Get Venture Capital Funds
Getting finance from Venture capitalists for your start-up is one of the major hurdle for entrepreneurs. In-fact, apart from funds, you will also get the knowledge and expert guidance from these investors for your start-up, since they are not only financing your start-up, they will be part of the start-up. If you make money, they also make money. It’s like joining hands with a friend who helps you with money as well as guides you wisely for the progress of your company. Read more about ways to get Venture Capital Funds.
How much Money can we get from Venture Capital?
Usually each fund will have a size of about $100 million - $500 million. Venture capital funds are like mutual funds. Same as mutual fund, the Venture capital is the money of others, which are managed and invested in shares of start-up companies for profit. The people or companies who invest in venture funds are call “Limited partners”. These funds are managed by professionals, known as General Partners”.
Will Venture Capitalists give money to Start a new Business?
Venture capital financing has some major stages as given below
Seed Stage
This is the stage where seed funding is used. During this stage the entrepreneur will have an idea of the product, technology or service. Make an estimate of the chances of success in the new business.
At this state the company needs funds for low expenses. Since the product or service hasn’t been launched, the risk of investment is very high. Entrepreneurs can approach family and friends or Angel investors to invest small amounts.
Start-up Stage
This is the stage when the business or company is already being set up. Initial workouts like market analysis is completed and the final product is ready to launch. Company needs more fund since, the manpower resources and materials have is required. Also, funds has to be allocated for marketing and advertising.
Due to the above mentioned requirements in the Start-up Stage, funds requirements will increase. This can be sourced through Angel investors, networks, friends and family. Apart from the above fund sources, venture capitals can start to invest to meet higher expenses and join hands for a long-term growth of the company.
First Stage
At this stage Venture capital firms are eager to invest. This is the stage when the final product is ready for market. The risk is comparatively low than the previous stages, the product will be tested thoroughly and there are very little chances to fail in the market.
Capital requirements are more at this stage for sales, marketing and expansion of production layouts.
Venture capitalists prefer to enter into the start-up at this stage since the testing phases are over and the chances to lose the capital is lower.
Second Stage
This is the stage when the production capacities are increased and new products are introduced, in order to catch up with the competition and to improve the position in the market.
More funds are required at this stage since the profits generated are not sufficient for product diversification and to implement wider range of services. The start-up will be growing at a fast pace and timely expansion of product ranges is required. Venture capitalists are ready to pump in more money at this stage since the idea of this start-up has already started making gains and expansion of the business will give more profits.
Bridge Stage
The company has already completed the early stages. It is the time to make acquisition of another company or to have a joint venture.
More Funds are required at this stage. The venture has already reached its maturity and big funds are ready to come in for acquisition or joint ventures.
Recommended Read :
- Bridge Loan Start Ventures
- What is Vendor Financing?
- Raising Fund From Family and Friends for Start Up Venture
- How to Secure a Micro Loan for Start Up Business?
- How to Invest in a Start Up?
- Risks Involved in Start Up Investing
- How Can I Become An Angel Investor?
- How Risky is to Become An Angel Investor?
- What is Bridge Loan?
- How to Become Venture Capitalist?
This is a good explanation of the process of being funded by venture capitalists. I had hoped some tips were included to expand upon ways to get venture capitalists interested. However, it is good to know the process of having a venture capitalist sponsor so you aren’t surprised in the long run.