Venture capital is a popular type of private equity and is a crucial component of the business world. Typically found in less mature companies, venture capital helps small startup businesses really take off and expand, particularly at a point where they may have trouble obtaining a bank loan and are too small to raise capital themselves.

Remember that in our program, Valencian Global, we offer venture capital for entrepreneurs. Contact us or download the full program following this link.

Depending on what stage a business finds itself in, however, venture capital can be found in forms that may vary somewhat; though the ultimate goal is always the growth of the business in question. In some cases, companies will need capital to launch the company in its first instance, whereas in others it may require capital to secure future expansion as it is yet incapable of producing quite so much revenue. As is all aspects of business, there are both advantages and disadvantages to using venture capital as a means of launching your company, and there are of course questions you should weigh up carefully. Let’s take a look.

Important questions to ask yourself when considering venture capital

  • Are you confident in your abilities as an entrepreneur and in the success of your business? You must be unwaveringly clear on your commitment to your company. Getting into bed with a venture capital firm is a huge step; one that can be extremely beneficial to both parties, but must be well thought out as the best option.
  • Does your business pose a high-risk, high-reward case for venture capital? Venture capitalists usually target companies that are still in their roots and still have a lot of growing to do, but look very promising in terms of the final product. Because of this, investors will be keen on taking part, as they will demand a large portion of this final product since they will be the ones to nurture it. As it’s relevant here, have a gander through our previous post on how to seduce business investors.
  • Have you got a solid business plan? Having a thorough business plan is essential, full stop. Any successful entrepreneur will say the same. But if you’re thinking of advancing your company through venture capital, the importance of this increases tenfold. As we have previously discussed, any investor needs to be able to see that you have paid attention to every intricate detail in the structure and development of your business. Basically, make sure you are dressed to impress, at all times.
  • Are you willing to surrender a sizeable stake in your company in exchange for venture capital? As mentioned earlier, if something sounds too good to be true, it usually is. While venture capital is a central pillar in the foundations of many now-flourishing companies, and may well end up being the same for you, it isn’t free. Venture capital firms take awe-inspiring risks at times when investing staggering figures of finance into seemingly unstable businesses, and therefore demand a large chunk of the future profits in return. There is no way around this if you decide to go down the venture capital route, so be clear on it.
  • How much venture capital will you need and how will you use it? This point ties in nicely with having a solid business plan. Venture capital firms will appreciate you having sound knowledge of how the process works and where their money is going exactly. Study this carefully, as it will also directly affect how much equity you will have to give up.
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