You're beginning a new company and as such, you're most likely looking for funding. This is where venture capital comes in.
What is venture capital? It's the financing that is invested in startups. It's usually a high risk investment with the potential for unlimited growth.
Most people who provide venture capital do it on an ongoing basis. In other words, that's their business.
To help you decide whether or not you should seek it out, we look at the five advantages of seeking venture capital.
#1: Venture capitalists provide expertise
Usually people who invest large amounts of money in startups have been doing it for a while.
They know what works and what doesn't. This is how they make a living, so it pays for them to know their risks.
Because many startup founders are providing multiple functions for their startups, they are often learning right on the job.
Sound familiar? If this sounds like you, you'll find that your venture capitalist may be able to offer you advice in things like product development, marketing, fundraising, human resources, and more.
In addition, venture capitalists tend to invest in things they know something about, so you can count on some expertise and advice in your chosen field as well.
Many startups find the expertise of their venture capitalists invaluable.
#2: Venture capitalists provide large sums of money
The most obvious advantage of venture capital is the money it brings to your business.
While you may be able to obtain money from bank or small business loans, you may find it difficult to get as much as you need. And, this can be risky for you personally.
Venture capital may come your way in large sums. In fact, your firm may even decide to give you money on an ongoing basis.
This can provide much financial stress relief so you can focus on growing your business.
#3: Venture capital is not a loan
The upside of venture capital is that you don't have to repay it.
Why? Venture capitalists invest in your startup in return for equity in your business.
You don't have to make regular monthly loan payments. Because of this, you are free to grow your startup and expand your operations.
Do remember, though, that venture capitalists own a part of your business, and you are sharing in the profits. They may even require seats on your board and other positions of importance.
#4: Venture capitalists have marketing clout
Another advantage of venture capital is these investment firms often have their own marketing staff as well as media contacts.
Because it's in their best interest to get your startup in front of as many people as possible, they offer some advertising potential.
In addition, they lend credibility to your startup because they felt you worthy enough for the investment. They can even help attract more investors.
This has powerful and positive ramifications for your startup.
#5: Venture capitalists can help with hiring
You'll find that venture capitalists know a lot of people and businesses and can offer hiring assistance.
For example, if you're looking to outsource your human resources, your venture capital firm may know of a quality business that can help.
Venture capitalists bring whole networks to your startup. They may know just how to help you find the employee or outsourced team you need.
The great thing about getting venture capital, is you get their connections and resources as well as their money.
With about .05% of startups raising venture capital, it's a competitive business.
If you're ready to take advantage of venture capital, there are a few tricks to approaching a firm.
Remember that they will be very selective because it's their money on the line.
When approaching a venture capital firm, go prepared with your business plan, your marketing plan, and your overall budget needs.
They will expect you to run a tight ship and have all the information they need to make an informed decision.
Take your time and get everything in order before approaching a firm for the best results.
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