How to Find Venture Capitalists For Your Business
Venture capital is a type of private capital financing, which is offered by venture capital funds or private equity firms to emerging companies, early-stage, or new companies that have been deemed to possess high growth potential or that have shown potential for profitability. Venture capitalists provide this type of financing as part of their investment in the companies. The venture capital firm provides this type of financing as a type of secondary market for the equity of the company. In most situations, venture capital funds do not provide an initial cash advance to the company. They instead provide financing which is used to make an equity investment in the company.
The venture capital firm typically will provide seed money, meaning a very low initial investment, instead of a large amount of equity. The reason for this is so that the venture capitalists can receive an initial return on their investment and then allow the company to build from there. In most cases, they will wait to make an equity investment for at least two years after the company has already generated revenue. Two years is often the time period which is deemed long enough for the company to develop into a dominant player in its particular industry and generate enough revenue from the sale of products or services to justify going to capital raise.
At times, venture capital firms will provide funding to small, mid-size or larger companies. This is done in order to provide the type of seed money that an individual investor may not be able to provide for a small or mid-sized company. However, there are also times when venture capitalists may provide financing to companies of a certain size which is considered to be “unicorns.” A unicorn is defined as a publicly traded company, which is valued at a greater than $1 million, and is usually protected by a written guarantee from a private shareholder.
One of the things that investors like about partnering with a venture capital firm is that they have a direct relationship with the company’s management team. Many times, the venture capitalist will have a direct seat in the boardroom and is privy to company discussions. They can also get involved in company decision making as well as being a key voting member on the major corporate shareholders’ meetings. This is beneficial to both the investors and the venture capitalists because it allows the venture capital firm to have a greater say in what types of deals they are willing to fund. Of course, the investor must have substantial experience in business as well as the ability to recognize companies which are headed in the right direction.
In order to find venture capitalists, you can turn to your local business community as well as those within other professional circles such as the boards of directors of corporations and schools. These individuals often work with venture capitalists on a regular basis. Additionally, you may also do a search on the internet as well as through business referral agencies. Referral agencies will often be able to point you to individuals who are experienced in dealing with the type of capital that you are looking for.
When you begin to seek capital, you should keep in mind that many of these investors are also angel investors. This means that they are wealthy individuals who have given money to a private company in return for a percentage of its profits in exchange for some type of commitment to share in the growth or future profits of that company. In the past, only wealthy individuals were able to invest in venture capital funds. However, in recent years as more individuals have become wealthy through investments, the availability of venture capital firms has improved. Therefore, it is certainly not out of line to seek capital from angel investors as well as venture capitalists.