Small business venture capital strategy

When starting a new small business, entrepreneurs often view venture capital as a source of funding. Here are 3 tips to make sure you get venture capital when you send your business plan:

1. Send your business plan to the right person

Venture capitalists tend to focus on certain types of business. Some people will focus on the industry, such as investing only in new energy companies, while others are looking for companies of a certain size. Before starting, it is necessary to conduct research to determine the impact of venture capital supporters on your industry. Send your business plan. Venture capitalists who are not in your industry can provide advice to make your plan more attractive to other venture capitalists. However, it is naturally wrong to send your plan to potential investors who don't even consider it.


2. from
   
    Make sure your business has sufficient profit potential

Most venture capitalists seek a return rate of about 5-10 times their initial investment. For example, a $2 million investment in a company should generate a return of $14 million to $20 million in about five years. In order to meet these requirements, it is often necessary to establish a business that is likely to achieve a high return on investment. If the rate of return can be reasonably expected to be low, such as for apparel retailers, it may be better to find alternative sources of funding [such as investment or commercial banks].


3. from
   
    Remember to provide an exit strategy for your investors

Venture capitalists usually do not want to participate in new joint ventures indefinitely. Most people plan to leave the new business after about five years, so you should clearly explain how to achieve this. There may be multiple reasons for this; some venture capital managers require regular sales of shares held to obtain other products. Still, by demonstrating that you understand the limited time frame of many venture capitalists, you automatically make your plan more attractive than those that are not.

All in all, by sending business plans to the right people, by identifying the rate of return required by venture capitalists, and by including exit strategies, you can increase your chances of getting venture capital for new and evolving businesses.

---

Orignal From: Small business venture capital strategy