Venture Capital investment for business 

 

The source of finance of choice for many new companies, especially when you won't have customers for a while.

Venture capital is an expensive source of finance, and often combined with debt or loans.  So you need to have the right product, team, market and plan in order to benefit from it whether you are starting out or looking to finance growth. 

However, it has many advantages too: 

  •              venture capital accelerates company growth, several studies show venture  capital backed companies grow faster than others that did not seek venture finance
  •       venture capital managers are well connected providing advice and often assistance in recruiting management teams and also finding clients
  •       venture capital backing inspires confidence in a company from bigger firms, customers, suppliers and even (at times) banks
  •       once invested venture firms interests are aligned with yours so they will provide advice and assistance to you and your board and often help you in difficult times.

You might counter by saying there are some downsides. Investors ultimately want their money back out with a large return. You are no longer your own master as you now have at least one more shareholder. Investors have a habit of wanting to know "why" if you deviate from your business plan and cash forecasts. No surprise really...

The point is venture capital is the sort of finance willing to take a large risk in you and your business, unlike the banks.

So venture capital managers need to be convinced you can make the business work, the market and product are able to grow and that the money in can generate the money out they need.

This is simply to ensure they can make a return to their investors (often you and me as many pension funds place some of our money in venture funds) and compensate for the businesses which dont work and they loose all.

So it pays to explore your options and consider carefully if you are right, and ready to seek and receive investment. Come and talk to us if you want to know more about venture capital.