by MyCapital Team
August 14th, 2011
Venture capital is money provided by an outside investor to finance a new, growing, or troubled business. The venture capitalist provides the funding knowing that there’s a significant risk associated with the company’s future profits and cash flow. Capital is invested in exchange for an equity stake in the business rather than given as a loan, and the investor hopes the investment will yield a better-than-average return.
Venture capital is an important source of funding for start-up and other companies that have a limited operating history and don’t have access to capital markets. A venture capital firm (VC) typically looks for new and small businesses with a perceived long-term growth potential that will result in a large payout for investors.
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by MyCapital Team
August 13th, 2011
Venture capitalists look for businesses that have the potential to grow quickly to a significant size, yielding a significant return on the VC’s investment in a relatively short period of time. VCs are not just interested in start-ups. Your company’s current size is less important than its future aspirations and growth potential. A target company for a VC is one that may be capable of becoming a large market leader in its industry due to some new industry opportunity and competitive advantage. There’s no single determinant for a successful portfolio company, but a VC tends to focus on the following factors:
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by MyCapital Team
August 11th, 2011
The first professional investor to a deal at the start-up stage is referred to as the Series A investor. This investment is followed by middle and later stage funding – the Series B, C, and D rounds. The final rounds include mezzanine, late stage and pre-IPO funding. A VC may specialize in provide just one of these series of funding, or may offer funding for all stages of the business life cycle.
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by MyCapital Team
August 5th, 2011
The exit strategy is the VC’s way of cashing out on its investment in a portfolio company. A VC often hopes to sell its equity (stock, warrants, options, convertibles, etc.) in a portfolio company in three to seven years, ideally through an initial public offering (IPO) of the company. The company becomes liquid through the sale of its stock to the public and the VC sells its stock to reap its return.
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by MyCapital Team
July 26th, 2011
There are some excellent alternatives to venture capital that you should also explore in your search for funding sources. One such alternative is an angel investor – a term for an investor that takes you under its wing and lifts you up to the next level of growth. Angel investors typically do not have deep pockets so the average investment tends to be smaller than that of a VC, typically hundreds of thousands of dollars rather than millions. For that amount of capital, proceed with caution if you’re considering giving up some control over your company.
2 users recommend
by MyCapital Team
July 24th, 2011
A term sheet is a document that sets out the basic terms and conditions under which the VC will invest in your company. Work completed in the due diligence phase of the funding process is used to draft this document. The term sheet is generally non-binding and is used as a template, along with further due diligence, to draw up more detailed legal documents.
1 users recommend
by MyCapital Team
July 20th, 2011
The first step in approaching a VC is to submit a business plan. Once the VC has received your plan, it will discuss your opportunity internally and decide whether or not to proceed. This part of the process can take up to three weeks, depending on the number of business plans under review at any given time.
2 users recommend
by MyCapital Team
July 16th, 2011
The executive summary is by far the most important section of your business plan because it’s the first thing the busy VC or prospective investor will look for and read to get an idea of your investment opportunity. If your executive summary is compelling enough, the VC will read further, contact you for more information, and/or ask you to come in for a meeting to present your ideas. If your executive summary fails to strike a chord of interest, the reader will quickly move on to the next business plan in the stack.
The executive summary – really just a compact version of your business plan – should concisely address the following:
1 users recommend
by MyCapital Team
July 12th, 2011
At the end of your business plan, you may want to consider including an appendix. The appendix contains any additional information you think would be helpful to share with potential investors. This may include resumes of your management team, additional charts, graphs, and/or financial information, any articles or other press coverage of your company, and a glossary of company- or industry-specific terms that may be helpful to define.
2 users recommend
by MyCapital Team
July 8th, 2011
The business plan is a detailed road map to your venture and how you plan to grow it into a successful business. It’s a crucial document for anyone seeking capital, and is typically developed with two audiences in mind: 1) angel investors – wealthy individuals who personally invest their money, expertise and experience in your venture; or 2) venture capitalists (VCs) – partnerships with funds of pooled investment capital with which to invest in a number of companies.
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