|Venture Capital Financing|
So you are determined to set your business off the ground. Great! No doubt you will explore venture capital financing at some point of time as it is one of the most sought after funding options among entrepreneurs. While there is an undeniable potential in the option to help your business grow and expand, it may not always be the best one for your startup.
Whether or not to raise venture capital is a critical question that you must have to answer depending on what matters to you most - getting rich quickly or being the sole controller of your startup and help it grow on its own pace. Here are some of the pros and cons of VC financing that should help you in your decision making.
Pros And Cons Of VC Financing
Pros And Cons Of VC Financing
● You get access to huge amount of capital phase by phase.
● VC financing is targeted to high-risk startups.
● The VCs offer many additional services apart from the capital such as offering guidance, mentorship, sharing contacts and assisting in building business strategies.
● Raising venture capital is a great learning experience that helps you rise as a better entrepreneur.
● You get the opportunity to build and grow your business with other people’s money.
● Even a single VC can add great value to your startup by investing in it.
● VCs are familiar with your industry and know a lot about the latest trends so they can always be a good source knowledge for your team.
● He can help you in critical decision makings.
● The funding option is not for every startup.
● There is tremendous amount of hard work and sincerity required in process.
● Without a sound knowledge of finance, the VC route is totally dark.
● The investor would like to take part in your board so that they can track the growth of your business at the same time ensuring that the capital is being utilized in the most productive areas.
● You may lose control over your business if you cannot handle the business properly.
● If you are too concerned about your control over your company, venture capital is not the option for you.
● You may need a lawyer and financial advisor which is going to be little expensive though worth the money at the end.
Typically, venture capitalists prefer to invest in established businesses or at least those that have already started earning revenues. However, there are many firms that are involved in seed-stage funding too so you always have options in the industry - all you need is the right set of tools to raise the money. Some of the prerequisites for venture capital include an innovative idea (product or service), a sizable and scalable market, an innovative business model, an impressive first pitch, a strong value proposition, etc.
Do share with your choices and experiences regarding fund raising in the comment box given below. For more information on venture capital financing, feel free to get in touch with us at Merger Alpha.