One of the most appealing forms of financing that many entrepreneurs reference in their success stories is Venture Capitalists (VC’s).
Traditionally VCs provide large sums of money, advice, and prestige just by association. If your business plan has potential, then having someone already established who will validate your capacity to grow can benefit both of you profitably.
What are VCs looking for?
Venture Capitalists often look for the following in a potential investment:
▪ The size of the market for the service or product being marketed.
▪ Does the company have a solid management team in place?
▪ Does the company have a solid business plan?
▪ Fast and steady sales growth.
▪ The dominance and relevance of your company’s product to the current market.
▪ The company in question’s potential to be profited from in a future sale.
Types of Venture Capital:
• Private venture capital partnerships: These are high risk with high investment return expectations but also come with very large capital bases to invest with.
• Industrial venture capital pools: The likelihood of this type of funding is based on the probability of success your firm has in the market.
• Industrial venture capital pools: Business stock is sold to equity investors to boost expansion capital.
Pros and Cons of seeking out Venture Capitalists
Seeking out a VC may be the right choice for your business. Our team of finance professionals can help you decide. Consider all the positives and negatives before entering into this type of investor.
Positives:
• Immediate infusion of finances can help your company grow quickly.
• VCs have relationships with other businesses and can help you network.
• VCs want your business to succeed.
• You don’t have to pay back the investment. This is not a loan.
Negatives:
• You are giving away equity share in your company.
• Depending on your agreement, VCs may be able to make controlling decisions.
• Your company may not be ready to grow as quickly as a VC would like.
• You may have to bring on a partner the VC chooses.
• VC firms expect returns on investment of 25% or greater.
Determining if a Venture Capitalist is the right investment option for your business should be done with the help of a qualified and experienced financial advisor.
MSM Virtual Financial Advisors can aid you in deciding what is best for your organization. You are not alone in this process. Our experts are here to help you with your financial decisions. Contact us to schedule a complimentary consultation to find out how we can serve you.
