Venture Capital Funding for Entrepreneurs
Venture capital is a source of funding for businesses that have a promising future for long-term growth. Startup firms and small businesses can gather a large amount of funding from venture capital investors, but, in exchange, they will need to sell at least 25 percent of their company. You might consider seeking venture capital funding if your startup has a high barrier to entry – it needs to be a business that can’t be started by just anyone.
Venture capital investors aim to make a sizeable return on their investment, which is why you would have to offer such a considerable portion of the ownership of your company in return for funding. If you are starting a business with the intention of being your own boss, venture capital funding would not be of use to you. But if your business has the potential for very large growth in the long-term, venture capital funding for your startup might be your most powerful opportunity for progress.
What Are Venture Capital Funds?
Venture capital funds are establishments that pool together money from different investors and invest the cash in small businesses and startups. You will need to pitch your business to a venture capital fund to be considered for investment.
How to Get Venture Capital Funding
Very few businesses are funded this way. In fact, just 0.06 percent of businesses are able to secure a deal with venture capital investors. So, it is very unlikely that venture capital funding is the best option for your startup. If bootstrapping will not supply the funds you need to start or grow your business, angel investors are most likely your most attainable option.
If you feel venture capital funding is right for you, you should introduce yourself to venture capital investors as soon as you start your business. You do not need to propose a deal immediately. You should just ensure that the investors are aware of your company. Early contact allows the investors to get a good idea of your rate of growth by the time you are ready to pitch your business. Some businesses are able to secure funding before they even launch, but this is very rare. It will take months, maybe even years to catch the attention of investors and secure a deal for your company.
What Venture Capital Investors Look For
Investors are always on the lookout for opportunities that have a high potential for making them money. They will only fund the businesses they view as having the lowest risk of loss and highest return on investment. With this in mind, you can create a pitch that highlights the potential of your business for long-term, high-return investment.
- Show experience. Investors have a tendency to prefer founders who have already successfully secured venture capital funding in the past. Even if it is your first time pitching for funding, you should present yourself as an experienced business owner. Your presentation should be polished, to the point, and professional.
- Demonstrate momentum. You will need to show that you will put the funds to immediate use, and that you have fast-moving plans for growing your company. Your startup should be progressing optimistically even without the help of venture capital funding.
- Be transparent. Make sure you have immediately access to any data you’ll need to answer questions and complete your presentation. Your presentation will not only consist of your slideshow, but the conviction with which you stand behind your business and your readiness for growth.
Securing funding for your business will take months, but that should not slow down the progression of your business. As you make pitches, connect with investors and propose deals, remember to only make funding efforts that are worth your time. Developing a strong business concept and managing your existing funds wisely will go a long way in showing investors that your company is profitable and constantly moving forward.