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.

Read Full Post »

4 users recommend

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:

Read Full Post »

4 users recommend

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.

Read Full Post »

3 users recommend

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.

Read Full Post »

1 users recommend

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.

Read Full Post »

1 users recommend

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:

Read Full Post »

1 users recommend

Explain why you need the funds, sources of your funds, and what the funds will be used for. Give as much detail as you can for how the money will be used. Most common uses for funding include R&D, working capital, and purchase of equipment.

Read Full Post »

0 users recommend

This is one of the most important sections of your business plan because it lays out the viability of your venture. You should have at least a basic understanding of the numbers you’re presenting – sales forecasts, profit-and loss statements, balance sheets, and cash flow projections, etc. – before you speak with any prospective investor, because you will be asked to respond to questions about these financial numbers.

Read Full Post »

2 users recommend

This section should include the names, backgrounds, and qualifications of key management and what their respective responsibilities are in your venture. Discuss why the management team is well qualified to make this business successful. If any of your management team, board, or advisors have had prior success as an entrepreneur, note this – it will boost the confidence level of your prospective investors.

A strong management team is extremely important to investors, often even more important than the business idea itself. Take the time to explain exactly what your management team brings to the table.

Read Full Post »

0 users recommend

This section tells your potential investors exactly how you make your product or service available to customers and how you plan to get the word out about your product or service. Here, you should discuss your marketing channels and provide sales targets. It’s best to give a number of different marketing strategies, possibly beginning with the least expensive and then progressing to the most costly. Be sure to include the cost and other details of your overall marketing plan.

Read Full Post »

0 users recommend