Raising Venture Capital ? The Pros And Cons | Articles For America

The major decision to make when raising capital for your business is whether to use debt or equity financing. Venture capital falls under the category of equity financing, which is very different from debt capital, which is commonly seen in the form of a loan from lending institutions like banks.

A major drawback to raising equity capital would be the notion that you first must qualify. Venture capitalists do prefer to select companies which are growing fast and present the potential to go public or be purchased within a few years. It is not uncommon that an entrepreneur will need to prove a business exists in an industry that is growing rapidly and that the entrepreneur has the skills to keep the business competitive.

To raise venture capital does require quite a bit of work. As an entrepreneur, you will need to prepare a thorough business plan with clear financial projections, power point presentations, and even look for third party counsel to make a proposal more compelling. As soon as you have established these deliverables, you will have to take part in networking and making connections with the right venture capitalist for your business.

On top of this, raising equity capital means you will be selling a portion of your business. Because of this, you would be giving away ownership in return for procuring funding. That means if your company is eventually acquired, you will need to share the profits with the venture capital firm.

Such might sound a little overwhelming at first but don?t be too worried. Minority interest in a large company is a lot better than a majority interest in a small company. Case in point, a 10% cut of a $10 million business is a lot more than 100% ownership in a $400,000 business.

Remember that venture capital firms tend to focus on a particular industry. With their stake in your company, you have access to all of the venture capital firm?s information and guidance. In fact, most venture capitalists will at least require being on your Board of Directors. These investors have the same goals as you, to grow a successful business and exit. Therefore their partial ownership in your company does not harm you.

Also, venture capitalists do present a helpful amount of capital in which to invest. When a firm offers the notion it has the ability to help a business grow, the expansion of the business could prove even more expansive. Furthermore, venture capitalists have the tools and network place to help expand growth.

Finally, to raise venture capital opens the door to concentrate on growing a business without the hassle of worrying about any short term payables. Through venture capital, you will never have to worry about any interest or principle payments which debt capital would mandate. Any company that is currently growth focused and not hugely profitable will find this makes a huge difference.

If you?re looking for business planning help, then consider using a business plan template, so you finish your plan in hours, not days, weeks or months.

Source: http://www.articlesforamerica.com/raising-venture-capital-the-pros-and-cons.html

christmas lights canon eos rebel t3 christmas photo cards ar 15 costco kmart urban meyer ohio state