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Idea Cafe's CyberSchmooz
Financial Feasts

Financing message forum where you can get and give insights found nowhere else. Belly up to the table and request funding. Or tell your money tales. Any money talk is fair game except ads.

The Latest Hot Topics:

Show Me the Money!
Belly up to the Financial Feasts table and talk turkey about money... what to look for, where & how? All money talk is fair game. Go

 

Venture Capital

1. What is a Venture Capitalist?

2. Who is This Good For?

3. When is This the Best Choice for Me?

4. When is This Not Advised?

5. Tips for Getting Money.

6. Ingredients You'll Need on Hand.

7. Idea Cafe Tips.

8. Watch Out For...

9. Web Links.

1. What is a Venture Capitalist?

A venture capitalist can be an individual or a venture capital "firm." They're all scouting for highly profitable, very fast growing, early to mid-stage ventures to sink money into.

Notoriously inpatient, they expect big and almost immediate returns on their investment. Venture capitalists don't just invest their own money; they raise funds from wealthy individuals and institutional investors (such as pension funds) who seek to allocate a portion of their holdings into potentially very-high return investments.

Venture capitalists are seasoned business and financial managers who look to be able to repeat formulas that have worked for them in previous investments. So they typically stick to specific fields they know well.

2. Who is This Good For?

Companies that have bootstrapped beyond the very beginning stages and are starting to have something to show for their efforts;

Companies that need a lot of money. It's generally not worth venture capitalists' time to manage a lot of little investments.

Companies that have the potential for explosive growth., On the hockey-stick growth curve that makes entrepreneurs drool, venture capitalists want to get in just at that little flat part before the growth soars up the stick.

Companies that can go public; this provides the most likely vehicle for vc's to get their investment back out in cash after a few years.

Hi-tech Companies: although there are some venture capital firms that invest in non-tech ventures, the majority of past venture success, and, therefore, future interest, is in technical and related arenas.

3. When is This the Best Choice For Me?

When you can take your market by storm with a big shot of capital. You've come up with your product, refined it, and you've got a small but fast-growing base of important customers. What you need is several million dollars to push you to the next level -- a splashy consumer marketing campaign, state-of-the-art manufacturing equipment -- so you can capture significant market share.

When you're willing to share, or give up, control of your company; venture capitalists not only take a big chunk of your business in exchange for their money, they want seats on the board, and may bring in their own selected people to replace the founders.

When your company will soon go public but you need extra capital to pay the expenses of the process. This stage provides quicker cash-out and less risk to venture capitalists than earlier-stage investments.

4. When is This Not Advised

If your company has solid but unspectacular growth prospects, look elsewhere, to an investor who appreciates stability. Venture capital companies want home runs, not singles and doubles.

When you can't stand the thought of giving up control.Venture capital firms like to use their own proven management formulas and people. They may not have the patience to give you the chance to prove yourself. So if you don't like watching from a luxury box on the sidelines, venture capital isn't for you.

When yours is a service business; only a few venture capital firms believe service businesses can be profitable enough fast enough.

5. Tips for Getting Money

Provide a business plan that includes everything they expect; it's your ticket to any further consideration;

Show that your company or product is on the verge of taking off big.

Have answers ready about your longterm strategy, such as how soon you might go public.

Keep in mind that bankers look at your past performance, but equity investors look to the future. It's not what you did for me yesterday, but what will you do for me tomorrow.

Please, don't call them "vulture capitalists." They really hate that.

6. Ingredients You'll Need on Hand

  • A great business plan.

  • Financial statements that document your company's progress so far.

  • Up-to-the-minute market research on your product or service.

  • Details on the background and personal strengths of your management, product development and marketing teams.

  • Basic financial package.

7. Idea Cafe Tips

Do your homework. Research venture firms just like you'd study the habits and needs of an important new customer. Each firm has their preferences and specialties, so find out which fit your own profile best, so you won't waste their time and yours.

Drop names. If you know any person the venture capitalist might know -- a client, educator, head of another firm, corporate board member, neighbor -- let recognized names slip into your cover letter, biz plan and/or phone call to help lift you out of obscurity and maybe get your plan pulled out from the stack.

Be "hot." What industries/types of companies have received most of the latest batches of venture funding? If your company looks similar, your chances of getting noticed will increase, and the urgency for funding you may speed up. If your company is clearly a different breed, look to VCs in a different geographic area, or focus on getting your funding from other sources, such as strategic partners, angels or a private placement.

8. Watch Out For...

Pretenders. Some companies want you to pay them to find investors. Don't bother. A legitimate venture capitalist won't charge you for looking at your proposal, and if they like it, finding other investors to join with them.

Time-consuming presentations. As with angels and private placements, you may have to make multiple presentations to venture capital firms, and that'll leave you with little time to run the business.

Being over-clever. You want to impress them, but keep your information clear, to-the-point, and credible. Special effects are not needed.

Losing time waiting for an answer. VCs are extremely busy, so they may not get back to you with any answer any time soon. Don't stand around waiting, keep shopping your plan to other firms.

9. Web Links

America's Business Funding Directory
Some 13,063 funding sources, including listings of angels and other would-be investors.

Venture-Preneurs Network
Offers services to start-ups, including locating venture capital.

Finance Hub
Intersoft Solutions Inc.'s site features more than 100 links to venture capital sites on the Web, as well as links to more than 200 banks.

Money Hunter
Lists of consultants, matchmatchmaking service for angels, investors and growth companies.

Venture Capital Resource Library
Links to everything from locating a venture capital firm to details of security law and text of articles, all related to getting investors.

Venture Associates Ltd.
A Denver financial consulting firm run by James Arkebauer. Information on finding angels, venture capital, investment bankers, management consultants and more.

Venture Capital Online
Information and networking opportunities for entrepreneurs and venture capitalists.

 

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