Posts Tagged ‘entrepreneurship’
Looking for Venture Capital Money?
Good luck with that. Seriously. It takes a lot of luck. Being in the right place at the right time, among other things. That’s a whole other topic.
This post is to ask WHY. Why do you want VC funding? Because it’s sexy? Most likely. You’ve got your own list of reason why you want VC funding. Let’s review some issues.
1) Venture Capital money doesn’t think small. If your business idea only requires thousands of dollars (tens of thousands or hundreds of thousands) then it’s too small. VC’s are looking to invest millions. And they want to make millions more.
If you’re thinking that it would be good to have a few hundred thousand dollars to get going then you’re thinking too small. The VC vocabulary is a whole other world – and the entire focus is on on INVESTMENT and PAYOUT. The first couple hundred grand is called seed money. Maybe that’s where the “angels” fit in. Then there is mezzanine financing. Then there is the actual VC investment, first round, second round…
2) Their goal is to grow your company, take it public (or sell it to a larger firm), and cash out. This is an important detail. Their goal is to invest their money and then get their money out. Venture Capitalists do not want to be your lifelong partner.
VC money isn’t a requirement to go public. Maybe you’d like to keep your multi-million dollar business private. Maybe you’d like to make the public/private decision at your discretion. Maybe you want to retain 100% ownership and 100% of the assets.
3) Each VC firm specializes in very discrete and finite segments of business. One VC firm only works with telecommunications products that are designed for utilities. Another firm only looks at veterinary products for farm animals. There are fashions in the VC community just as there are fashions in clothing. This is why venture capital is such a good option for highly specialized, large revenue generating specific industry concepts.
If your business idea is last year’s model then you’re wasting your time. If your business idea is next year’s model then they might have already funded it three years ago. VCs are looking for the idea they haven’t seen and can absolutely believe in.
Maybe it’s time to reconsider your funding goals and requirements. A loan from someone you know or a loan from the bank., self financing or bootstrapping. Recognize that VC money is NOT an easy fix. There’s a lot of hard work associated with getting funded by a VC. In the end, you have twice the experts and half the ownership. Sometimes that’s a good trade. Other times, not so much.
