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| Venture Capital Funding |
Raising a business is like raising a
child. Both demand dedication, love, sincerity, effort and time. However,
raising a business often calls for raising capital which comes with huge
responsibilities as you are expected to delight your investors with huge
profits after a certain period. As a first-time entrepreneur with a seed-stage
startup, you may find it very difficult to convince banks or other financial
institutions. So the common options you are left with, typically, includes
friends and family, incubators, crowdfunding and venture capital funding.
While the other funding options do not
require much forethought, venture capital funding do require a good amount of
homework as it comes with a lot of terms and conditions which might not be
always favorable for your startup. So to determine whether or not it is a
suitable option for you, you can read the advantages and disadvantages of VC
funding mentioned below. If you think the points under disadvantages don’t
really bother you, then yes, you must chase a VC!
Advantages Of Venture Capital Funding
●
A venture capital
firm can give you access to maximum amount of fund that no other investor can
think of.
●
You can raise
your business with other people’s money.
●
You can not only
grow your business but also expand your company with venture capital.
●
A venture
capitalist can add great value to your company by investing in it.
●
They offer many
other additional services apart from capital such as knowledge sharing,
offering guidance and mentorship, sharing valuable contacts and expanding your
business network.
●
You get
introduced to many influential people in the startup eco-system who can offer your
new ideas on business building strategies.
●
Venture
capitalists, typically, have years of experience in managing finance and business.
They are always available to offer you proper guidance on how to utilize the
fund to gain maximum profit.
●
Once you manage
to partner with a VC, finding another VC becomes easier.
Disadvantages Of
VC Funding
●
There is huge
competition in the VC industry. Out of 100, a VC firm usually selects only 2 or
3 startups for investment.
●
The investment
tenure is typically, 3 to 5 years after which investors prefer to exit with
their share of profit. You have to ensure that you startup can manage to make
that much profit within the time-frame.
●
Legal and
accounting fees are often very high. If you are aiming for a small-scale
business, you must give a second thought to VC funding.
●
A detailed
business plan along financial projections are a must. The procedure is comparatively
lengthy and complex, so proceeding without proper planning can cost you hugely.
●
VC companies are
usually actively involved in your company’s decision-making process so there
consent is a must at every step.
●
They usually
offer the capital in exchange of a share of your ownership in the company. If
you are too concerned about your control over your business, you should better
look for some other funding option.
●
There are chances
of your losing control over the business if you cannot manage it properly.
●
Watch out for
your share of profit percentage at the end.
Conclusion
So these are some of the major factors,
typically, associated with raising venture capital. Some are really exciting
while some are matters of serious concern. At the end of the day, it is all
capital that brings in capital, i.e. you must have enough money to jump into
the campaign. And even before money, what you need is a highly innovative
business idea that carries a much-awaited solution for the target customers.
If you have a unique idea, a smart and
talented management team, an innovative business model, a scalable market, a
strong value proposition, an interesting pitch and enough capital for your
campaign, you are quite likely eligible for venture capital. So explore your
strengths and get ready for the most suitable fundraising campaign! Also, do
share with your experiences with VC raising.
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