Your company is up and running. Things are looking good. Projections and demand are so positive, that taking this thing public on one of the stock exchanges seems viable. Venture capital may be the key to pulling it off.
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.
When I suggest these funds swing for the fences, I mean it. The investors know most of the companies invested in will fail. Still, it only takes one to go public and produce a profit so large it boggles the mind.
That being said, venture capital firms are risk sensitive. They know most companies will not make it. As such, they invest in 8 to 12 companies instead of just one. If you fit the niche they are looking for, you can be one of these.
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 venture capital firm typically will be looking for a turn around time on its investments of three to seven years. This means it is looking for companies that should go public in this range.
Another item to keep in mind is the actual money distribution. It is not given to you in a lump sum. Instead, you will receive it as progress is made in a number of different funding rounds.
There can be four to six total funding rounds. The seed money round is the first one and often a big check occassion. It is designed to take care of immediate needs. The other rounds only occur if progress is deemed acceptable.
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.
Where does all this power come from? You gave it to them. While they were handing you the first check, you were signing over a large chunk of the ownership in the company to them. Welcome to the world of venture capital.
There are definite advantages to using venture capital. The blunt truth is you often need a strong financial backer to become a successful company. Unless you have a rich uncle, venture capital is pretty much your sole funding source.
The clear downside, however, is your business is no longer YOUR business. This can lead to a loss of enthusiasm for some owners, particularly when under the pressure of a VC firm looking to protect its investment.
So what should you do? Well, it is up to you. Venture capital is a high risk, high reward game. If you want to play with the big boys, it is a necessity. If you are uncomfortable with such pressure to perform, pass it by. - 15254
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.
When I suggest these funds swing for the fences, I mean it. The investors know most of the companies invested in will fail. Still, it only takes one to go public and produce a profit so large it boggles the mind.
That being said, venture capital firms are risk sensitive. They know most companies will not make it. As such, they invest in 8 to 12 companies instead of just one. If you fit the niche they are looking for, you can be one of these.
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 venture capital firm typically will be looking for a turn around time on its investments of three to seven years. This means it is looking for companies that should go public in this range.
Another item to keep in mind is the actual money distribution. It is not given to you in a lump sum. Instead, you will receive it as progress is made in a number of different funding rounds.
There can be four to six total funding rounds. The seed money round is the first one and often a big check occassion. It is designed to take care of immediate needs. The other rounds only occur if progress is deemed acceptable.
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.
Where does all this power come from? You gave it to them. While they were handing you the first check, you were signing over a large chunk of the ownership in the company to them. Welcome to the world of venture capital.
There are definite advantages to using venture capital. The blunt truth is you often need a strong financial backer to become a successful company. Unless you have a rich uncle, venture capital is pretty much your sole funding source.
The clear downside, however, is your business is no longer YOUR business. This can lead to a loss of enthusiasm for some owners, particularly when under the pressure of a VC firm looking to protect its investment.
So what should you do? Well, it is up to you. Venture capital is a high risk, high reward game. If you want to play with the big boys, it is a necessity. If you are uncomfortable with such pressure to perform, pass it by. - 15254
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