How do you find money to change your dream business into reality? Fortunately, we live in an age where the possibility of financing reaches far beyond the standard bank business loan. Whether you are considering a start-up or ready to expand your successful business, research all your options so that lack of planning is not too expensive in the long run. One such financing option is through a venture capital company.
VC companies use high-value investors (sometimes referred to as “angel investors”) who want to significantly increase their return by investing their money into more risky companies for larger ROI. Funds are professionally managed and are usually provided for potentially high and developing growth companies with the possibility of reaching $ 25 million in sales within five years. Some VCs may require equity pegs and active roles in your business as a term of partnership. Active roles can include board positions, sales and marketing planning, or decisions regarding corporate governance. The amount you can borrow varies, but an average of $ 500,000 to $ 10 million. Obtaining money from VC companies is not suitable for every business. Every company adheres to the investment profile, limits the type of business where it invests. This allows company members to be more experienced in certain fields, then increase the possibility of successful investment.
Venture capital companies take risk investment that the bank can refuse; Therefore, it is difficult to secure funds if you have not fully prepare your business plan. Also, be prepared to pay a higher interest rate than you will pay for bank loans.
After you research the risks and returns to pair with venture capital companies and have decided to progress, this is what expected:
• VC members review your business plan. If your business meets the VC criteria for business types, the development stage, etc., members will meet you to take the next step, which …
• Conduct a thorough test. This might be the most important step in the process, because it can make or destroy your chance to get funds. Great details are paid on the numbers behind your plan – your business financial statements, details about your management team, and company governance documents for several names.
• Create investments: Once VC members have decided to progress by funding your business, the term terms are arranged. This sheet describes the terms and conditions at which money will be given. If you agree to these terms and conditions, money is invested and you, in return, provide an agreement on equity in your company, mitigating risks for VC. Money is paid with installments based on the milestone made in the agreement.
• Out of business: VC decides their relationship with the company at some point – usually within four to six years. This usually occurs through mergers, acquisitions, or IPOs made possible by VC company business bonds. It also when the initial loan was repaid, with interest, and money returned to high-value investors. Payments through shares are sometimes acceptable.