|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.
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.
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.
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.