Business Venture Capital
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Obtaining business venture capital can be a high priority for start ups and companies that find themselves behind the eight ball on funding for research and development or marketing. In the strictest sense of the term business venture capital is applied to certain enterprises by investment firms or individuals usually amounting into the millions of dollars. Those companies that catch the eye of potential investors have a very distinct profile. This limits these kinds of funds to only a few select young and high potential companies before the enterprises go public with their stock offerings. There are some distinct characteristics for which a VC investor is looking.
Consider first that in most cases, the product or service provided by the potential client company will need to be in the medical or high tech genre. The potential for breakthrough drugs or a new direction for computing can be worth literally billions of dollars. A provider of VC is going to look hard at the already functioning commerce plan of the young company and in some cases insist on changes made to be more favorable for the investor. A caveat for many VC agreements to be approved is the inclusion of one or more investors coming on board as officers of the company. Since the business venture capital provider often gathers investment money from a number of sources such as other investors and pension funds, the fund resource firm can be quite insistent that great care be taken in who and how the money is given.
Once an agreement has been made with the fledgling company, there then comes the full development of the product which may take a number of years in research and testing. During these intermediate years, or whatever length of time is needed for completion the VC firm or individual will of course take very keen interest in the day to day operations of the company. In most cases, the product does come to fruition and the company goes public, offering shares on the open market to the highest bidders. When that time arrives, the provider of the original business venture capital will take a tremendous profit from its investment. But the company is also going to profit if the original agreement is crafted to include its own enjoyment of the proceeds. A person who wishes to follow God ought to have the attitude of David who uses the word perfect here in the sense of doing all he can to make it happen: "I will behave myself wisely in a perfect way...o when wilt thou come unto me? I will walk within my house with a perfect heart." (Psalm 101:2)
Among the many VC firms that can provide venture capital funding are individuals who are called angel investors. While VC firms with their many association contacts with hundreds of resources can provide hundreds of millions of dollars, an angel investor is often looking for that "entrepreneurial soul mate" that shows great promise. In some cases, the angel moniker may actually fit the personality and motive of the business venture capital provider, and in other cases it will only be about the money. The Small Business Administration estimates that at least a quarter million angel investors are in operation around the United States. The ranges in investment from "angels" may range from about twenty five thousand to a million and a half dollars. And in most cases these types of investors only put money into local companies that they know and can observe. Often, an angel providing business venture capital doesn't have the medical or tech requirements for their investment targets as do firms supplying ginormous capital have, and are also very willing to get involved in helping to guide and advice young companies.
But let's say that both of the options are not available for the small enterprise owner. In that case there are options that maybe have been overlooked. Getting a home equity loan for a business startup may be a perfect solution for that business venture capital need. In this case, a bank or other lender may be willing to fund up to sixty-five or seventy percent of the value of the house equity that you have. A person's credit history and score will have to be pretty good for a bank to even consider such a request. A credit union will have a little less stringent requirements and a loan company even less. But of course as the requirements go down the interest rates climb.
A sit down talk with a Small Business Administration mentor might prove to be very helpful in this whole discussion about business venture capital needs. Without cost, these mentors can help develop a strong business plan, help with the company structure and just be a source of encouragement. And by the way, the angel investor option had not even be considered until after a very strong business plan is in place; a plan that has been thoroughly vetted and scrutinized by a business expert needs to be in order because it will be demanded by the angel. If all else fails, getting a credit card exclusively devoted to the business can be a good idea but care should be exercised in the use of the card. And don't forget to file for incorporation papers if you are a brand new business owner because such filing can bring some tax benefits your way.
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