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| Venture Capital Financing |
Venture Capital Financing
Pursuing venture capital financing, though sounds exciting, is actually
venturing into a highly challenging task, perhaps, even more challenging than
starting a new business. However, if there are failed attempts than there are
success stories too! So no need to get disheartened with the complexity of the
fund raising campaign - simply move forward with a positive attitude and the
prerequisites like a unique idea (products or service), a great team, an
innovative model, a strong value proposition and an interesting pitch.
However, there are the major aspects of
VC financing that you must know before embarking into the campaign as you never
know how far these aspects may sound appealing to you as an entrepreneur. If
you think the advantages of this financing method dominate over the disadvantages,
you know you should for it, or else, you may have to give it a second thought.
So let’s have a look at the various pros
and cons of venture capital investments so that you know what to expect in due
course of time.
Pros And Cons Of Raising Venture Capital
Pros
1.
Venture capital
is the biggest source of fund your business can ever receive.
2.
Venture capital financing compels you to push your boundaries so that you
can raise it with ease. This in turn significantly increases your overall
business potential.
3. Raising venture
capital is like receiving a certificate of trust that attracts more and more
investors to pour money into your startup.
4.
Apart from
capital, venture capitalists offer many additional services like knowledge
sharing, offering guidance, contacts sharing, offering assistance in building
exit strategies, etc.
5. VCs help you
widen your business network and bring you to the limelight so that you can
attract further financing.
6.
The venture
capital tenure ranges from 3 to 7 years so you have enough time to make money
for the investors as well as your business.
7. VCs are masters
of management and finance so you have enough scope to learn from them so as to
boost your revenues.
8. There is no
dearth of money in the VC industry. They usually invest between $ 500,00 to $ 5
million.
9. Since they are
waiting to gain profit from your business, they will try to offer the best
possible resources to your company.
Cons
1.
Raising venture
capital is a challenging task and is at, at times, not suitable for all
startups.
2.
Convincing a VC
is, perhaps, one of the toughest exams you would ever appear.
3. Venture
capitalists usually prefer to invest in growth stage or later stage only.
However, there are some who prefer to invest in seed stages too.
4.
Not finding a
suitable venture capital firm can end up wasting your valuable time and money.
You must follow only those who are interested in your sector and stage of
development of your startup.
5. Partnering with a
venture capital company means you have share your control over the company with
the investors. If this becomes a major concern for you then venture capital is
definitely not the right option for you.
6. They might want
to become a member of your board and will always keep an Eagle’s eye on how and
where the fund is being utilized so as to ensure that even a single penny
contributes to their ultimate ROI.
7. There are cases
where a VC firm completes takes over the control on their investee company if
the company/startup is not able to make money on its own.
Conclusion
So now it’s all up to you to decide
whether or not to spend time on this source of capital. You can always take the
help of a startup advisor or take suggestions from other entrepreneurs who have
already tasted success through venture capital raising.
No matter what, it will still remain a
fact that once you raise VC money, the path ahead will become smoother for your
startup. Do share with us your thoughts and queries in the comment box given
below.
For more information on venture capital financing, feel free to
get in touch with us at Merger Alpha.
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