in five years or so. You are going to be under pressure to produce and produce now.
Another thing to understand is the pace of funding. You do not get one giant check. Instead, you get money parcelled out in stages much like on a construction project.
The first stage is known as the seed money round. It is money used to get the company up and moving. If things go well, another round of funding will be provided at a set date. It is not uncommon for four or five rounds of funding to eventually be done.
If things go well, the venture capital firm will be very friendly. If they go bad, the opposite is true. The firm can put all kinds of pressure on you by refusing to provide further funds, demanding the removal of executives and so on.
How can it do this? Well, part of the answer has to do with what the venture capital firm gets in exchange for its investment. The answer is stock in the company. That stock gives the firm leverage to make changes particularly when it is holding the financing strings.
If you really want to make money through a successful business venture, money is going to be a huge issue. Venture capital is the answer to that issue, which is the primary benefit it offers. Many companies have been very happy with it.
On the con side, the venture capitalists are going to watch their investment closely. That can cause a lot of pressure. More than a few small business owners have grown disillusioned because of this.
Getting venture capital investment money is a smart move if you make it big. The majority of businesses do not, unfortunately. So, what do you do? If you can handle a bit of pressure and believe in your business, venture capital funding is the answer. - 15465
Venture capital typically consists of a pool of money in a fund. Wealthy companies, individuals and pensions often put money into the fund. Their goal? To swing for the fences.
What does this mean? They are looking for companies that will go public and produce huge returns on their investments. Imagine getting in on the ground floor for Microsoft and you have the idea.
Although venture capitalists are agressive investors, they are not idiots. They understand risk. To minimize against it, they will invest in ten to 15 companies instead of just one. Your goal is to be one of those companies.
Before you rush off to get venture capital funding, it is critical you understand what you are getting into. It can be easy to get big eyes about the money, but come to really regret it later when you realize the true cost.
The first thing to realize is the clock starts running when you cash the check. A VC firms wants action. That means selling or taking the company public in five years or so. You are going to be under pressure to produce and produce now.
Another thing to understand is the pace of funding. You do not get one giant check. Instead, you get money parcelled out in stages much like on a construction project.
The first stage is known as the seed money round. It is money used to get the company up and moving. If things go well, another round of funding will be provided at a set date. It is not uncommon for four or five rounds of funding to eventually be done.
If things go well, the venture capital firm will be very friendly. If they go bad, the opposite is true. The firm can put all kinds of pressure on you by refusing to provide further funds, demanding the removal of executives and so on.
How can it do this? Well, part of the answer has to do with what the venture capital firm gets in exchange for its investment. The answer is stock in the company. That stock gives the firm leverage to make changes particularly when it is holding the financing strings.
If you really want to make money through a successful business venture, money is going to be a huge issue. Venture capital is the answer to that issue, which is the primary benefit it offers. Many companies have been very happy with it.
On the con side, the venture capitalists are going to watch their investment closely. That can cause a lot of pressure. More than a few small business owners have grown disillusioned because of this.
Getting venture capital investment money is a smart move if you make it big. The majority of businesses do not, unfortunately. So, what do you do? If you can handle a bit of pressure and believe in your business, venture capital funding is the answer. - 15465
About the Author:
Pat Gibson writes free articles for VentureCapitalInvestmentFirms.com on subjects such as venture capital for alternative energy.
