You have started your business and are ready to go gangbusters. All signs are positive. You just need some funding to get things really rolling. You decide to take a look at venture capital and are wondering how it works.
So, where do venture capitalists get their money? They actually form private money funds that wealth parties put money into. These funds are considered very aggressive with a hit or miss projection the norm.
When I suggest these funds swing for the fences, I mean it. The investors know most of the companies invested in will fail. Still, it only takes one to go public and produce a profit so large it boggles the mind.
That being said, venture capital firms are risk sensitive. They know most companies will not make it. As such, they invest in 8 to 12 companies instead of just one. If you fit the niche they are looking for, you can be one of these.
How do you become a recipient of venture capital? Well, we are not going to focus on that in this article. Instead, we are going to look at what happens to your company once you have it. This is almost as important as getting it.
The first thing to realize is the clock starts running when you cash the check. A VC firms wants action. That means selling or taking the company public in five years or so. You are going to be under pressure to produce and produce now.
Another thing to understand is the pace of funding. You do not get one giant check. Instead, you get money parcelled out in stages much like on a construction project.
The first stage is known as the seed money round. It is money used to get the company up and moving. If things go well, another round of funding will be provided at a set date. It is not uncommon for four or five rounds of funding to eventually be done.
Obviously, the venture capital firm is watching things progress carefully. If it feels the company is losing its way, the firm may withhold further funding or demand changes to the board of directors and officers.
How can it do this? Well, part of the answer has to do with what the venture capital firm gets in exchange for its investment. The answer is stock in the company. That stock gives the firm leverage to make changes particularly when it is holding the financing strings.
If you really want to make money through a successful business venture, money is going to be a huge issue. Venture capital is the answer to that issue, which is the primary benefit it offers. Many companies have been very happy with it.
With every advantage, there is a negative. With VC, it is pressure to perform. The firm has given you a lot of money and it is going to watch that investment closely. Some people are not phased by this, but others fall apart. Know thyself!
So what should you do? Well, it is up to you. Venture capital is a high risk, high reward game. If you want to play with the big boys, it is a necessity. If you are uncomfortable with such pressure to perform, pass it by. - 15246
So, where do venture capitalists get their money? They actually form private money funds that wealth parties put money into. These funds are considered very aggressive with a hit or miss projection the norm.
When I suggest these funds swing for the fences, I mean it. The investors know most of the companies invested in will fail. Still, it only takes one to go public and produce a profit so large it boggles the mind.
That being said, venture capital firms are risk sensitive. They know most companies will not make it. As such, they invest in 8 to 12 companies instead of just one. If you fit the niche they are looking for, you can be one of these.
How do you become a recipient of venture capital? Well, we are not going to focus on that in this article. Instead, we are going to look at what happens to your company once you have it. This is almost as important as getting it.
The first thing to realize is the clock starts running when you cash the check. A VC firms wants action. That means selling or taking the company public in five years or so. You are going to be under pressure to produce and produce now.
Another thing to understand is the pace of funding. You do not get one giant check. Instead, you get money parcelled out in stages much like on a construction project.
The first stage is known as the seed money round. It is money used to get the company up and moving. If things go well, another round of funding will be provided at a set date. It is not uncommon for four or five rounds of funding to eventually be done.
Obviously, the venture capital firm is watching things progress carefully. If it feels the company is losing its way, the firm may withhold further funding or demand changes to the board of directors and officers.
How can it do this? Well, part of the answer has to do with what the venture capital firm gets in exchange for its investment. The answer is stock in the company. That stock gives the firm leverage to make changes particularly when it is holding the financing strings.
If you really want to make money through a successful business venture, money is going to be a huge issue. Venture capital is the answer to that issue, which is the primary benefit it offers. Many companies have been very happy with it.
With every advantage, there is a negative. With VC, it is pressure to perform. The firm has given you a lot of money and it is going to watch that investment closely. Some people are not phased by this, but others fall apart. Know thyself!
So what should you do? Well, it is up to you. Venture capital is a high risk, high reward game. If you want to play with the big boys, it is a necessity. If you are uncomfortable with such pressure to perform, pass it by. - 15246
About the Author:
Find California venture capital investment firms at VentureCapitalInvestmentFirms.com.
