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Article Series: Venture Capital
Venture Capital A To Z
Venture
Capital - What You Must Know
"Venture
capital" is
a term that is often heard in business discussions. But more
often than
not, the more common belief is that this is rather complicated
and difficult to understand, especially for those who are new
to the game of business. For entrepreneurs and anyone who may
be interested in getting into business, it is important to
understand what this is all about.
Venture
capitalists and firms are composed of people and firms
that have pooled in their resources in order to invest
in businesses,
whether to fund start-up financing or for a company expansion
(for the purpose of earning profits within a short period
of 3-7
years). The goal is to increase the company's value so as to
yield more profit at its exit, which may be an initial public
offering or what is commonly known as an IPO. Other exits include
an investor's buyout, a merger, or an acquisition.
These firms concentrate on a certain field or area. It is
therefore important that you know what these areas are. This
is called investment criteria. If you have a specific area
in mind which does not match that of the firm, there are many
other firms that you can find. You just have to know where
to look.
The
web is one source of venture capital firms. Do a search on
the internet. Some sites are helpful enough to provide listings
of these firms as well as other tips such as how to draft your
proposal, how to raise venture capital, among others.
When you've found the investor to match, it is then time to
draft your proposal. It should be truthful, direct and thorough.
You might want to ask a professional to check on your proposal
before submitting it. Your proposal should leave a mark in
the minds of the capitalists, since they have to go through
tons of them. An estimate of 1 in every 400 proposals gets
approved, so it is imperative that your proposal be impressive.
When
we talk of profits and earnings, we're not talking of a few
thousand dollars in a year. These firms seek a return
of up to five, even ten, times the initial investment, not
to mention the management fees and other fees that they require.
This explains why these firms tend to take the reins of the
company. That is why it is important that you organize a solid
management team that knows what they're doing and at the same
time is able to handle the pressure from these capitalists.
But while it helps if you appear to manage the company well,
it is still important to listen and follow the strategies that
these firms provide. Aside from being tried and tested policies,
following their decisions will also benefit you in the long
run should you need more capital.
Venture capital is a wise investment alternative for both
entrepreneurs and capitalists. You and the investment firm
have a common goal, and that is to receive as much profit as
possible after a short period of time.
If this is not what you want or does not seem feasible to
you, then there are other financing options that you can avail
of. The important thing is to weigh all pros and cons before
deciding anything.
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: 2008
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