How To Raise Funds Through Venture Capital Funding?

Watching your friend sucessfully raising venture capital has motivated you and now you are also looking forward to get a venture capitalist to invest in your startup. Great! It is quite justified for the venture capital funding to gain so much popularity as the money provided by the VCs is far more than any other source of capital. But convincing these professional investors is a tough nut and that's where entrepreneurs are mostly out of their depth.

Well, there's no need to get discouraged, as this method of statup funding is tough but not impossible. But from your side, you have to be very sure that you want to raise venture capital for your startup. Whether you will be able to raise it or not will come next but unless you are mentally prepared for venture capital funding, it will all be a wastage of time and energy. Also, while approaching for venture capital funding, there are three most important things that have to be taken care of - research, attitude and network.

So, here's how you should approach for venture capital funding.

Research Well For The Right Investor

See how the venture capitalists perform their research before adding a company to their portfolio. Similarly, as an entrepreneur you also need to research well before choosing the right investor. Thankfully, you have internet at your rescue. Explore the web, check out the websites to find out whether their investment strategy fits your business proposal or not.

If yours is a seed-stage startup, it is advisable to look for the local investors first as they are easy to get access to and will also make it easier for you to convince a distant/foreign investor to invest at a later stage in your company. You have to understand their mindset. Investors in the venture capital firms find it reliable to invest in an investor-backed company. So once a local investor invests in your company, it greatly increases the value of  your business. Try to build a strong network and get hold of a person who can introduce you to of these investors. The venture capitlists trust such referrals and consider them as ideal investments. Before anything else, it is about trust as the investment involves huge risks.

Also, research well about their industry preferences like whether it technology, telecommunication or infrastructure or any other industry they are interested in. Approaching an investor not interested in your industry vertical would be nothing but wastage of time.

Keep The First Meeting Crisp And Powerful

Your first meeting with the venture capital firms should be such that the investors should get curious about your company and suggest for a second meeting. If that happens, you should consider that as your first step towards success. No need to go for a detailed narration at the first meeting. You just need to present your idea as a lucrative investment option. So basically it is all about presentation based on which the investors will decide whether they should proceed further with your company or not. And it won't take much time; within a few minutes they will realize how far they woud like to go with the deal. So you know how critical the first meeting is.

It's Time For Your First Pitch. Are You Prepared For It?

For venture capital funding, everything needs to be just perfect. Prepare your first pitch as if it is your last pitch on the earth. It should provide the investors with a 360 degree view of your business - length, breadth and height, everything should be crystal clear. I mean to say, it should include your business plan, the market oppotunity, market traction, expected turnover, your competitors, your team, the business model, just everything that the venture capital firms would like to know. The mangament team in your company should be the greatest attraction. Investors rely only on companies with a highly-efficient management team comprising of smart, hardworking, passionate, commited and confident members.

Also, it would be great if you can quantify the capital you need, say for your equipments, office space, market launch or expansion. It adds great value if you can prove your efficiency in the matters of finance. The venture capital firms gain the confidence that your company will spend the capital at the right place which will boost the productivity resulting into higher profits.

Conclusion

These are the most important things that you need to take care of while raising venture capital for your startup. These things look simple but once you get into the field, you will realise what all it takes to convince a venture capital firm. But then, it's not impossible again. You have to ensure no matter what it takes, you are willing to work with these investors. When it comes to venture capital funding, sharing the ownership often becomes an issue. If the fear of losing your control over the business haunts you every now and then, it is good to look for some other funding option. Other than this, it's all fun working with the venture capitalists as you get access to so many value-added services along with guidance, knowledge and contacts apart from the much-needed capital.

Are you still apprehensive about raising venture capital? For any assistance, feel free to visit us at mergeralpha

Is Venture Capital Funding Suitable For Everyone?

As a first-time entrepreneur, you may find it depressing but it's still a fact that venture capital funding is not meant for everyone. Yes, I do agree, it is the most powerful source of startup fund but winning over the venture capital firms is a task almost impossible. Why am I being so rude? Not at all.

According to Small Business Administration, out of 6 lac new businesses starting every year in the US, only 300 are able receive venture capital. This shows that the percentage of those lucky entrepreneurs is just around 1 percent. I won't say it is only about the competition; there are various other factors that ultimately determine whether you should at all waste your time and energy on the method or not.

Even if yours is a small but high growth company, raising venture capital can be still challenging. You have to remember that as an entrepreneur, your biggest assets are your brain and your time, so be very careful and act smartly before you spend them, especially your time. At this stage, each second is precious for your business, so you must have to be very sure about which method to approach. A cost-effective strategy should always be there in your mind.

If the venture capital firms go through 100 business plans, they might end up considering only one or two for an investment. Well, that's how it is and you have to accept these choosy investors just as they are. And why they do so? Well, investing in a startup, especially at the seed-stage involves huge risk. So they want to be extremely sure before investing in a startup.

Now, there are many reasons why the startups get rejected by the venture capital firms. Either they don't have a unique product/service, poor market potential, no proven potential or any signs of future  growth and profit making or may be they lack a good management team or there can be many more reasons.

Also, the suitability factor should be evaluated not only from the investors' point of view but also yours. Suppose you have a unique business idea, you have a highly efficient management team that is driven by commitment and quality, your market potential is simply superb, in short every has fallen in place but, you are highly concerned about your
ownership in the business and you are not in favor of sharing your responsibilities with anyone. Then
what?

If this is the case, you have to think thousand times before approaching for venture capital. Venture capital firms typically get actively involved in the company's decisions and share almost 50 percent, if not more, of the ownership in the business. They will invest hugely so they will always make sure that the capital is being utilized in the best possible way so that it generates huge profits.

Now, it's kind of a necessary evil for many. You know you need the capital; you know it is only the venture capital that can easily help your business grow and expand. But is that OK if it is at the cost of your control over the business? For many entrepreneurs, ownership is not a concern as they are more bothered about getting rich so they desperately go after the venture capital firms. So it is solely up to you to decide what matters most to you.

Another very important thing is the overall expenditure involved in receiving and utilizing the venture capital. Even if you manage to get venture capital funding, the average cost of the venture capital is usually very high.You have to ensure that your company will be able to sustain the rate of growth at any cost. Entrepreneurs often do not pay much attention to this aspect which ultimately results into remarkably hgh expenditure. Also many venture capital firms often require preferred stock in exchange of their investment, which can be detrimental for a small startup.

Therefore approaching the venture capital firms may although sound quite exciting but it is often not suitable for all businesses. In any case, the biggest demand is  a unique idea, an efficient management team, a scalable market and your determination about sharing your ownership in the company with the investors.Only then you can think of spending your time and resources on venture capital funding.

If everything falls in place in your case and a venture capital firm invests in your business, then rest assured that your company will receive the biggest boost it could ever get from anywhere. Not only in terms of capital but you will also get free access to knowledge, guidance and a great network of industry experts.

So, are you ready to hear from the venture capital firms? Do you think your startup is suitable for this method? Feel free to share your thoughts, ideas and experiences with the venture capital firms, if any.

For more information on venture capital, feel free to get in touch with us at mergeralpha

How Working With The Venture Capital Firms Can Help Your Startup Earn Huge Profits?

Venture capital is the money invested to support small, unproven or newly started businesses which are typically not bankable but have a bright future. To be true, venture capital is not meant for all and the fund is too hard to raise. So, it is advisable to be realistic in your approach to the various startup funding methods, especially if it is venture capital. If you are looking for the venture capital firms to invest in your startup, you better be ready with all the essential requirements.

The venture capital firms prefer to invest only in those startups that can return their investments not just with the interest but also with huge profits. Also, if you are highly concerned about your control over the company, it is better to look for a source other than venture capital as the investors will be actively involved in the critical matters of the company so as to ensure that the company is moving in the right direction to gain huge profits.

If everything falls in place, i.e., you have a viable business plan, a great management team, a strong network and someone who can introduce you to the venture capital firms, you cannot even imagine how efficiently your business is going to run under the guidance of these venture capitalists.

The most important thing about venture capital is, it is a long-term financial source. The investors are highly committed and ready to share the risk.  Usually they take a minor share holding in your company as their ultimate focus is to take your company to a position where it can start earning huge profits. Their dedication is mainly due to the high risk they are taking by investing in your startup. Since the success of the venture capital firms is dependent on the success of your company, they will work with your company and help you make it rich.

The venture capital firms may insist on becoming a member of the Board Of Directors or may also like to offer marketing, management or technical guidance, but they are hardly interested in the day-to-day management of the company. They will allow you to operate it independently and will intervene only when the future of your company is at stake.

Venture capital firms are run by highly professional investors who have a giant network spread across the globe. They are familiar with highly influential people and can also introduce you to many industry experts who are a great source of knowledge and expertise. Getting familiar to such a network will soon take your business to a whole new level. They will show you how to plan a strong business strategy and enable your business to gain more visibility and popularity.

Once a venture capital firm invests in your startup, it will remain with you till your company attains a flourishing stage. And the best part, you don’t need to make regular repayments like you do in case of a loan.  Rather you will pay dividends whenever your company makes a profit.  This way, with the venture capital, you are getting sufficient amount of time to focus on the growth and expansion of your business which actually enhances the chances of profits.

You may find it terrifying to share your control over the business but the fact is, nowhere will you find such an investor who is ready take so much of risk and make a huge investment. If you are confident about your business plan, then you need not worry at all. At the end of the day, venture capital is indeed the most suitable option if you are really looking forward to high profitability.

Venture capital firm

 For more information on venture capital firms, feel free to visit our website at mergeralpha

How A Startup Can Benefit From A Venture Capital Firm?

Venture Capital Firms

Raising capital through venture capital funding is a deciding factor for any startup. You have to be highly sure about what exactly you want. Either you can choose to be your own boss or if you want to earn huge profits, you may have to share your ownership with an investor. Well, there’s no denying the fact that venture capital firms can immensely benefit your startup as there are solid examples like Google, Twitter and Facebook who wouldn’t have been able to rise to the present position had they not entered into a partnership with such firms. So once you are assured that you have a unique idea, a great business plan, a highly organized management team and most importantly, you are ready to share some of your responsibilities in your company, you can definitely think about venture capital funding.

Here are a few ways in which the venture capital firms can benefit your startup. 

•           You Get Access To The Much-Needed Money

There are many other methods of startup funding. You can use your personal savings, ask your friends and family, your employees or you can go for other sources like incubators, angel investors and crowdfunding. But, nowhere will you be able to raise as much fund as with venture capital funding. These firms have plenty of resources but they would only invest if they find the growth potential in your startup. So with a unique idea, it’ll be much easier for you to convince these investors and get access to the much-needed resource for the growth and expansion of your company.

•           You Get Access To Many Value Added Services

Venture capital firms typically prefer to invest at the seed stage. Now, this is certainly a high-risk investment so the VC firms always make sure that they provide the startups with as many facilities as possible so that it can run smoothly and efficiently and start earning profits within the expected period.  The firms offer a wide variety of value added services like mentoring, alliance and exit facilities.

•           It Increases The Value Of Your Startup

The value of a business has a lot to do with its future fund raising campaigns. The higher the worth of your business, the easier it is to convince an investor at a later stage. And if you have the venture capitalists investing in your startup, there’s simply nothing like it as the value of your business automatically goes up with such influential people interested in your business.

•           You Get Access To Guidance And Mentorship

Venture capitalists are usually experts in the field of finance, marketing and management. They may not have an exact knowledge of your business or the industry you are dealing with but they can definitely assist you through proper guidance and mentorship in the matters of finance and marketing. Once they invest in your company, they become actively involved in all the important matters of the company and are always there to give a sound opinion. They also offer valuable ideas so as to help you build a strong business strategy. Now if you find this as interference, you have to plan it right from the beginning so that you don’t end up messing the partnership with your potential investors.

Conclusion

These are some of the most important advantages of approaching the venture capitalists.  This method of startup funding is more beneficial if it is a newly started business.  The fund you receive will enable you to execute the expansion plan which is critical at this stage of your company’s growth. Moreover, with this type of startup funding, you don’t even need to sell your equity although the investors provide you with alternate funding options. So you always have a choice – either you receive the money as a debt or you can sell your equity to minimize your risk of loss. You can even buy equipments or office space for your startup with the money provided by the venture capitalists.

However, you still have to remember two most important things – firstly, this type of funding is not meant for everybody and secondly, make sure that you choose the right investor with proven track records and industry relevance.

For more information on venture capital funding, feel free to visit us at mergeralpha

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