Venture Capital Funding

So, you are looking for venture capital funding. But is your company worthy of getting this kind of funding? Does it have what it takes? Probably reading the information below will help you decide whether your company is worthy of venture capital funding or not.

However, before reading this, let us get some things straight. If your company fits within the requirements stated below, it means that your company has much better chances of getting some venture capital funding. But, if it doesn’t fit within those requirements, it doesn’t mean that it will be totally impossible for it to get funding that way. Things will become more difficult, of course, but it will still be possible for it for be funded through venture capital.

The following are the main criteria that venture capitalists are looking for as a potential company to invest in.

The Nature of the Company

The industry of the company will decide a major share of whether a venture capital provider will be interested in your company or not. The venture capitalist company needs to gather suitable investors to pool in their finances to invest in the company. Now, this is only possible if the business promises to be lucrative. If the venture capitalist investors find that the company will be a winning proposition for them, they are likelier to invest in it.

Generally, venture capitalists already have some kind of idea in mind about what kinds of companies they want to invest in. This is especially true of venture capitalist companies, where these people might also discuss in advance about what kind of business ideas they would like to consider. When they get a proposal, they will first see what niche the company belongs to, and then they will make their decision. It is not necessary that your company should belong to the exact niche that they are looking for, but if it is closely allied to their predetermined niches, then you stand a great chance of getting venture capital funding through them.

Generally, companies that are liable to make immediate profits are considered by venture capitalists. They may invest in a totally new business as well, but they will make sure that the business is unique and that it has potential. In any case, most venture capital funding providers don’t look at their investments for 5 to 7 years after they have provided the startup capital.

Businesses that are currently considered to be ‘hot’ ideas for venture capital funding are those which belong to sectors such as IT, research and development and companies that have a new product or service to offer.

The Location of the Company

The location of the company becomes important because of government restrictions. If you are an entrepreneur who wants to set up a company in a different area from where you reside, you will need to first make sure that you have enough creativity and inventiveness to keep the company going. At the same time, you need to mention the location of the company to the venture capitalist. They may or may not allow the location, which may be against their rules and restrictions.

The Size of the Funds

This is another consideration that the venture capitalists make. Here, their intention is to dispense funds that will be used for the growth of the companies. They don’t want to hold back funds that might stop a company from growing, and they also don’t want to put in so much that they won’t get a significant return on investment. It becomes important for them to decide how much is precise.

Venture capitalists, in such situations, draw their inspirations from few factors. They might see the business plan and the projection and decide from that how much they should invest. However, this is one-dimensional, because this is just a view of the entrepreneur. Business venture capital funding providers don’t rely on the business plan completely, but take that as a benchmark for arriving at their decisions. Their major decision-making is done through brainstorming within their own group, where they might draw in from the collective pool of their past experiences and decide how much investment is just right.

People who provide business venture funding are always looking for solid and stable companies that work on existing business models but have some superlative business idea. Most of them want the ideas to be unique and sensational, but the way in which the business is run needs to be safe and conventional. A lot of deliberation is done on what kind of product the new business will deal with. There are extra brownie points if such a product or service hasn’t been provided before, or if the product or service will cater to some yawning gap in the existing market or if simply the product or service seems to have a high degree of demand.

For all that they represent, business venture capital funding providers are in it for the profit. They want to see returns. They don’t mind putting in heavy sums of money, sometimes even millions of dollars, if they are convinced that the returns will happen. If we go by current norms, we can see that this still works. Despite the fact that many venture capitally funded businesses don’t work, the fact that even if one works, they can get 300 to 1,000 percent times of their investment. This is certainly a huge profitable proposition, and that’s the reason why moneyed people are thinking of venture capital funding to expand their savings.

Where Do You Get Your Venture Capitalists from?

This point makes a difference because your venture capitalist will be only as good as the source you get them from. Some venture capitalists work as individuals—their capacity to invest might be limited—but some of them work in groups. These are the people you must connect with if you are looking for a larger amount of funds.

It is also true that some venture capital funding associations and individuals are more popular than others. These people are always flooded with proposals that they barely sift through and reject. If you want a venture capitalist to consider your request, you have to make sure you hook them well right at your proposal stage.