Venture capital is a specific term that refers to funds obtained from venture capitalists. These are professional continuous investors and may be part of an individual or company. Venture capitalists often occupy a place based on the type of business and/or size or growth stage. They may see many proposals in front of them [sometimes hundreds of monthly], interested in a few people, and even less investment. About 1-3% of all transactions offered to venture capitalists are funded. So if the numbers are low, you need to be obvious.
Growth is often associated with acquiring and protecting cash while maximizing profitable business. Venture capital is often seen as a panacea for solving all problems, but it is not. Owners need to have a huge desire to grow and are willing to give up some ownership or control. For many people, not wanting to lose control will make them unsuitable for venture capital. [If you solve this problem earlier, you may save a lot of trouble].
Remember, this is more than just money. From the perspective of business owners, there is money and smart money. Smart money means it has expertise, advice and frequent contacts and new sales opportunities. This helps owners and investors develop their business.
Venture capital is just one way to fund a business, and in fact it is one of the least common but often discussed ways. It may or may not be your right choice [discussions with company consultants may help you determine the path that is right for you].
Here are some other options to consider.
Your own money from
- Many companies' funds come from the owner's own savings, or funds from property rights. This is usually the simplest fund. Investors often want to see some of the owner's funds ["skin in the game"] in the company before they consider investing.
Private property from
- Private equity and venture capital are almost the same, but the taste is slightly different. Venture capital is often a term used for early corporate and private equity to be used for later financing for further growth. There are experts in each area and you will find that different companies have their own standards.
FF&F from
- Family, friends and fools. Those who are closer to the business are often not sophisticated investors. Such funds may bring more emotional baggage and interference [rather than help] from their providers, but may be the fastest way to get a small amount of money. Usually, multiple investors will make up the total amount needed.
Angel investor from
- The main business angel is different from the motivation and participation of venture capitalists. Often, angels are more involved in the business, providing ongoing guidance and advice based on industry-specific experience. Therefore, matching angels and owners is crucial. There are a large number of angel networks that are easy to locate. Compared to venture capitalists, the requirements for asking them are not low, as they are still reviewing hundreds of proposals and accepting only a few proposals. For angels, the exit strategy requirements are usually different, and they are satisfied with a slightly longer investment [eg 5-7 years old, while venture capitalists are 3-4].
guide from
- Organic growth through reinvestment of profits. No external funds were injected.
bank from
- Banks will borrow money, but care more about your assets than your business. I look forward to personally guaranteeing everything.
lease from
- This may be a way to fund specific purchases that allow for expansion. They are usually asset leases and are guaranteed by these assets. It is usually possible to rent professional equipment that banks do not lend.
Merger/acquisition strategy from
- You may seek to obtain or be acquired. Often, even mergers have stronger and weaker partners. Combining the resources of two or more companies can be a way to grow - at least on paper, at least when working with a company in the same business. Many mergers are influenced by cultural differences and unforeseen resentment.
Inventory financing from
- Professional lenders will lend money to mortgage the inventory you own. This may be more expensive than a bank, but it may allow you to get funds that are otherwise unavailable.
Accounts Receivable Financing / Factoring from
- Become a professional loan field again, allowing you to take advantage of sources of funding that you don't know.
IPO from
- This is usually a strategy after initial financing and it is proven that the business is viable by developing track records. There are various "list" ways in Australia. They are very useful for raising more money [$50 million and above] because the cost can be quite high [more than $1 million].
MBO [management buyout] from
- This is often a late strategy, not a start-up strategy. In essence, debt is raised to acquire owners and investors. This is usually a strategy of gaining control from an outside investor, or when an investor attempts to divest from the business.
One of the most important things to remember in all of these strategies is that they all require a lot of work to get them to work – from the way business structures are structured to working with employees, suppliers and customers – and need to be checked and organized So that they make the company attractive as an investment proposition. This sorting and ridicule process can take anywhere from three months to a year. Actual costs [consultants, legal advice, accounting advice] and the shifting of the owner's attention from "persistent weaving" to business and making money in the business to focus on how the business is presented are often costly.
Orignal From: Alternatives to venture capital to increase growth capital
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