VC Funding to Expand Your Business
It is certainly not an easy task to seek out a venture capital firm. Many businesses have spent numerous hours and lots of money trying to obtain this type of funding only to come up short. This is simply because they are not yet in a position to seek VC funding. How do you know when it is time to seek help from a VC firm?
Solid Business Model
Do you have a proven business model in place? If a business does not have a business plan that has been tested and proven to be effective it is likely that a VC firm will not make an investment in the business. As part of the business model, there needs to be the ability to prove that the product or service will meet a need which customers are going to be willing to pay for. You will also need to be able to show how you plan on making a decent sized profit on the sales. And another part of your business model will need to include how you plan to use the money you are asking for to help the business experience growth.
Previous Business Experiences
You may also be ready for business funding through a VC firm if you have prior business experiences. The venture capitalist is more likely to make a financial injection in the company if you have some prior business experience. If you have helped run a business before and you are an entrepreneur it is appealing to the VC firm. That proves to them that you will not typically be making all the first timer mistakes.
How is Your Management Team?
A VC firm such as Effi Enterprises can offer management expertise. If yours is a startup business it can be very difficult to attract the right managerial people to the business. This is where a venture capital firm can provide leadership and help set up a solid management team. If you can show that the business is profitable but is in need of a proper management team, a VC firm is likely to want to provide this type of support in exchange.
It will be imperative to convince the VC firm that you have high goals. Actually when you set your goals high it will be appealing to the firm since they really are looking to invest in businesses which can set goals that supersede the ordinary. If your business is just settling to make a little profit, a VC firm will not be interested in what you have to offer. They want to be in on the next big wave and make a substantial profit from it. But if you feel your business is potentially going to make it big and that is incorporated into your business plan and part of your goal, then it might just be time to call a venture capitalist.
Is it worth it?
You will want to weigh out the pros and the cons before engaging with a venture capitalist. An entrepreneur may find venture capital funding very beneficial especially if they need a larger amount than what they can obtain from a commercial or government lender. It can also be very beneficial if they need some assistance such as what VC firms can offer, such as startups or late stage companies need from time to time. Although VC funding can be a great advantage there are also some things that will need to be measured to see if they are worth it. For instance, you will most likely have to give up some of your shares to investors, possibly surrender some managerial control to the VC firm and share privileged information from your business model. You will also need to be willing to risk that the VC firm will be able to take the company all the way to its IPO.
Before working with angel investors or venture capitalists, make sure the pros outweigh the cons. Venture Capital can be a great form of business funding when you need to grow the business.
Posted on January 1, 2013, in Business financing, Effi Enterprises, investing, VC financing, Venture Capital and tagged Angel Investors, business financing, business model, VC funding, venture capitalist. Bookmark the permalink. 1 Comment.